Amazon as a Restaurant Supplier? Not Yet.

With over 300 million loyal customers, dozens of partnerships with esteemed brands, and half a million employees, there’s no denying that Amazon is one of the most successful online retailers and e-commerce companies in the world. In fact, its market cap is more than double that of competitors, easily surpassing companies like Walmart, Costco, and Target. But what does that mean for the restaurant industry? 

Amazon has always targeted a wide range of markets, but it shook the grocery industry in 2017 after announcing its $13.7 billion dollar acquisition of Whole Foods Market. Many labeled this deal as Amazon’s attempt to dominate the fresh grocery delivery market, and there was even speculation that this might be Amazon's first foray as a restaurant supplier.mediterranean-cuisine-2378758_1920


Many expected Amazon to completely transform the food industry. In theory, with Amazon’s pre-existing infrastructure, reliability, quick service, and cheap products in bulk, its acquisition of Whole Foods Market could have resulted in a drastic change not only in grocery retail, but for restaurant purchasing as well.

I mean, think about it: how could the combination of one of modern technology’s most powerful search algorithms, the “world’s most trusted” selling platform, and a brand long trusted as a leader in natural and organic foods result in anything other than domination? 

Some analysts believed that restaurants would begin buying from Amazon simply because of the convenience and optimal prices. Additionally, public expectation was that there would be changes in purchasing behavior, with a new era of sorts in B2B and food service distribution. Minor competition from local and regional distributors was somewhat likely, but also, due to Amazon’s stature, quite irrelevant. Or so people thought

What Plate IQ discovered, however, after analyzing on our database of millions of restaurant purchases, doesn’t exactly align with the expectations.

Here’s the thing—restaurants' Amazon purchases grew significantly from 2017 to 2018, rising from 3,274 to 9,717—an almost 200% gain. Likewise, the number of restaurants that bought from Amazon increased by almost 60% over the same period.

What was surprising, however, is that this change was largely due to an increase in purchases of supplies—office supplies, in particular—not food purchases. Supply purchases in 2018 thus far are more than double those of food, and even that isn't a huge number:

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Why hasn't Amazon's role in the restaurant industry lived up to the hype? While we can’t speak for everyone, perhaps restaurants still don’t see Amazon as a viable source for any of their regular purchasing—office supplies included!

Some possible explanations may be that consumers (restaurants in particular) don’t necessarily equate “online” with “fresh." Additionally, restaurants have pre-existing relationships with vendors and may not want to damage them by a switch they see as unnecessary, especially when the change takes time and effort. 

Other studies find that restaurants “know it's risky to over-trust a distributor, [thus buying] from many to keep them honest," a choice that allows them to further optimize prices and quality of various products. 

Another possibility is simply that Amazon may have overestimated their appeal to smaller restaurants. Those operators may be accustomed to working with wholesalers like Costco and may see little benefit in Amazon's offerings. 

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That isn't to say that Amazon will never make inroads into the restaurant industry. Tamara Barnett, The Hartman Group’s director of strategic insights, believes that change will take time because “the way we buy and eat food is very cultural and habitual. It’s going to take a little while to break those habits and get people thinking about buying groceries online.”

For now, the data tells us that Amazon is going to have to do more to win over operators if they want to claim market space as a restaurant supplier. And if they can deliver low prices, convenience, and the transparency that restaurants have longed for, they might just have a shot at transforming the industry.

Mitali Shanbhag

Mitali Shanbhag

Mitali studies Business and Computer Science at the University of Southern California and is a marketing intern Plate IQ for the summer. She may live in LA now, but no amount of sunshine can stop her from cheering on the Warriors.