The service economy depends on tipping in the U.S. Last-mile delivery is a service job that falls between the cracks when it comes to tipping because those who deliver products don't work for the company that is selling you the product, leaving the responsibility and incentive
The new startup is called Drivr.
Drivr uses data science to map drivers to neighborhoods and then creates tipping pools to collect monthly contributions from residents in those neighborhoods, with the sum then divided up among drivers serving those areas according to how many deliveries they have made there. Drivr has built apps for the two sides of its marketplace: residents to tip money, and drives to sign up and collect those tips, and it will launch first in the city of Santa Cruz, CA, before looking to expand elsewhere in the US.
Several other startup are thinking about tipping and how to build a business out of it, as Drivr arrives. They include Tiphaus from Seattle, Tipjar in the UK, 7shifts, and EasyTip, all of which have raised millions of dollars. The company is working on the idea of customers paying producers as part of the remuneration equation. The monthly contribution element of Drivrs is similar to the monthly contribution element of Patreon.
It will take a long time for a platform to be built to collect and distribute tips to last-mile delivery drivers.
Tipping is no longer an issue in the world of on-demand mobility services.
Initially the leading company in the space,Uber, was reluctant to create a space for tipping, arguing that the price they were charging, and the payouts to drivers, already took tipping into account The lack of transparency felt exploitative and unfair to drivers and customers. The option for tips was created by the ride sharing company. User behavior initially appeared to leave tips out.
Last-mile delivery drivers have a lot of pressure to deliver and it's even bigger.
The pay range for a daily route is between $16 and $22 per hour of work. During holiday sales and made up sales holidays, the number of packages increases up to 400. There is a reason why Amazon doesn't employ tipping for drivers, and it's because membership services like Prime have lowered the barrier to buying by including shipping charges.
The concept is still in its infancy, and so is the startup, which is being self-funded by the co- founders.
The pair have worked together for years, building a number of startups together, some of which were acquired by Aol and Yahoo, which are now the same company, Yahoo Inc. That is not how I met the startup. The pair worked together at Amazon after the acquisition of Owlcam, where both had senior roles.
Lipman told me that he began to think about the role that last-mile delivery drivers play in the e- commerce industry. Drivers don't have it good. They are central to both the customer experience and the completion of transactions by way of delivering the product into the buyer's hands. Both FedEx and Amazon do not directly employ all their last-mile carriers, so drivers have to work for both businesses. Flex and Wholefoods are examples of exceptions where Amazon doesn't.
Drivers don't usually have a place to take tips.
Drivr is here. Lipman believes that because tipping has become a central part of how people in delivery roles are remunerated, when it is not possible to do so, it affects not just those drivers' take- home pay, but their loyalty to staying at the job. Delivery drivers don't fare well at attrition rates. Estimates vary but one report estimated that 1/3 of drivers on the dispatch model leave their jobs within 30 days. According to research, only 10% of people stay for a year. The pay for a lot of them is not worth the effort.
Initially, Drivr will operate its tips service by way of a pooled model: it uses algorithms and census data to determine "neighborhoods" around which it organizes both residents and the drivers who work in that area, and it will include in that data about where and how many drivers
Their location and time spent are tracked. Lipman said that they take the data and distribute it in a fair way.
Residents use an app to put money into a payment pot which is divvied up and distributed among the drivers in the area being served Drivr takes a 6% transaction fee as its cut when drivers are paid out twice a month.
The model may only work well if Drivr scales. If a neighbohood only has take-up from one or two residents who are chipping in $10 per month, that makes for a very measly pot of money to share. There is a leap of faith in the larger goal.
Our strategy is to start hyperlocal and expand out. Lipman said that they developed the neighborhood before launching it to drivers. Even a modest tip jar has value for drivers. If 10% of customers tip, driver pay will increase by 20%. It has a significant impact on driver income.
Not all drivers are great. Customers will be able to use the app to tip specific drivers in the future, according to Lipman.
There is going to be some confusion when you put another delivery layer on top of the current model. Drivr may be acting as a go-between for people who are having trouble with their deliveries, just as they are for tips. Those having issues need to contact Amazon directly, according to Lipman.
Is it possible that Amazon or others will try to stop Drivr from entering the process?
Lipman said that Amazon and FedEx drivers don't work for them but for third-party companies that deliver for them. Amazon doesn't have a say
We are open to feedback if there is a legitimate reason for the service provider not to use our platform. We think the opposite is true. We are helping to get drivers paid more, which is the best way to address last mile drivers, and is their number one problem and cost center. Lipman did some pre-launch homework and found that most of the service providers were supportive of the product and encouraged their drivers to sign up.
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