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Amazon Shuts Down Food Delivery Service


Amazon just closed down its food delivery service. It was called Amazon Restaurants. But the tech giant is trying to learn from its mistakes. It's now trying to solve an issue that has perplexed them for years, the so-called last-mile delivery. Planet Money's Stacey Vanek Smith and Sally Herships explain.

SALLY HERSHIPS, BYLINE: Compared with the kind of traffic Amazon sees on its main site, amazon.com, Amazon Restaurants, it was kind of limited.

STACEY VANEK SMITH, BYLINE: Never even heard of it.

HERSHIPS: (Laughter) Well, Stacey, the service was offered in only about 25 cities, and you could only use it if you were a Prime subscriber. Amazon Restaurants worked a lot like other food delivery services. You pull up the site. You type in your zip code. You figure out what you want to eat, and then hopefully, very soon a delivery person from Amazon's grocery delivery service, Prime Now, would show up with your food.

VANEK SMITH: The service faced all of these problems, and one of the biggest problems was delivery. Sally, you talked to Vishal Agarwal about this delivery problem. He is the CEO of itsacheckmate.com. That is a company that makes software which helps restaurants get orders from services like Seamless and Grubhub.

VISHAL AGARWAL: Amazon - if you look at it very minutely, Amazon doesn't really do the last-mile delivery, and food is all about the last mile.

HERSHIPS: If you order batteries or yoga pants from Amazon, they may be shipped to one of the company's fulfillment centers. But getting your box to the last mile, to your address, that represents a giant logistical challenge.

Think about it. The United States Postal Service is the only service that does regular, daily delivery to every single address in the country. Vishal says the reason other food delivery services, the reason they've been able to succeed at delivery, is because they are the opposite of Amazon. They started local.

AGARWAL: So you can't launch something on a national scale with food delivery. You have to go city by city to get any good foothold.

VANEK SMITH: Amazon has really been trying to figure out this last-mile delivery problem, but it has not been able to crack the code yet.

HERSHIPS: No, and another problem Amazon Restaurants faced - customers. They do not want to pay more than $5 for meal delivery. And keeping delivery costs low is hard enough if you're ordering a book or something non-perishable. But now imagine you are responsible for shipping a juicy, warm cheeseburger, some fries.

VANEK SMITH: This sounds delicious.

HERSHIPS: Yeah, right? Also you have to make sure the fries don't get soggy...


HERSHIPS: ...And all of this, the knowledge and the special ability to deliver food and the ability to be able to get it where it needs to go warmly, that is really, really hard to do. And Amazon has shut down other services and canceled other products in the past. There was Endless, a high-fashion site that Amazon launched in 2007. Then there were the Dash buttons, physical buttons, and you would push them to automatically reorder fabric softener or dish detergent.

VANEK SMITH: They are also gone.

HERSHIPS: Well, kind of. This is the thing about Amazon, Vishal says - an Amazon fail is not as black and white as it might first seem.

AGARWAL: I don't think they fail. I think they learn and they really evolve from there.

VANEK SMITH: The dash button also still lives on, in a way. It's become a virtual button, an app, and that's what Vishal thinks is happening with Amazon Restaurants.

So if you were paying attention, you'd know that, yes, Amazon closed its restaurant delivery service. But at the same time, it also made this massive investment, $575 million, in this company called Deliveroo. And it delivers food to people in 14 countries. So this does not sound like a failure on the part of Amazon. Instead, maybe we should be calling it more like a recalibration. Stacey Vanek Smith.

HERSHIPS: Sally Herships.


MARTIN: And just a note, Amazon is an NPR sponsor. Transcript provided by NPR, Copyright NPR.

Stacey Vanek Smith is the co-host of NPR's The Indicator from Planet Money. She's also a correspondent for Planet Money, where she covers business and economics. In this role, Smith has followed economic stories down the muddy back roads of Oklahoma to buy 100 barrels of oil; she's traveled to Pune, India, to track down the man who pitched the country's dramatic currency devaluation to the prime minister; and she's spoken with a North Korean woman who made a small fortune smuggling artificial sweetener in from China.
Sally Herships