Retailers and other online sellers reliant on last-mile delivery providers to ensure consumers receive their orders in a timely and safe manner are increasingly finding new options popping up – from established companies that specialize in last-mile delivery to the Uber driver using a third-party app to retrieve orders from stores and restaurants. In some cases, those specialized delivery providers are simply accessing Uber’s and Lyft’s labor forces.
Just recently, discount retailer Five Below (NASDAQ: FIVE) reached a deal with Instacart for same-day delivery services from its 1,100-plus stores. Instacart has several deals with retailers, including Michaels (NASDAQ: MIK), CVS, Costco, Petco, BJ’s, Walmart Canada, Whole Foods, 7-Eleven, Dick’s Sporting Goods and the Disney Store.
DoorDash (NYSE: DASH) has also inked deals recently with retailers, including grocery chain Albertsons, and continues to push its DoorDash for Merchants product.
What all of these services require, though, is drivers. And as Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT) have found in the wake of the COVID-19 pandemic, those can be hard to find. And they are even harder to onboard quickly.
“For years the delivery space and delivery concerns were occupied by those in the third-party space – the couriers,” explained Aaron Hageman, owner and CEO of Delivery Drivers Inc. (DDI), a provider of human resources services for 1099 independent contract drivers. “Simply stated, the rising tides and rising demands of delivery demand across the board [has forced] the retail world to shift how to address delivery.”
A new world
Retailers are increasingly finding last mile to be an important part of their sales solutions. The ability to quickly add drivers to make those deliveries is cumbersome and not typically in the wheelhouse of the retailers.
DDI has spent 25 years serving as an administrator of 1099 human resources needs, everything from recruiting drivers to screening to onboarding and to handling tax and insurance programs. Hageman said that while regulations – such as Prop 22 in California – continue to change the industry, DDI’s goals have remained the same.
“Our job on DDI’s side is to address this ever-changing world from an HR side, but looking at it through the driver’s lens,” he said. “We have a supply-and-demand issue where we are interested in connecting our world of drivers with retailers.”
Hageman said he has attended industry trade shows for years and he had seen a shift in attendee demographics prior to COVID – show attendees included many retailers looking to connect with delivery companies and back-office suppliers like DDI.
DDI’s network of 1099 drivers can be quickly accessed by retailers and the company’s technology allows the retailer to communicate directly with the drivers.
“We can plug in our HR platform into the retailer so that the drivers are available for dispatch and you can have that relationship with the customer. You can own the brand, you can own the data,” he said.
Like the general workforce, there is a shortage of drivers at a time when the “delivery business is busier across all sectors,” Hageman said. “It’s busier everywhere. I simply say if you are already delivering and had a bunch of drivers, you need a bunch more.”
A number of companies in the past year have approached DDI looking for help in building a delivery program. Doing so, though, has been complicated by the regulatory landscape, Hageman said.
“When we started [DDI] in the ’90s, there were 10, 12 tests that differentiated 1099 from W2 employees. These days there are well over 100,” he said.
Most retailers are learning that the regulations are too complex to handle themselves and accessing drivers when needed during peak times is problematic. The growth of microfulfillment centers to handle e-commerce orders has also contributed to a more distributed workforce, something that DDI is able to help rectify.
“On the DDI side, we think about it from the labor standpoint first,” Hageman said. “The drivers we’ve worked with have [traditionally] worked in silos. Take New York City – there could be 10 companies and each has 100 drivers, so there are 1,000 drivers” but a single retailer could not access those 1,000 drivers as it was limited to only those drivers working for the company it contracted with.
But if you put all those 1,000 drivers onto the DDI network, you “flatten that network out” and give the retailer access to more capacity and, in many cases, capacity that is closer to the end consumer, which reduces cost and speeds delivery.
“DDI’s technology can help identify drivers already in the network that can quickly connect to the retailer,” Hageman noted.
In addition, DDI and companies like it are able to collect useful data that aids the retailer’s fulfillment operations. For instance, 60% of drivers in DDI’s network work on three or more app platforms while 80% are on two or more.
“We get a lot of integrated live data these days from our clients,” Hageman said, noting the datasets include earnings over time, earnings per job, customer interest and more. This benefits everyone in the chain – from the driver to the retailer. For the retailer, the access to live data ensures capacity is available when it is needed and only when it is needed. For the drivers, DDI is able to consolidate the information into tools like tax management and insurance offerings.
DDI handles all payments to the drivers and provides records to the retailer. It also ensures drivers meet the standards set by the retailer.
“We’re looking at the driver side and our retail partners are making sure their customers are taken care of,” Hageman said.
The result is a win for everyone looking to benefit from the growth of e-commerce.