It has been reported that Amazon is in advanced talks to buy Zoox Inc. The potential purchase would support Amazon’s logistical self-sufficiency goal.
The possibility of autonomous deliveries could significantly push costs down. This is a key driver of Amazon’s interest in Zoox.
Zoox could also place Amazon firmly in the race for developing commercially viable self-driving technology.
Terms of purchase would likely value Zoox below its $3.2bn valuation received in its most recent funding round in 2018.
Zoox purchase could bring spiraling fulfilment costs down
While luring customers in with one-day deliveries has been a good move by Amazon, it is expensive. Shipping and fulfilment costs grew by over 34% in the last quarter, compared with the previous year. These costs are growing more quickly than the company’s sales, which grew by 22% in Q1 2020.
The possibility of autonomous deliveries could significantly push costs down. Shipping costs would plummet and without the need to hire human drivers, the company could also save additional costs. This is a key driver of Amazon’s interest in Zoox.
Paying drivers to deliver its goods to customers is one of the biggest costs that Amazon faces.
As such the company is willing to make significant investment in automating its business.
The company has made a series of acquisitions and advancements within this field but operating autonomous delivery at scale remains out of reach.
The acquisition of Zoox could bring Amazon a step closer to automating its delivery service.
Acquisition could put Amazon in competition with Google for self-driving technology
Zoox could place Amazon firmly in the race for developing commercially viable self-driving technology. Self-driving technology remains out of reach at present and hasn’t come to fruition anywhere near as quickly as was once expected. The capital required has been spiralling and accidents have put the technology out of reach of being regulated.
Given that Amazon has already made a number of acquisitions within the auto industry, the company could become a major automotive player if the Zoox purchase goes ahead.
Development of this technology requires a company with the potential to invest significant capital and be willing to wait for the rewards. Amazon would make a good contender.
Buying Zoox now could mean paying under its valuation
Buying the company now would mean the e-commerce giant is likely to pay below Zoox’s $3.2bn valuation received in its most recent funding round in 2018.
Prior to the Covid-19 pandemic, Zoox had begun to reach a point where it was in need of new funds. Spiralling costs and settlements with Tesla have taken their toll.
As the coronavirus pandemic hit, Zoox let go 120 contract workers and reduced its workforce by 10%. With the pandemic putting a halt to the company showcasing its latest technology, it faces a difficult few months.
Any buyer looking to acquire the company now will likely pay significantly below the $3.2bn valuation.