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GrubHub Facing Serious Challenge From Amazon

GrubHub shares slipped on Wednesday as investors pondered the implications of, Inc. (NASDAQ:AMZN)'s new competing service called Amazon Restaurants. The stock fell 3.49% to close the day at $26.86 per share, likely because Amazon already poses a serious threat for the food delivery service, which has been struggling to grow. Shares of GrubHub fell again in early trading this morning, declining as much as 0.71% to $26.72 per share

Amazon food service launch was strong

Cowen analyst Kevin Kopelman and his team said they were surprised at how strong Amazon's food delivery service already quite strong. Currently Amazon's service is only available in Seattle as the online retailer tests it out.

Amazon added the food delivery service to its Prime Now mobile app in the city. The company is using its Prime Now infrastructure to make those deliveries, which is basically a "courier model." Prime Now delivers a broad selection of items in local Amazon warehouses within an hour, so the addition of food deliveries isn't much of a stretch.

Amazon already dangerous for GrubHub

Cowen analysts surveyed the online delivery options for restaurants in downtown Seattle and learned that Amazon is already almost as large as GrubHub. The online retailer already has a wide selection of restaurants even though it has only been in the business for about a week and GrubHub and other competitors have been there for years.

Other strengths for Amazon

Further, Amazon's selection of restaurants is set apart from its competitors, as the Cowen team discovered that 72% of the restaurants that are participating in...