Just Eat left feeling queasy after Amazon delivers for Deliveroo

Concerns the king of online retail will shower Deliveroo with enough resources to make it near impossible for rivals to prosper

Deliveroo founder  Will Shu said  that Amazon had been an inspiration both to him and to the company he found in 2013

Deliveroo founder Will Shu said that Amazon had been an inspiration both to him and to the company he found in 2013

 

If we were Just Eat we might be suffering from a bit of an Amazon-related queasy tummy this weekend. It emerged on Friday that the king of online retail had been the biggest backer of a $575 million fundraising round by Just Eat’s rival Deliveroo. The news immediately sent UK-based Just Eat’s shares lower, with peers in other European countries feeling the same pain.

The fear, understandably, is that Jeff Bezos’s Amazon will now turn a huge hose of cash in Deliveroo’s direction, showering it with sufficient resources to make it near impossible for others in the sector to prosper in its turquoise shadow.

It is a simple enough idea, and the way of the capitalist world: where business models are broadly similar and management teams comparably clever, the edge can come with a little extra investment. In this case that little extra is likely to end up being a lot extra. Deliveroo, still in the “pre-profit” phase, has said it now plans to “invest heavily” in its technology, with new products likely to emerge.

Just Eat and others such as Germany’s Delivery Hero now face the not-so-simple challenge of pre-empting this with less money at their disposal. This comes a week after US group Uber raised a massive bag of cash in its IPO, thus providing significant financial comfort for its own food delivery arm Uber Eats.

Deliveroo founder and former investment banker Will Shu said on Friday that Amazon had been an inspiration both to him and to the company he found in 2013. Of course it is: it is worth $940 billion and has fingers in more pies than Deliveroo could fit in all of its insulated backpacks put together.

What Amazon taking a bite out of Deliveroo will end up meaning for consumers is as yet moot, but anything that reduces competition in a sector for which we clearly have a huge appetite should be viewed with at least some caution.

If you want a window on how this sort of thing can go, consider the €5 cancellation fee the dominant MyTaxi hailing app introduced last week, a market leader’s thank you to its customers for making it the top dog in a small sector.

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