Tipping in the US is a critical part of how the wheels turn in the service economy. One area of service that is very much overlooked, however, is the world of last mile delivery – a service job that falls between the cracks when it comes to tipping, as those who deliver products typically don’t work for the company you buy the product, leaving the responsibility and incentive for tipping up in the air.
Now called a new startup Powered launches to attempt to close that gap.
Drivr is a crowdsourced tipping platform that uses data science to map drivers to neighborhoods, then creates tip pools to collect monthly contributions from residents in those neighborhoods, then split the amount among drivers serving those areas, based on the number of supplies they have. made there. Drivr has built apps for the two sides of its marketplace: residents to give money, and drivers to sign up and collect those tips, and it’s launching first in the city of Santa Cruz, California, before launching elsewhere in the U.S. wants to expand
The arrival of Drivr (ho ho) comes because several other startups are also thinking about tipping and how to build a business out of it. They contain Tiphaus from Seattle; Tip jar in the UK (which raised about $4 million from angels and crowdfunding); 7shifts (which covers a wider range of services and has raised more than $130 million); EasyTip; and TipPot. Patreon, now valued at over $4 billion, also capitalizes on the idea that customers are voluntarily paying producers as part of the compensation equation. Patreon’s focus is on creatives, but also happens to have a membership concept similar to Drivr’s with its monthly dues element.
Building a tip collection and distribution platform for last-mile delivery drivers is a long time coming, given that tipping has already become so commonplace in other areas of service, including tech economics.
In the world of on-demand mobility services dominated by Uber and Lyft, tipping is already a tricky business.
Initially, the leading company in the space, Uber, was reluctant to create a space for tips, arguing that the price they charged and the payouts to drivers already accounted for tips (it also helpfully helped reduce friction). for paying for a service that was already potentially dancing on the verge of being reasonably-sufficient-affordable for the majority of consumers). Drivers and customers objected, as the lack of transparency felt a bit exploitative rather than fair. Finally, in 2017, Uber succumbed and created a tipping option. But that was not without problems: User behavior initially seemed inclined to omit tips.
The challenges are even greater for last-mile deliverers, who have a lot of pressure to deliver, so to speak.
A daily route often includes between 250 and 300 packages with a pay range between $16 and $22 per hour of work. The number of packs per day — but not the pay rate — goes up to 400 during holiday sales and made-up sales holidays like Prime Day. Aside from the complexity of Amazon’s management of tips for drivers it doesn’t employ, there’s another hurdle: Membership services like Prime have deliberately lowered the threshold for buying by including shipping costs — meaning it’s on the one hand. somehow incorporating a tipping option would beat the point of that as far as Amazon is concerned.
The concept is still in its infancy, as is the startup, which to begin with is primarily self-funded by $1 million from co-founders Sol Lipman and Jacob Knobel himself.
The pair have been working together for years and built a number of startups together, some of which were acquired by Aol and Yahoo, which are now the same company. (Yahoo also owns londonbusinessblog.com, and just to be clear, that’s not how I got in touch with the startup.) Most recently, the pair worked together at Amazon on things including Ring, after Amazon acquired a startup called Owlcam, where both senior positions had.
At Amazon, Lipman told me, he started thinking about the role that last-mile delivery drivers play in the e-commerce ecosystem. In short, drivers have it bad. On the one hand, they are central to both the customer experience and more practically the completion of any transaction by delivering the product into the hands of the buyer. But on the other hand, drivers also work remotely from the companies themselves, as both Amazon and major delivery partners like FedEx generally don’t employ all of their last-mile carriers directly. (Flex and Whole Foods are examples of exceptions where Amazon does, and you can tip drivers for these services.)
One of the consequences is that drivers generally do not have the option to withdraw tips.
This is where Drivr comes in. Lipman’s theory is that because gratuities have become a central part of how people in delivery positions are rewarded, when this isn’t possible, it affects not only those drivers’ home pay, but also their loyalty to the driver. work. As a result, the dropout rates are terrible for delivery drivers. Estimates vary, but a report estimates that 15.8% of drivers who work under the dispatch model typically leave their jobs within 30 days and 35.4% are gone within 90 days. Drivr cites research that claims only 10% stay for a year. Simply put, the reward for many of them is not worth it.
Initially, Drivr will operate its tipping service through a pooled model: it will use algorithms and census data to determine “neighborhoods” around which it organizes both residents and drivers working in that area, and it will include data about where and how many drivers work.
“We track their location and time spent in a particular neighborhood. We take that data and share tips fairly based on that,” said Lipman.
Residents put money in a payment pot with an app, which is distributed and distributed among the drivers in the area that is served. Drivers are paid out of the pot twice a month and Driv charges a 6% transaction fee as a discount.
There are some aspects to the model that may only work well when and if Driv is scaling. If a neighborhood only uses one or two residents who pay $10 a month, that’s a very meager pot to share with significantly more than one or two drivers. Like many crowdsourcing efforts, there is a leap of faith and belief in the greater purpose.
“As with NextDoor, our strategy is to start hyper-locally and expand regionally. We develop the neighborhood before launching it to Drivers to avoid empty neighborhoods,” Lipman said. “But for drivers, even a modest tip jar to start has value. Again, if 10% of customers tip $10 a month, increase the driver compensation by 20%. This has a significant impact on the driver’s income. The alternative is simply doing nothing to show your support for drivers.”
There’s also the fact that not every driver is great. Lipman said in the future, the plan is to let customers use the app to tip specific drivers, in addition to tipping in the virtual tip jar.
There may also be some confusion once you start putting another service delivery tier on top of the existing delivery model. People who do have problems with their deliveries might be inclined to think that Drivr acts as an intermediary for that as well, as it does for tips. Lipman notes that those who have issues should still contact Amazon (or the other relevant retailer) directly.
That does raise another question, which is whether Amazon or others will attempt to destroy Drivr because it inserted itself into the process.
Lipman’s response: Amazon and FedEx drivers do not work for Amazon, but for the third-party companies that make the deliveries for them. Meaning: Amazon technically has nothing to say.
“If there is a legitimate reason that a [service provider] don’t want to employ our platform, we are open to feedback. However, we believe the opposite is true,” said Lipman. “Retailers like Amazon and the delivery service providers will enjoy what we do. We help drivers get paid more, which is the best way to tackle churn among last-mile drivers. , and it is their biggest problem and expense.” Lipman did some homework for the launch and said conversations with the service providers themselves showed that “100% of them support the product and encourage their drivers to sign up.”