Since April 2015, Amazon Prime has offered one-hour delivery service across much of greater Austin. Residents from Northwest Hills to Travis Heights can get everything from books to furniture delivered often in an hour or less directly to their homes. It’s no wonder, according to GeekWire, that membership grew by 53 percent in 2014. Now, Amazon is unveiling the latest service as part of its Prime package. As TechCrunch reported, Amazon is set to begin offering restaurant delivery in Austin and other select U.S. markets.
Food to go
The delivery service is part of Amazon’s Prime Now app, which costs members $99 per year. Two-hour delivery will be free, and members can opt for a one-hour delivery for just $7.99. As TechCrunch noted, the Prime Now service doesn’t include any hidden fees, and none of the items will be marked up beyond menu price. Though Amazon hasn’t revealed how much it makes from Prime deliveries, it did explain that it generates profits through a revenue-sharing model with restaurants and other retailers. In addition to Austin, Prime Now already runs in several other major cities, including Chicago, Dallas, Las Vegas, Miami, New York, Los Angeles, Portland, Sacramento and San Antonio. No word yet on how many Austin restaurants will be apart of the process, but there could still be several options even in the early stages. For comparison, L.A.’s Westwood neighborhood features 30 options, from pizza to Thai food. In each city, availability is based on unique zip codes.
A crowded table
Amazon’s decision to get into the food delivery industry is an interesting one, considering many of these cities already have a slew of similar services. In cities like Austin and other urban centers, services like Eat24, Sprig, Postmates, Munchery, GrubHub, Caviar and UberEats, among others, have been in operation for sometime. However, as Eater noted, Amazon didn’t launch this service simply to compete – it did so to offer fresh new perks to existing Prime customers. Having already offered everything from e-books to free TV shows, free food delivery is just the latest gift Amazon is offering for loyal customers.
Not that the company still won’t prosper. Speaking with Eater, Amazon publicist Tim Cook explained that restaurant food delivery could be a huge growth sector for the industry giant through much of 2016. And, as Eater mentioned, Amazon is already in a position to dominate the market thanks to its massive infrastructure and sizeable consumer base.
Getting the bill
No doubt the prospect of free two-hour delivery is going to be a huge drawing point for many people. While it will remain free for the foreseeable future, TechCrunch noted that Prime Now could one day feature an as-yet-undisclosed surcharge. Of course, that’s not the only charges you can expect with the use of Prime Now. There is a reason that Amazon is offering so many perks for its premium services: They want you to spend more money. A report from ComScore found that Prime members not only make twice as many purchases as non-members, but they also spend nearly 40 percent more with each new transaction. Consumer Intelligence Research Partners compiled a report of the average spending habits of Prime members. Between October and December 2014, the average member spent $1,500 annually, while non-members spent less than half that, or an average of $625.
Breaking the bank
It’s not just your own wallet that’s affected by Prime-style delivery services. While getting food at home is a huge perk for many individuals, it does affect the bottom line of many of your favorite local restaurants. According to Quartz, GrubHub’s commission is somewhere near 13.5 percent per delivery. In 2013, there were over $1 billion in orders through GrubHub, and the company garnered just over $137 million in total revenue. While GrubHub insists that restaurants can choose the rate of commission, those companies that pay more are prioritized higher in its sorting algorithms, meaning these eateries have greater visibility than lower-paying spots. There are also hidden costs for many delivery services, as NPR reported. Seamless, for instance, charges a $150 monthly “marketing fee.” And when one restaurant – Brooklyn’s Luz – experienced an increase in monthly orders, Seamless increased its per order commission from 10 percent to 14 percent.
As such, devotees of the local culinary scene may want to consider their role if they ever decide to order some nachos during a night in.