Will Amazon and GrubHub take a bite out of Uber and DoorDash’s dominance in food delivery?

Amazon.com Inc. is jumping further into the food delivery business by partnering with Grubhub, just as some analysts say they see the pandemic-induced spike in that market slowing. So what does this mean for dominant US delivery companies Uber Technologies Inc. and DoorDash Inc.?

Some analysts say the Amazon AMZN,
-The Grubhub partnership, which was announced in early July, could have an additional effect on DoorDash DASH’s dominance,
which is the US market leader in app-based delivery, and #2 in Uber Eats UBER,
That will depend on how Amazon chooses to market Grubhub, analysts say.

“We question how much visibility this will receive,” JMP Securities analysts wrote in a note to investors. “Put simply, we wouldn’t be surprised to see Grubhub+ lost in the myriad of benefits Amazon offers its subscribers.”

Morgan Stanley analysts have written of a possible upside for Amazon, which has a similar partnership with Deliveroo in the UK. Amazon’s efforts to promote Grubhub “to Prime members will be important to watch,” they said. “For context, Deliveroo saw its subscriber base double within a month of launching its partnership with [Amazon].”

In June, DoorDash had 57% market share in the United States, Uber Eats had 32% and Grubhub, which is owned by Dutch company Just Eat Takeaway TKWY,
had 11%, according to email receipt data from YipitData.

See also: 5 Things to Know About Amazon Prime’s Grubhub+ Free Membership Offer

Competitive issues aside, it seems that delivery app companies are becoming more cost-conscious. DoorDash recently announced that it is increasing the minimum order total for its DashPass subscribers who order at convenience stores, pharmacies, and liquor stores, as well as the company’s own DashMarts.

Meanwhile, analysts at Raymond James said trends in their app data showed a slowdown in food delivery in the second quarter as inflation continued to affect consumers. This lines up with DoorDash, Uber Eats and Grubhub all posting lower gross food sales from May to June, according to YipitData, and slowdowns followed by chains such as Chipotle Mexican Grill Inc. CMG,
which reported this week “lower delivery costs associated with lower volume of delivery transactions”.

In another sign of delivery difficulties — and the economy in general — some super-fast delivery startups have shut down, such as Buyk and Jokr, which is closing its operations in the United States. Other delivery companies, including Gopuff and Getir, have laid off employees.

Uber will release its results on Tuesday and DoorDash will release its results on Thursday. Here’s what to expect:

What to expect from Uber

Earnings: According to FactSet, analysts on average expect Uber to post an adjusted loss of 27 cents per share, the same as Uber’s adjusted performance a year ago. Estimize, which compiles estimates from analysts, hedge fund managers, executives and others, also expects the company to post earnings of 5 cents per share.

Revenue: Analysts on average expect revenue of $7.36 billion, according to FactSet, up from $3.93 billion a year ago. Estimate expects $7.57 billion.

Movement of stock: Uber stock has fallen after posting earnings in two of the last four quarters, and seven of the 13 reports he has written since their publication. Uber shares are down nearly 48% so far this year through Thursday’s session, while the S&P 500 SPX index,
has fallen nearly 15% since the start of the year.

What to expect from DoorDash

Earnings: Analysts polled by FactSet on average expect DoorDash to post a loss of 21 cents per share, following a loss of 30 cents per share last year. The average expectation as collected by Estimize is a loss of 26 cents per share.

Revenue: Analysts on average expect revenue of $1.52 billion, according to FactSet, up from $1.24 billion a year ago. Estimize expects $1.5 billion.

Movement of stock: DoorDash shares are down about 60% this year until Thursday’s session. Shares have risen five out of six times after the company reported earnings since its IPO.

What analysts say

Analysts note that Amazon shut down its previous ready-meal delivery entry, Amazon Restaurants, in 2019.

“Amazon has been trying to build its own third-party food marketplace for years and hasn’t had much success,” William Blair analysts wrote in a recent note. They said they believe that even despite growing competition, DoorDash will “remain a strong player in the space” due to its scale, technology, brand and partnerships. They also noted that Uber continues to grow in the space, “demonstrating the strength of its business portfolio in the global market.”

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Needham analysts also seemed skeptical about the impact of the Amazon-Grubhub partnership on market leaders.

“The bull case for DASH and UBER is if the partnership fails to gain traction,” Needham analysts wrote. “There have been other market industry partnerships that haven’t been major needle movers, in our view, like Grubhub+ and Lyft Pink.” Analysts also asked how much Amazon would subsidize Grubhub+ to the company’s Prime members.

Wherever possible, however, Amazon beat everyone else, with analysts at JMP Securities noting that the company has more than 200 million Prime members and DoorDash has about 10 million DashPass subscribers. “The concern here is that new diners (or just non-DashPass or Uber One subscribers) may ultimately choose Grubhub given the additional savings offered by Grubhub+,” they said.

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