Is This An Amazon Product Manager Failure?

Amazon is abandoning its restaurant delivery business
Amazon is abandoning its restaurant delivery business
Image Credit: ulterior epicure

I’m pretty sure that by now we all know who Amazon is. They are the very large company that started out as a book seller and over time has morphed into a company that sells just about everything and seems to do just about everything. The Amazon product managers seem to have an almost golden touch when it comes to their product development definition – everything that they lay their hands on seems to be very successful. They have started offering the world’s most successful cloud service, they bought Whole Foods, and they have just launched one-day deliveries. However, it turns out that not everything that they do is successful. A good example of this is their restaurant delivery business.

What Went Wrong With The Restaurant Delivery Business

So let’s start with the facts. Amazon has announced that they are shutting down their restaurant delivery business. This business was called “Amazon Restaurants”. This business was run for four years and it was designed to compete with other major restaurant delivery companies including Uber Eats and Grubhub. However, it failed because the Amazon business never seemed to gain much traction in the highly competitive restaurant delivery business. This is not going to look good on anyone’s product manager resume.

With Amazon’s announcement that they were pulling out of this business, the stock prices of the firms that they had been competing with all went up. The Amazon restaurant delivery business came with some restrictions. First off, it wasn’t offered everywhere – just in a limited number of zip codes. Secondly, not everyone could make use of it. This service was only available to Amazon Prime members. There are 100M of those members, but still – not everyone is a Prime member. The Amazon product managers really believed in their business and shortly after they rolled service out in the U.S., they then set up shop in the U.K. What made the Amazon service unique was that Amazon announced that Prime customers would get their food within an hour ordering it. Additionally, the food would be delivered without the customer having to pay a delivery fee. Amazon stated that they were not going to try to deliver food from every restaurant. Instead, they stated that they were going to be setting a “high bar” to determine which restaurants they did business with.

So what went wrong? Two main things did this Amazon product offering in. The first is that this business never really showed any significant growth. Amazon is a huge company and all parts of it always have to be showing significant growth in order to justify having the company continue investing in it. After four years, this part of the company just wasn’t producing the returns that Amazon requires its businesses to create. Additionally, Amazon never aggressively promoted this service. What this means is that when people decided to have a restaurant deliver food to them, they may not have known that they could have contacted Amazon to have the food brought to them.

Why The Restaurant Delivery Business Is So Hard

Amazon ended up closing its U.K restaurant delivery business last year. In the U.S., the restaurant delivery business never expanded beyond 25 cities. This is not the only failure for the Amazon product managers. They also screwed up when they introduced the Amazon Fire smartphone, a travel site, and Amazon Local — a site to final local deals. The restaurant delivery business is already filled with powerful competitors and, perhaps even more importantly, it is largely unprofitable.

One of the things that the Amazon product managers may not have realized is how labor intensive this business is. Creating a business to pick up food from a restaurant one or two meals at a time is a financial disaster. Nobody knew that this was a service that Amazon provided and the Amazon product managers did not do a good job of marketing the service.

In the end it was the competition that did this Amazon service in. The competitors were specialists who were able to raise immense amounts of money. Since this market is so cutthroat, any possible profits have been eaten away. Currently in the U.S when you take a look at the restaurant delivery business, between DoorDash, Uber Eats, and Grubhub roughly 80% of the U.S. market has been seized. Another problem that the Amazon restaurant business had to deal with was the fact that Amazon has other food delivery programs that got better support from the company. These include grocery delivery for Whole Foods. Whole Foods food delivery is currently available in 88 cities.

What All Of This Means For You

The product managers at Amazon have made a rare misstep with their restaurant food delivery business. They have decided to shut this part of the Amazon business down because it has not been profitable for them. Restaurant food delivery is a tough competitive market and this time around, Amazon just didn’t have what it takes to be successful – their product managers should have taken a closer look at their product manager job description before they got into this business.

Amazon ran their restaurant food delivery business for four years before shutting it down. This Amazon service was only offered in a select number of zip codes and it was only offered to Amazon Prime members. Amazon also limited the number of restaurants that they did business with. This business never really showed any growth and Amazon never really properly promoted it. This is not the first product that Amazon has created that has failed. Restaurant food delivery is a very labor intensive business. Amazon’s competition has been able to raise a lot of money and they own 80% of the market. Amazon also had to deal with other parts of Amazon that were focused on delivering groceries to customers.

Amazon has proven time after time that they can be successful in multiple markets. However, when it came to restaurant food delivery, it appears as though the company’s heart was never really in it. Amazon’s decision to withdraw from this market was a result of a lack of effort on the company’s part and the fierce competition that the other players showed. It looks like the next time the Amazon product managers decide to enter a market, they need to spend more time trying to be successful.

– Dr. Jim Anderson Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: What do you think that Amazon could have done differently to be successful in the restaurant food delivery market?

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What We’ll Be Talking About Next Time

Anyone who went to university knows all about Domino’s. After a late night of studying, they were the ones that we’d all call to have a hot and tasty pizza delivered to us. What a lot of us may not know is that it was Domino’s that first made pizza popular in the U.S. back in the 1960’s. The pizza market is in the midst of undergoing a high tech transformation and its product managers are going to have to get ready to deal with a brave new world. What kind of changes to their product development definition are they going to be facing and how will they deal with them?