The author and Facebook product manager Parth Detroja has made a bold prediction: In the next 18 months, he says, Amazon will buy Lyft, the ride-hailing company that is reportedly planning to go public next year. In the view of Detroja, who coauthored a book on key business strategies in tech, “Swipe to Unlock,” a better move for Lyft’s business would be an acquisition by Amazon.
The deal would benefit both companies by solving their key pain points, Detroja says: Amazon’s signature subscriber offering of two-day shipping is costly and difficult to execute, and Lyft has yet to make significant progress entering international markets.
If Amazon acquired Lyft, the company could use drivers’ trunks to make deliveries when they aren’t picking up riders. In turn, Lyft could compete on a global stage against Uber by tapping into Amazon’s rapidly growing international Prime-subscriber base.
How Amazon’s last-mile delivery pains could be relieved
“If you look at ridesharing, the fundamental problem is that it’s incredibly difficult to open a new market because you need a steady base of both drivers and passengers for the service to work,” Detroja says. “The costs to do that are insane.”
With a Lyft acquisition by Amazon, Detroja suggests, the shopping giant could offer Prime subscribers discounted rides — which could open new markets for the ride-share company overnight. In turn, Lyft could acquire new drivers by offering better pay than its biggest rival, Uber, by using the empty space in drivers’ trunks to courier Amazon packages to Prime subscribers.
Amazon has already looked into acquiring a driver base that would corner last-mile food delivery, Detroja points out. In September, The Telegraph reported that Amazon engaged in early-stage acquisition talks with the European courier service Deliveroo twice in recent months.
“The logistics of Amazon’s last-mile food delivery are so expensive,” Detroja says. “There’s also gaps with ridesharing. What if Lyft drivers had food or items in their trunk that they could deliver along passenger-pickup routes?”
Detroja acknowledges a few obvious snafus with this theory: A trunk full of packages be a problem for passengers traveling with luggage, and a deluge of riders may cause issues ensuring timely package delivery.
“Of course there’s intricacies here that would need to be sorted out,” he says.
“As Amazon grows in established markets, what they’re trying to do is outspend and out-offer their competitors. For instance, free two-day shipping wasn’t even a thing until Amazon pioneered it — they’re forcing everyone’s hands.”
Uber’s valuation may suffer as a result
Detroja also points out that if Lyft and Amazon teamed up, they’d be formidable contenders against Uber.
“Uber and Lyft have tried to engage in a price war, but their prices will always be in within 5% of each other,” he says. “If they tried to compete for better prices forever, it would be a race to zero. But if Amazon owned Lyft, they could pass on savings to the consumer. It’s the same strategy Amazon used to offer people video and music services.”
Additionally, with a Lyft acquisition, Amazon would acquire yet another interesting asset, Detroja notes: Lyft’s self-driving technology, which highlights an area that Amazon has expressed growing interest in over the past year.
Detroja predicts an acquisition would have a direct effect on Uber’s multibillion-dollar valuation. “I think Uber’s valuation would be cut substantially,” Detroja says. And, if the acquisition took place before Uber’s initial public offering — which, like Lyft’s, is reportedly expected to take place in 2019 — Detroja says, the company might need a new valuation before going public. “Uber would take a huge hit in market share overnight,” Detroja says.