Amazon Taste-Tests Restaurant Takeout, Delivery Business
The new offering has the rather unimaginative name of Takeout & Delivery, but we know that clever corporate monikers aren't necessarily Amazon's strong suit. After all, this is the company behind Audible audiobook rentals, Prime Instant Video streaming, and e-commerce websites including Soap.com and Diapers.com.
141 Seattle Restaurants to Start
The name may be a bit vanilla, but it's fairly descriptive. There are 141 Seattle restaurants in its initial incarnation, and the vast majority only offer takeout. Less than two dozen offer delivery.
We're still early in the initiative. Amazon hasn't indicated if it will expand beyond Seattle and at what pace. It has taken its time before. AmazonFresh -- the e-tailer's grocery delivery service -- launched in a trendy Seattle neighborhood in the summer of 2007, and it took six years before it finally expanded into Southern California last summer. Amazon's fresh grocery service has gone on to quickly expand into San Francisco, Brooklyn and Philadelphia.
Then again, AmazonFresh is the exception to the rule. Amazon Local -- the dot-com giant's Groupon-like platform -- launched in major markets fairly quickly. The difference here is that AmazonFresh required the buildout of local grocery warehouses and a fleet of refrigerated delivery trucks to make it happen in every new market. Amazon Local was simply a matter of establishing a sales team to reach out to area businesses. In that sense, it's far more likely that Takeout & Delivery follows the Amazon Local trajectory and expands quickly since it won't require major investments to enter into individual cities.
That may be welcome news for Amazon fans looking forward to new ways to line up dinner, but it's going to be bad news for GrubHub (GRUB).
The Table's Getting Crowded
GrubHub went public at $26 in April, and it was an initial success. The stock soared 31 percent on its first day of trading. However, the stock has pretty much meandered since then -- and naturally the stock has been drifting lower since Amazon rolled out Takeout & Delivery earlier this month.
GrubHub offers online ordering for takeout at roughly 30,000 restaurants across 800 cities. Its popularity is booming. GrubHub had 4.57 million active diners in its latest quarter, 50 percent more than it served a year earlier. On any given day, 172,700 hungry customers lean on GrubHub to feed their bellies.
Unlike many fast-growing tech startups, GrubHub is profitable. However, everything that it's been building can naturally be threatened by Amazon, a company that has proven in the past that it's not afraid to lose money to enter a market that it desires. Amazon has the brand, local connections and an industry-leading Web services platform. If Amazon wants to disrupt an industry, investors are well-served by respecting the space and avoiding the companies that CEO Jeff Bezos is about to compete against. When Amazon's hungry -- and it's hungry now -- it can be voracious.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. Want to make 2015your best investing year ever? Check out The Motley Fool'sone great stock to buy for 2015 and beyond.