The ride-hailing service Lyft is taking the leap into the competitive food-delivery space through a partnership with the online-ordering giant Olo, the two companies jointly announced Tuesday.
Justin Paris, the head of Lyft Delivery, said the “opportunity size” tied to partnering with Olo is “several hundred thousand deliveries per week.”
Olo, which went public in March, works with 500 restaurant brands that have 76,000 locations in the US. Large chains like Wingstop and Denny’s use Olo’s network of two dozen delivery providers to offer delivery to consumers. Lyft is now part of that delivery-provider mix, which also includes Uber Eats and DoorDash.
But unlike third-party platforms, Lyft is not trying to sell directly to consumers. “We don’t have a consumer-facing marketplace,” Paris said.
“This is not about Lyft creating a clone of Uber Eats,” Olo CEO Noah Glass told Insider in an interview ahead of Tuesday’s announcement.
Instead, Lyft’s strategy is to facilitate last-mile deliveries for merchants who are tired of “paying high commissions” and “losing control” of consumer data by using other delivery service providers, Paris said. Most third-party platforms do not share customer data with restaurants.
“Our approach is instead of trying to compete with retailers and merchants for eyeballs and customer data, we’re actually enabling these merchants and retailers to do local delivery without having to have their own internal fleet,” he said.
Lyft has been building its delivery business for a year, testing business-to-business deliveries with retailers like Napa Auto Parts.
Lyft’s B2B offering is aimed at undercutting the prices of third-party platforms like Uber Eats, DoorDash, and Grubhub, which can charge restaurants as much as 30% per order, Lyft President John Zimmer told Reuters in November 2020.
“What we’re hearing from restaurants is they’re looking for a partner who will not charge 30% commission, but still offer delivery service,” he said.
Glass said partnering with Lyft will likely bring down delivery costs for both restaurants and consumers because it creates more competition.
“It’s a little bit like the old LendingTree commercial of ‘When banks compete, you win,'” Glass said. “When delivery service providers compete, you win because you get better rates, and you get faster delivery times.”
Lyft delivery is live in about 25 markets, including Dallas, Miami, Tampa, Chicago, and Denver.
“We’re just scratching the surface,” Paris said. “We would expect to rapidly increase that to several hundred markets.”