Highlights

• On Wednesday, Amazon struck a deal with Just Eat’s Grubhub to provide Prime members food delivery perks.

• As a part of the agreement, Amazon has an option to acquire 2% stakes in Grubhub.

• The deal is a great relief for Just Eat, Grubhub’s parent company whose shares have fallen drastically this year.

Amazon, the e-commerce giant, has struck a deal with Just Eat’s Grubhub a Dutch multinational meal ordering and delivering company, in the US. This great strategy of joining hands by both the companies is likely to boost their respective businesses. Both Amazon and the food delivery firm will earn benefits by attracting more customers.

Amazon is alleviating the perks of its prime users, which counts more than 200 million members and already enjoying some food-related benefits such as grocery discounts. From now on as per the agreement prime members will be able to cut out food delivery fees on some Grubhub orders and will have access to other Grubhub loyalty program benefits at no extra cost.

As per the deal prime subscribers will get a surprise freebie for a year, they will be getting a free subscription to Grubhub for a complete year. Normally Grubhub charges $9.99 monthly in which all the orders from hundreds of thousands of associated restaurants above $12 will be delivered free of cost. The service is available to all Prime members across 4000 cities in the US. After the end of the subscription, the same amount will be charged by Grubhub for continuing access to the service.

The Tie-Up

A few years back Amazon tried to establish its own third-party food marketplace and food delivery service in the US. But in 2019 Amazon announced that it was suspending its short-lived food delivery service due to poor response. So, this announcement of the tie-up between Grubhub and Amazon looks like a newer and potential approach for Amazon to build itself back in the space.

The latest deal will give Amazon the option to take 2% equity in Grubhub (Just Eat Takeaway), with this Amazon could become a shareholder in Grubhub’s business. The stakes could increase to 15%, if certain business conditions and performance targets are met, as per the announcement made by Grubhub’s parent company.

The agreement comes as a relief for Netherlands-based Just Eat the parent company of Grubhub whose shares have fallen 70% this year, amid the pressure from investors to either sell it or find a partner for Grubhub to improve its business. Grubhub was bought just last year.

Impact on others

Amazon’s deal with Grubhub could upend the food delivery sector and the other leading food delivery companies may get negatively affected.

DoorDash a leading company in the food delivery market, its stocks fell some 8% on Wednesday morning and has crashed by around 50% since the beginning of the year. Shares of Uber, the operator of UberEats, have slipped more than 4%, Wednesday morning and similarly fallen 50% in 2022.

DoorDash still dominates the US food delivery market with a 50% market share compared to UberEats with 24% and Grubhub with 13%.