Amazon.com Ready to Deliver the Goods... and Your Takeout Order

Yet another expansion of its local services division shows where the Internet retailer is really heading.

Jun 28, 2014 at 6:00PM
Chinese Take Out

Source: Wikispaces.

The old mantra "Think globally, act locally" apparently applies to Amazon.com (NASDAQ:AMZN), which is gearing up to roll out a food takeout service. The e-commerce behemoth plans to capitalize and expand on its growing network of local services, and starting with a base in Seattle, Amazon plans to eventually go global with it.

Think of it as a mashup of its AmazonFresh grocery delivery service that it started some five years ago with the news from Reuters earlier this month that it wants to compete against local marketplace platforms like Yelp and Angie's List to pair up consumers with everything from babysitters to contractors. There hasn't been anything publicly revealed by Amazon itself, other than a brief appearance of the service on the Amazon Local iPhone app before it was reportedly pulled because of a bug, but Tech Crunch reports it's going to be part of Amazon Local and possible acquisition targets are already being eyed.

Similar to Groupon, Amazon Local offers consumers daily deals, coupons, and discounts from merchants in a customer's neighborhood. And though the Internet retailer's plans for a futuristic drone delivery service have been temporarily grounded by the FAA, it seems this is a coordinated plan a long time in the making. Yet I imagine drone deliveries will be happening sooner rather than later, as Russian pizzeria DoDo Pizza made the first commercial pizza delivery via drone last Saturday.  We're likely to see more such services popping up around the world.

Despite the global potential of Amazon's foray into takeout, it's expected to take a go-slow approach unless the service is an overwhelmingly big hit. Still, it's easy to see how all this will integrate into a seamless endeavor to make itself indispensable to both local businesses and consumers. 

Unlike a few years ago when local services business like LivingSocial, Local.com, and ReachLocal were suddenly hot and viewed as threats to Groupon, the lack of a competitive moat made their proliferation superfluous. It's no surprise they crashed and burned, and today their stocks, including Groupon's, are shells of their former bloated selves. But Amazon doesn't have that problem.

It's broadly entering the local services market, not only hooking up merchants with potential customers, but giving them a means to make payments too. Last year it acquired mobile payments start-up Gopago, which meshes well with its "Login and Pay with Amazon" service. It provides the retailer with a means of opening up other verticals, and with its focus on food, a restaurant reservation service that competes with OpenTable -- which was just bought by Priceline for the sum of $2.6 billion -- is one potential service that would seem to be a natural outgrowth of this focus on local.

Even so, Amazon is right to not rush this service out too fast. As it found with grocery delivery, it's not so simple or easy as shipping a big-screen TV, especially when it comes to produce, because spoilage has to be accounted for. The delivery service was launched with the reported intention of serving as many as 40 markets, but today it still only serves three: Northern California, Southern California, and Seattle. With food takeout, individual local preferences have to be taken into consideration, which may prove cumbersome for a company with a virtual global footprint.

The development shows Amazon is still an innovative force, and brings to mind a lot of possibilities of how many other pies it can stick its fingers into, but don't look for this to become a meaningful part of its business model anytime soon -- and for most of the country, don't expect to log on to Amazon's website to order up some Chinese takeout, either.

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Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Priceline Group, ReachLocal, and Yelp. The Motley Fool owns shares of Amazon.com and Priceline Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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