Lyft and Cadillac Fairview: Leveraging Partnerships for the “New Normal”

Almost no industry or individual has been left untouched by COVID-19. Lyft and Cadillac Fairview (CF) have been no exception to heightened turbulence over the past ten months. Opportunity, however, lies in the wake of challenge.

Lyft provides ride-hailing services, capitalizing on a North American shift away from car ownership. In the face of COVID-19, however, transportation volume has declined substantially, as working from home has become the new normal and large social gatherings are in many instances illegal. Lyft has fully felt these impacts, reporting a 61 percent year-over-year decline in Q2 revenue, with active riders dropping 60 percent from 21.8 million to 8.7 million in the same period. Since Lyft has not diversified revenue streams outside of ride-hailing—unlike competitor Uber, which offers other services such as UberEats—Lyft has faced a uniform decline in demand.

CF, valued at more than $30 billion, maintains a Canadian portfolio covering over 35 million square feet of leasable space at 69 properties. For years, e-commerce has left CF’s brick-and-mortar retailers rethinking how to reach consumers, with COVID-19 increasing the urgency of achieving this goal. In response, CF has introduced LiVE by CF, an app that allows shoppers to search stores for products and offers ahead of time, with the goal of enabling customers to efficiently plan shopping excursions. However, declining foot traffic and organic shifts to e-commerce prevent this initiative from reaching its full potential.

Retail Before and After COVID-19
Prior to COVID-19, demand was growing for the convenience of same-day delivery. The global e-commerce market grew from $1.3 trillion to $3.5 trillion from 2014 to 2019, with COVID-19 recently accelerating this shift. Conversely, mall foot traffic was already declining in Canada even before the crisis hit, with the country’s top ten malls seeing 22 percent declines from 2018 to 2019. Of these top ten malls, CF owns five.

Post-Pandemic Shopping
Reacting to COVID-19, retailers have adapted the layout of their stores and imposed capacity restrictions. Consequently, the incentive to make in-person purchases has declined sharply. As a solution, some stores have offered increased checkout options like self-checkout, curbside pick-up, and streamlined return processes. CF’s initiatives have included increased cameras and digital directories to monitor capacity, CF Guest List to aid with curbside pick up processes, and the aforementioned LiVE by CF app. However, as stores have introduced reduced hours of operations and various capacity protocols, the general consumer response has been a shift to online shopping.

Lyft: COVID Response
In response to COVID-19, Lyft has implemented various initiatives to diversify revenue. Among these initiatives is the LyftUp Driver Community Task Force, designed for drivers to make essential deliveries to support their communities in Ottawa, Toronto and Vancouver. Over 120,000 drivers signed up to be a part of this initiative. More recently, the Essential Deliveries initiative allows drivers to deliver essentials to government agencies, local non-profits, businesses and healthcare organizations in the U.S. Both of these initiatives are limited to delivering cleaning supplies, groceries, and other essentials to select groups and regions.

A Partnership To Lyft Up Retail
Given their past experience with the LyftUp Driver Community, it is clear that Lyft is capable of mobilizing its drivers to deliver goods in a similar way to competitors like Uber. Applying the same framework for CF’s retail goods is an untapped opportunity that will diversify Lyft’s revenue streams and position the company to succeed in the long-term as e-commerce becomes increasingly prominent. Lyft’s delivery infrastructure and the LiVE by CF database are well-poised to meet increased demand for courier services in Canada. By bringing together a disruptor with the disrupted, Lyft and CF could diversify revenue streams, offset losses, and capitalize on e-commerce trends.

This would not be the first time Lyft and CF have come together for a powerful partnership. In 2018, an exclusive new collaboration with CF and Lyft was established by designating a pick-up and drop-off zone at the Toronto Eaton Centre during the holiday season. As a leader in digital innovation, CF has repeatedly invested in initiatives that allow shoppers to be rewarded and efficient in their purchasing. At the time of the partnership, Jose Ribau, EVP Digital & Innovation at CF, stated the importance of “adapt[ing] as needed to always reflect what shoppers are looking for.” Lyft has helped CF accomplish this goal in the past, and now both organizations can work together again to achieve their needs by introducing Lyft x LiVE by CF: delivery courier services in Canada for participating merchants at CF shopping centers.

