Amazon and Deliveroo have entered into a partnership to offer free deliveries to Prime customers on specific orders. For two years now, the eCommerce behemoth and the London-based food app have worked together to deliver food from groceries and restaurants to customers.
This is the first customer-facing partnership that will see millions of Prime customers saving time and money. They will enjoy free delivery on every £25 (or more) order they make on Deliveroo.
The offer is equivalent to Deliveroo Plus’s “silver” tier, a level that usually goes at £3.49 per month. Deliveroo has not yet revealed whether Amazon has paid an extra fee to enable its Prime members to enjoy this perk.
Lisa Leung, Amazon UK director of Prime and Marketing, said that “Amazon is always looking for ways to offer even more value to Prime members.” These members benefit from discounts, free shipping, and video streaming services.
Amazon boasts 200 million Prime subscribers globally and an undisclosed amount in the United Kingdom and Ireland.
This current partnership comes despite competition regulators in the United Kingdom scrutinizing the risks of such a tie-up between the two companies. Last year, the authorities raised concerns that if Deliveroo continued to tap into the juggernaut’s Prime network, it might have an unfair advantage over Uber Eats, Eat Takeaway, and other competitors.
But in August 2020, the Competition and Markets Authority (CMA) ultimately cleared the deal, concluding that it didn’t present any substantial competition concerns to warrant government intervention. They also stated that the investment is necessary for the food company’s survival.
“The CMA found, on a realistic prospect basis, that the parties would have the ability to bundle Deliveroo Plus and Amazon Prime and could use this strategy to foreclose Deliveroo’s competitors,” the agency said.
“The CMA also found, however, that any incentive to engage in a foreclosure strategy arising from the transaction would be insufficient to result in a realistic prospect of an SLC (substantial lessening of competition).”
Amazon holds a 16% stake in Deliveroo. The eCommerce company folded its own UK restaurant delivery wing shortly before kick-starting the discussions to partner with Deliveroo. But both have separately been growing their grocery delivery services.
This year saw Amazon opening six of its physical fresh grocery stores in London. The stores use the company’s “just walk out” technology to eliminate traditional checkouts.
On the other hand, Deliveroo plans to expand its Plus subscription service to reinforce customer retention and loyalty amidst fierce competition. To achieve this, it will use a part of the proceeds from March’s initial public offering.
August 2021 witnessed the food app’s shares briefly going back to 390p, at which it priced its IPO. However, the figures have subsequently gone back to about close at 331p on 14h September 2021.
Tim Shelton is a senior partner with machete.systems with E Juma – Staff Researcher