SALLY HERSHIPS, HOST:
Amazon recently stopped delivering something.
STACEY VANEK SMITH, HOST:
Wait; what? I have, like, eight orders pending. What are you talking about?
HERSHIPS: Hold your horses, Stacey.
VANEK SMITH: (Laughter).
HERSHIPS: It stopped delivering food from restaurants.
VANEK SMITH: I didn't even know that you could order food from restaurants on Amazon.
HERSHIPS: Well, you can't anymore. But until very recently you could. The service was called Amazon Restaurants. And if you're thinking, I have never heard of that...
VANEK SMITH: Yes.
HERSHIPS: ...That is probably because the service failed. The food delivery industry is worth a ton. It's about a quarter of a billion dollars, and it is growing.
VANEK SMITH: We're so lazy.
HERSHIPS: (Laughter) I know.
VANEK SMITH: Wonderful.
HERSHIPS: And that's - our laziness is why all these companies, like Grubhub and Seamless - they are all trying to deliver us food, and succeeding.
VANEK SMITH: So the shuttering of Amazon Restaurants seems a little strange and kind of represents this rare defeat. I mean, usually, businesses just sort of bow down or, more accurately, maybe, are crushed under the giant wheels of Amazon. The company already has, like, all these captive customers, all these devoted members. And it's really easy for them to add new services and have those new services get a lot of attention and use right away. According to a poll NPR did last year, 75 million Americans now subscribe to Amazon Prime. The population of the whole United States, by the way, is about 327 million.
HERSHIPS: I'm Sally Herships.
VANEK SMITH: And I'm Stacey Vanek Smith. And this is THE INDICATOR FROM PLANET MONEY. Today on the show, Amazon shuts down Amazon Restaurants, its food delivery service. But here's the thing. Delivery is the very thing Amazon is supposed to be best at. So what happened? And is this closure actually a failure? Also, what does the cancellation of Amazon restaurants tell us about the food delivery industry as a whole?
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HERSHIPS: Compared with the kind of traffic Amazon sees on its main site, Amazon.com, Amazon Restaurants - it was kind of limited.
VANEK SMITH: Never even heard of it.
HERSHIPS: Well, Stacey, the service was offered in only about 25 cities, including New York, Seattle, Baltimore, Tampa, 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.
HERSHIPS: It's kind of weird, too, because Amazon, like, is all about home delivery, right?
VISHAL AGARWAL: Exactly.
HERSHIPS: I mean, ironically, it failed at the thing it's supposed to be best at.
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 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. There is also UPS and FedEx, but you have to pay more. They come at a premium.
Vishal says the reason other food delivery services, like Seamless and Grubhub - the reason they've been able to succeed at delivery is because they are the opposite of Amazon. They started local, and that makes it much easier to recruit drivers, to train them, to sign up restaurants in the area. So Amazon was partially crippled by its size.
AGARWAL: So you can't launch something on a national scale with food delivery. You have to go city by city and geography by geography to get any good foothold.
VANEK SMITH: Amazon has really been trying to figure out this last-mile delivery problem. It is aggressively hiring drivers and trying to take on the U.S. Postal Service. This may even be why Amazon bought Whole Foods. I mean, the grocery stores are really just giant warehouses. They're full of fresh food, and they're close to customers. Also, do you remember when Amazon wanted to deliver packages via drone?
VANEK SMITH: That was also part of the company's attempt to solve this last-mile 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.
VANEK SMITH: Well, no, especially if your meal's, like, 15 bucks. Like, that is a lot of delivery charge.
HERSHIPS: It is, yeah. And keeping delivery costs low is hard enough if you're ordering a book or something nonperishable. But now imagine you are responsible for shipping a juicy, warm cheeseburger and fries.
VANEK SMITH: That sounds delicious.
HERSHIPS: Yeah, right? And don't forget the milkshake. You have to keep the burger warm and the milkshake cold, and you also have to make sure the fries don't get soggy.
VANEK SMITH: Yes.
HERSHIPS: And the person who ordered this is hungry. They want their burger quickly.
VANEK SMITH: Oh, nothing worse than when your food delivery takes longer than it's supposed to.
VANEK SMITH: Meltdown.
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, or whatever...
VANEK SMITH: Coldly.
HERSHIPS: ...Coldly - that...
VANEK SMITH: Crisply.
HERSHIPS: 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.
VANEK SMITH: Never heard of Endless.
HERSHIPS: Well, it is no more. Then there was...
VANEK SMITH: It ended.
HERSHIPS: It ended.
HERSHIPS: Wasn't endless. Then there was the Fire Phone...
VANEK SMITH: I remember the Fire Phone.
HERSHIPS: ...Arguably Amazon's biggest flop back in 2014.
VANEK SMITH: Not as hot as they'd hoped.
HERSHIPS: No. Then there were the Dash Buttons, physical buttons you were supposed to mount on your kitchen cabinets or on top of washing machine, and you would push them to automatically reorder fabric softener or dish detergent.
VANEK SMITH: That's very weird.
HERSHIPS: Well, they are also gone.
VANEK SMITH: 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 that.
VANEK SMITH: Vishal says Jeff Bezos is kind of into failure. He embraces it. He says that's a lot of how Amazon learns and innovates. Take Endless, Amazon's former high-fashion site. It didn't actually disappear - not entirely. It just kind of changed forms. It was folded into Amazon's bigger fashion site. The Dash Button also still lives on in a way. It's become a virtual button, an app. And also, automatic reordering was folded into Amazon's regular shopping site. You'll see it sometimes when you order staples, like laundry detergent or vitamins. 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. Deliveroo is based in London. And guess what it does. 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, a look at how Amazon can get better at the food delivery business and ultimately conquer it and crush the competition, like it does.
HERSHIPS: Like it does. Is there, like, a "Terminator" movie or something where, like, alien or the robot is coming, and we shoot at it, and it, like, sucks in the bullets and gets stronger and then, like, spits them back out at people, because that's what it's doing. It's, like - right?
HERSHIPS: We're crushing it.
HERSHIPS: It's learning us, but then it's coming back stronger.
AGARWAL: Happened with "Black Panther," right? The more bullets you shot at the suit, the better energy it got.
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LETITIA WRIGHT: (As Shuri) The nanites absorb the kinetic energy and hold it in place for redistribution. Strike it again in the same spot.
CHADWICK BOSEMAN: (As T'Challa) You're recording.
WRIGHT: (As Shuri) For research purposes.
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BOSEMAN: (As T'Challa) Delete that footage.
HERSHIPS: And according to Amazon, this was a learning moment of sorts. The company says it closed Amazon Restaurants so that it could further invest and continue to grow its grocery delivery service.
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VANEK SMITH: This episode was produced by Constanza Gallardo, fact-checked by Emily Lang and edited by Paddy Hirsch. THE INDICATOR is a production of NPR.
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