EconomicsNewsThought Leadership

Why Lyft could provide the boost needed in Walmart’s fight for online dominance

 A Lyft driver loads goods into his car at a Walmart as part of the retailer's trial program to have Lyft and Uber drivers make deliveries.
A Lyft driver loads goods into his car at a Walmart as part of the retailer’s trial program to have Lyft and Uber drivers make deliveries.


The fierce battle between Amazon and Walmart rages in almost every segment of society – online shopping, food, logistics and delivery – and there are likely more. So it’s no wonder that everyone has an opinion on what each should do to win the battle. The assumption is that someone has to win.

The latest is an opinion column written by Chris J. Snook, managing partner of Launch Haus, on Snook lays out the case for why Amazon should purchase Lyft, the ride-sharing company, and how that purchase would impact Uber.

“Why not buy Uber if you’re Amazon?” Snook asks. “That was my first inclination … when I saw the news of [Uber CEO Travis] Kalanick’s resignation. At first blush, it makes sense. Uber is the king of ride-sharing, has no way of going public any time soon, and their $60 billion valuation is likely ripe for a discounted deal with the right buyer that could promise the institutional shareholders a real path to growth and future liquidity.”

Snook notes that Uber’s autonomous vehicle division would be a fit with Amazon, but then he lays out the case for why Amazon should not go after Uber, instead laying claim to Lyft. He does so in 9 reasons, point by point.

Those points include Lyft’s lower price – he estimates a $15 billion price tag – and the fact that competitors such as Walmart would be forced to keep up and make a bid for Lyft.

Either ride-sharing company could provide a critical link to last-mile delivery for an online retailer. With their large stable of available cars and the mobile app technology already in place, Uber or Lyft would represent an increase in package delivery capacity for either retailer.

But, acquiring a ride-sharing company may be more critical to success for Walmart than Amazon. Here’s why Walmart should make the first move and acquire Lyft.

Walmart is already testing delivery of online orders using current employees, allowing employees in the test markets to pick up extra cash for making deliveries on their way home from work. Second, the idea of using ride-sharing firms to make deliveries is not a far-fetched idea – in fact, it is already being considered by Walmart, which launched a trial program with Uber and Lyft drivers in certain areas of Denver and Phoenix.

“We’ll start small and let our customers guide us, but testing new things like last-mile delivery enables us to better understand the various ways we can best serve our customers how, when and where they need,” said Michael Bender, the operations chief for Walmart’s e-commerce arm, said at the start of the program last year.

Third, Walmart needs something to differentiate itself from Amazon. Both companies are now involved in the government’s SNAP program, allowing recipients to purchase eligible products online. It is estimated that about 20% of Walmart’s sales are currently SNAP related. More than half of its sales come from groceries – some $167 billion worth in 2015.

But, that dominance Walmart holds in groceries is quickly eroding. Amazon has been pushing into this area in recent years and its planned purchase of Whole Foods finally gives it a physical foothold to make local deliveries of healthy, organic foods. Whole Foods storefronts, though, only number around 350, while Walmart has over 5,000 locations in the U.S. and Puerto Rico. Walmart claims that 90% of the U.S. population lives within 15 minutes of a store.

That proximity to and the volume of stores is a huge advantage for Walmart when it comes to speedy, local deliveries. Even Amazon’s impressive logistics network can’t match that, and for that reason Walmart should have an advantage in the battle for food dollars. But making those deliveries in a timely manner is a problem – and it’s one that Amazon has battled as it has tried to grow its Amazon Fresh brand. It turns out that getting fresh food to customers is not as easy as shipping a Kindle across the country in two days.


From farm to plate, the logistical challenges of shipping produce

Could Amazon’s Prime discount pull freight from Walmart?

The great capacity gamble: Amazon or Walmart?

Walmart also has additional experience with last-mile delivery thanks to its Sam’s Club unit, which has been testing grocery delivery with Deliv, a Silicon Valley delivery startup.

By acquiring Lyft, Walmart, with its sheer size, would be getting a local delivery courier that Amazon can’t match at this time, finally giving it a leg up in its e-commerce battle.

But there are other potential benefits for Walmart. Amazon bundles its services together as part of the Prime membership. Walmart could do the same. Walmart has been on a buying spree lately, acquiring Bonobos,, Moosejaw,, and, which specializes in online ordering, in an effort to keep pace with Amazon. Acquiring Lyft and packaging a membership service that includes a Lyft membership and benefits tied to the many other brands Walmart now controls creates a new revenue stream.

To keep pace with Amazon’s two-day shipping, Walmart had to alter its own two-day program – which included a fee – and offer free two-day shipping. What if, with Lyft’s thousands of drivers onboard, that two-day shipping now becomes same-day or even two-hour shipping for in-stock items? What if that Lyft membership not only included same-day shipping, but unlimited rides to and from Walmart stores, thereby bringing more foot traffic into the store? What if it also included a certain number of Lyft rides to and from other locations?

Finally, on-demand urban delivery is a hot market right now. According to a report from McKinsey & Co., there has been more than $5 billion invested by venture capital firms in startups dedicated to this market since 2014. Most of that money is being invested in the logistics networks just to get these companies off the ground.

“Although urban delivery start-ups are striking a chord with consumers, their rise is ultimately due to investors’ bets on a virtuous cycle. Namely, the success of the urban delivery market depends on scale at a level that is only possible with heavy up-front investment,” McKinsey wrote.

The firm notes that the average cost of delivery is between $7 and $10, with much of the focus on food delivery. The market is expected to grow to $200 billion within 10 years.

“On the retail side, brick-and-mortar stores stand to recapture ground from fast-growing pure e-tailers,” McKinsey noted. “They alone have the dense network of physical stores to support same-day order fulfillment and delivery from ‘the city as a warehouse.’ In logistics, incumbent parcel services—not startups—stand to gain at least 80% of the future same-day market. Only they have the critical capabilities that retailers will seek: proven expertise in consolidated network operations, synergies with significant base volume, and the commercial capabilities and standing big-customer relationships to support such deals.”

Lyft has over 100,000 drivers, the company says, and completes more than 1 million rides a week. Acquiring Lyft would give Walmart the capacity needed to capture the same-day business McKinsey is predicting will boom in the next 10 years, while Amazon is busy sending its packages through more traditional and costly parcel carriers. It also would lower the cost of delivery substantially from the $7 to $10 range McKinsey estimates through scale and the combination of services. Especially if those Lyft drivers are already on their way to deliver a passenger.

The logistics of coordinating ride-sharing and package delivery will not be easy, but the technology exists to do so.

In a society that many believe is beginning to move slowly away from car ownership in favor of ride-sharing services, and in a society that is moving quickly to e-commerce with consumers expecting goods delivered faster than ever, having an in-house delivery service is an outside the box move that needs to be happen.

It’s inevitable that either Amazon or Walmart will go down this road, either through an acquisition or a formal partnership. The question is, which one will move first?

Show More

Brian Straight

Brian Straight covers general transportation news and leads the editorial team as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler.