Amazon
AMZN
has inked a deal with Just Eat Takeaway’s Grubhub in a bid to offer a new perk to its Prime members ahead of this Prime Day.
Under the partnership with Grubhub, Amazon is offering a free, full-year Grubhub+ membership to Prime members at no additional cost in the United States.
Grubhub+ offers unlimited free delivery on orders above $12 from hundreds of thousands of restaurants.
The new perk can be availed across more than 4,000 U.S. cities by Prime members at the cost of only their Prime subscription.
Given the other several perks of Prime membership in retail and streaming fields, the latest move will help Amazon in attracting more U.S. customers to join its Prime program, which, in turn, will drive its subscription revenues.
Subscription services have turned out to be the cash cow of the e-commerce giant in recent years. Amazon witnessed 11% growth in its subscription services sales, which were $8.4 billion in first-quarter 2022.
The latest perk is likely to aid the company’s momentum during its upcoming mega shopping event — Prime Day.
Amazon.com, Inc. Price and Consensus
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More Into Details
The underlined Grubhub+ membership to Prime members will get renewed every year.
In lieu of the partnership, Amazon will get a 2% stake of Grubhub’s common equity, which is expandable up to 15%.
The latest move marks the comeback of Amazon into the food delivery market from where it exited three years ago.
We believe that the Grubhub partnership and Amazon’s expanding Prime subscriber base will help the latter in rapidly penetrating the booming food delivery space of the United States.
This, in turn, is likely to instill investor optimism in the stock. Amazon has lost 31.4% on a year-to-date basis.
According to a report from IMARC, the online food delivery market in the country reached $23.4 billion in 2021 and is now expected to hit $42.6 billion by 2027, seeing a CAGR of 10.4% from 2022 to 2027.
A Statista report indicates that revenues in the underlined market are projected at $63.02 billion in 2022. Further, the figure is expected to reach $93.4 billion by 2026, witnessing a CAGR of 10.3% between 2022 and 2026.
Additionally, the number of users in the U.S. online food delivery market is expected to reach 217.3 million by 2026.
Competitive Scenario
Amazon’s partnership with Grubhub is likely to intensify competition for players like
DoorDash
DASH
and
Uber Technologies
UBER
, which are also making concerted efforts to bolster their presence in this potential market.
DoorDash, which has lost 53.3% on a year-to-date basis, is continuously benefiting from its strategic acquisitions in the online food delivery space. Its acquisition of Caviar from Block remains a noteworthy move. On the back of Caviar, the company has been catering well to the increasing demand for online food delivery in the United States since 2019.
DoorDash recently completed the buyout of Wolt Enterprises — a Finnish food delivery startup. The deal bodes well for DoorDash’s growing efforts toward international expansion.
Uber, which has lost 48.7% on a year-to-date basis, is witnessing strong momentum across its food delivery platform, Uber Eats. The company’s recent acquisition of an alcohol delivery startup, Drizly, remains a positive. Notably, Drizly’s marketplace has been integrated with the Uber Eats app.
Apart from this, Uber’s launch of a pilot program for autonomous food deliveries via Uber Eats in Santa Monica, CA, in collaboration with Motional, is noteworthy. Customers will be alerted when the order arrives at the drop-off location. They can unlock the vehicle door through the Uber eats app and collect their orders from the backseat. UBER plans to roll out the autonomous food-delivery service in Los Angeles and other cities in the near future.
In addition to Uber Eats, Uber’s buyout of Postmates, which offers a food delivery service, remains a positive.
Nevertheless, Amazon’s aggressive expansion strategies, solid Prime momentum, and Grubhub’s strong delivery network and growing relationships with restaurants are expected to aid its competitive position.
Zacks Rank & Stock to Consider
Currently, Amazon carries a Zacks Rank #3 (Hold).
A better-ranked stock in the retail-wholesale sector is
The Kroger
KR
, which currently carries a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Kroger has gained 4.8% over a year. The long-term earnings growth rate for the KR stock is currently projected at 11.27%.
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