By Greg Bensinger
Amazon.com Inc. is joining the "gig" economy.
The Seattle online retailer in recent weeks has quietly rolled
out a program in its hometown to ferry merchandise to customers'
homes using a network of independent contractors, similar to
so-called on-demand services such as Uber Technologies Inc. and
Postmates Inc.
Under the new service, called Amazon Flex, people sign up for
shifts through an app that prompts them to fetch packages from
mini-warehouses and take them to customers' homes in as little as
one hour. Amazon pays the drivers about $20 an hour to make the
deliveries.
The Wall Street Journal in June reported Amazon was considering
a similar service known internally as "On My Way."
"There is a tremendous population of people who want to work in
an on-demand fashion," said Dave Clark, senior vice president of
world-wide operations. "This is another opportunity for people to
work with the company."
It is also the latest move by Amazon in its perpetual drive to
lower shipping costs and pare delivery times as it seeks to become
the central commercial hub for all shoppers. As part of those
efforts, Amazon is building out its own last-mile network and has
turned to a widening variety of couriers and delivery workers. to
shuttle goods to their destinations--not to mention its goal of
delivery by drone.
The new service would give Amazon more control over the delivery
experience, including proprietary mobile routing and tracking
software, and help contain shipping costs that grew 31% last year,
faster than revenue.
But by relying on an on-demand workforce, Amazon also risks
plunging itself into the center of a contentious debate roiling
Silicon Valley over whether such laborers deserve full benefits and
pay.
Amazon Flex, for now, is part of the Prime Now service available
in 13 cities that promises deliveries as quickly as one hour for
$8, or free for two hours or more. Prime Now is available only to
members of the $99-a-year Prime unlimited shipping program.
The Flex service will initially be only in Seattle, though Mr.
Clark said he expected to expand it to other Prime Now areas. He
said Amazon will route Prime Now merchandise using either Flex
drivers or one of several courier companies it relies on.
Amazon says tens of thousands of items are available for
delivery under Prime Now including, in Seattle, alcohol. Gene
Munster, a Piper Jaffray analyst, said as Prime Now expands, Amazon
is becoming a greater threat to brick-and-mortar retailers.
"Same-day and same-hour delivery have the potential to open an
entirely new retail segment to Amazon--the instant gratification
market," he said. Traditional retailers have historically enjoyed
in-store pickup as a competitive advantage over Amazon--that
advantage is slowly going away."
However the Flex program opens up Amazon to new risks as well.
Like countless other on-demand delivery services, Amazon is
shifting to Flex workers expenses like car insurance, fuel and
health care, which helps keep costs low. Amazon said that many
workers enjoy the flexibility that being a contractor, rather than
an employee, affords them.
But that distinction is at the heart of several lawsuits against
Uber, grocery delivery startup Instacart, Postmates and others over
whether contract workers were misclassified and should be entitled
to back pay and benefits.
In Seattle, the City Council is considering a bill that would
allow for-hire drivers to unionize.
Two drivers for Uber in recent months were found to deserve back
wages and a California judge this month granted some of them
class-action status.
Amid the raft of suits threatening to reclassify contractors as
employees, some startups aren't waiting for the legal system to
play out, choosing instead to convert their contract workers to
employees.
"We feel very confident in our approach," said Mr. Clark. He
said he expected as applicants "serious people who want to do a
good job."
Amazon said the company generally assumes liability for the
products Flex drivers deliver, but will also closely monitor
workers' performance and could suspend them from the program if
multiple problems occur.
The company will typically pay between $18 and $20 an hour to
drivers, said Mr. Clark. Drivers can make more if they deliver more
packages quickly because many customers also pay tips.
Amazon will conduct background checks on applicants using an
Irvine, Calif., firm called Accurate Background Inc.
The company declined to say which cities it would roll out Flex
to after Seattle, though a screenshot of the app it provided showed
a map and address of Miami, a Prime Now city.
Write to Greg Bensinger at greg.bensinger@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 29, 2015 00:15 ET (04:15 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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