Amazon enters Chicago's crowded food delivery market

Amazon has announced the launch of Amazon Restaurants, which will deliver from nearly 80 Chicago restaurants through Prime Now. Entering an already saturated food delivery market, the company will be competing against the likes of GrubHub, DoorDash, Caviar Seamless, and reportedly soon, UberEats.

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Amazon will now deliver from a slew of trendy Chicago restaurants through Prime Now, elbowing its way into an increasingly crowded food delivery market that also saw news Thursday of an UberEats expansion.

Amazon said Thursday morning it had launched Amazon Restaurants with nearly 80 restaurants in Chicago, with plans to add more daily. Customers who dish out $99 for an Amazon Prime subscription — which includes free two-hour delivery and $7.99 one-hour delivery on certain retail items — can receive free delivery on restaurant orders for a limited time, the company said.

The company is entering an already packed market, with companies from Chicago-based GrubHub and DoorDash, Caviar and Seamless offering similar services with varying delivery fees. Uber is also introducing a full-scale meal delivery service, the Wall Street Journal reported Thursday. In 10 cities including Chicago, the ride-hailing company will roll out a new standalone UberEats app allowing customers to order from full menus of dozens of local restaurants.

For Amazon, Chicago is the sixth market to offer restaurant delivery, Amazon Restaurants general manager Gus Lopez told Blue Sky. Average delivery times by Amazon drivers in the first five markets has been 39 minutes, he said.

The restaurant list includes high-end options like Balena and RPM Steak alongside more casual spots like Da Lobsta and America’s Dog, Lopez said. The service is available to customers in 18 Chicago Zip codes.

Delivery is free for now; in Seattle and other cities that have launched since September, Amazon is not charging delivery fees.

“We want people to try the service, but we may down the road introduce a delivery fee,” Lopez said.

The food delivery space is likely to see large companies duke it out for the No. 1 spot as regionally focused delivery companies continue to pop up.

"There's very likely going to be one winner, one who's second and likely trailing by a distance, and a number of regional players that either get consolidated in" or eventually determine they don't have a profitable business model, said Darren Tristano, president of food industry consultancy Technomic.

Tristano also said he could see the large tech companies start to branch out into more B2B services. Uber launched an on-demand delivery service for local businesses in October.

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"They're already in the delivery service — delivering retail products or people from one destination to another," he said. "The ability to take that distribution process and apply it to other businesses creates really strong opportunities."

Those built-in courier networks are gobbling up more than half the growth in the food delivery industry in the US, said Kevin Kopelman, who covers local Internet and online travel at New York-based Cowen & Co. He said slowing sales and increased investment in GrubHub's own delivery service show the company is feeling the pressure.

"Their whole business was providing this software and having the biggest network," Kopelman said, "and now the game has changed to where you're having to really run a logistics business and do fleet management."

Kopelman said it could take years to crown a winning service or model in the food delivery space. He downgraded his target price on GrubHub stock to $20 from $22 on news of the UberEats expansion but maintained a market perform rating. It is trading at $19.85 midday.

Amina Elahi contributed.

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mgraham@tribpub.com

Twitter @megancgraham