Putting it Together: Pricing
CF and Lyft should pursue a hybrid pricing model composed of a predetermined base rate and additional charges depending on the distance travelled. The last-mile delivery cost will be transferred to customers, with no cost to the retailer to participate; however, retailers will have the choice to subsidize part of the delivery cost to encourage purchases. Typically, Lyft charges C$12 – 15 for a six-kilometre, 15-minute drive in Toronto during standard demand levels. A pricing model that would optimize revenues for Lyft and participating CF retailers could include the same base rate delivery fee of C$2.75 for ridesharing services in Toronto. Following the current pricing model, each kilometre will be priced at a base rate of an additional C$0.75, dynamically changing depending on the availability of drivers. Drivers can also do multiple deliveries located in similar areas to maximize earnings. On top of this fee, Lyft will also collect a service fee of C$2.75 per delivery. Consequently, retailers derive increased margins through cost savings on delivery and packaging fees.

There are a potential 26.1 million e-commerce shoppers to be captured through this service; within this broader market, the college and university population is a prime target, presenting huge spending potential despite only constituting under seven percent of each region. Among 15 to 24-year-olds in Canada, the demographic most likely to be students, over 88 percent shop online. Students have long been targeted by ride-sharing programs, as many students do not drive or own a car.

Since the adoption of a new service requires a certain level of familiarity and a high level of convenience, a partnership with familiar brands would address current consumer needs in university and college vicinities. Lyft represents one of the first ridesharing services available in Canada and currently boasts 250,000 annual users throughout the country. Though the platform currently has under 50,000 drivers in Canada, the effects of COVID-19 have accelerated the shift to “gig” employment; many new drivers will be ready to join Lyft as unemployment and furloughed labour increase. Meanwhile, LiVE by CF already has approximately 65,000 monthly downloads. Mobile app downloads are projected to increase by a predicted 25% annually into 2022 as the world becomes more digitized.

A Test Drive Before Hitting The Road
Lyft should begin its roll-out with smaller locations close to student demographics to collect data testing demand, supply and delivery processes. These could include London’s Masonville, Hamilton’s Lime Ridge and Markham’s Markville. Following this, more urban malls in densely populated areas could begin to host the service, including CF’s Toronto Eaton Centre, Sherway Gardens, Vancouver’s Richmond Centre, Ottawa’s Rideau Centre and Galeries d’Anjou in Montreal.

Getting retailers on board is vital to Lyft’s strategic success; many brands have developed their own shipping processes, investing millions into dispatch centers and warehouses. Additionally, many have implemented various value-adds into their pricing, such as free delivery promotions. LiVE by CF’s immersive app has already partnered with H&M, Saks Fifth Avenue, Roots, Hudson’s Bay, and Banana Republic; these partners represent retailers looking to take the next step in bringing the mall experience to shoppers virtually.

CF should develop the capability to make purchases through LiVE by CF. After customers locate the items they would like to purchase and pay for them through the app, the app will contact local Lyft drivers to set up the delivery. Once orders are placed, malls could designate a Lyft pickup zone, where purchases are funnelled into and organized in a way that they are bundled by vicinity to similar neighbourhoods. Shoppers would be able to select their optimal delivery time, with same day or next day delivery guaranteed, depending on the time the order is placed.

Driving On The Road To The Future
Lyft and CF both face acute, existential challenges in the wake of COVID-19. The pandemic has severely dislocated both companies’ business models while reinforcing and accelerating existing trends toward e-commerce. Fortunately, through the benefits of their existing relationship and the logistical support provided by LiVE by CF, Lyft and CF can effectively reimagine the value proposition of the shopping mall for customers and retailers alike and deliver a robust, price-competitive last-mile delivery solution. Taking the mall experience virtual while catering to the needs of all stakeholders will not come without headwinds. However, by continuing to view challenge as a window for opportunity, the months ahead under the cloud of COVID-19 begin to look a little less grey.