Why Amazon is giving employees $10,000 to quit

Take Walmart: Two years ago, it tried asking its employees to deliver online orders before and after work, in their own cars. That idea was later abandoned, but the problem of the last mile remains, even for the biggest retailers. Now, Amazon is offering to pay its employees thousands of dollars to deliver packages—they just have to quit their current jobs first.

Last June, Amazon created the Delivery Service Partner program to allow entrepreneurs to create their own businesses delivering packages for Amazon. The idea was to get orders moving fast, without the need to rely on UPS or FedEx. On Monday, Amazon said it would begin offering employees up to $10,000 in startup costs to leave their current positions to join the program, as well as three months of gross pay. The initiative arrives as Amazon is pushing to deliver Prime orders within one day instead of two, making the last mile all the more important.

Not just anyone can sign up to be an Amazon Delivery Service Partner. You need to invest at least $10,000 and have liquid assets of at least $30,000. (The latter requirement is being lowered for employees.) Those stringent rules may be one of the reasons Amazon is now turning to its own workforce for help. The company says more than 200 delivery partners have sprung up in the past year, but the US labor market remains extremely tight, and it’s not clear how many more people are in a position to join the program.

What’s more, Amazon appears to prefer contracting with smaller delivery companies. On its website, it says partners typically have fewer than 100 workers and 40 vans. There may be only so much growth left for Amazon’s current partners, while its delivery needs seem to have no limit in sight.

Delivery partners are considered outside contractors—the drivers who work for them aren’t Amazon employees. While they can technically do work for any company, Amazon provides partners with access to branded vehicles that can be used only for hauling Amazon packages. That employment setup helps Amazon compete with companies like FedEx, which also has third-party drivers at the wheel of its branded vans and trucks. And it saves Amazon the responsibility of providing drivers with benefits like health insurance.

That doesn’t mean Amazon has avoided using individual delivery drivers entirely. Since 2015, it has relied on them through its Uber-like Flex platform, where contracted drivers can sign up for shifts delivering Amazon packages for $18 to $25 an hour before expenses. The program is likely cumbersome to run, says Cathy Morrow Roberson, founder of research and consulting firm Logistics Trends & Insights. She says companies shouldn’t depend on crowdsourcing for their entire last-mile strategy, since it’s hard to plan around such a precarious workforce.

Amazon Flex has also proven to be a public relations nightmare. A series of media investigations and first-person accounts have documented the grueling work that can come with delivering for Amazon and how drivers must submit to the use of facial recognition.

Delivery partners, by contrast, can manage their drivers however they choose. That freedom may prove attractive to many current Amazon employees interested in starting their own company. Becoming a delivery partner could also be a smart business decision, especially since self-driving delivery services are still years away. While Amazon is quickly automating other parts of its supply chain, it will continue to need drivers ensuring that packages make it the last mile.

In the meantime, Amazon’s rivals are catching up: Walmart just announced it’s going to provide next-day delivery too.  (WIRED)