After experiencing two seizures while behind the wheel—first plowing her car into the side of a drugstore and then, less than a year later, into a stone wall—Connie Godby gave up driving for good late last year. Even when she can control her seizures, vestiges of a brain tumor she suffered more than a decade ago, the arthritis curling her left hand makes it hard to grip the wheel. She recently moved from Kentucky to the Maryland suburbs of Washington, D.C., to live with her daughter and son-in-law, busy professionals with two small children and scarce time to ferry her around. So she does it with an app. She is now one of a growing number of seniors using ride-hailing services like Uber and Lyft to get around.
A graying America is also an America that is gradually, reluctantly, sometimes painfully giving up its keys. Driving can be dangerous for people with slowed reflexes and cognitive functioning, but not driving can be dangerous too: A lack of independent mobility leads many seniors to miss medical appointments and can isolate them from the social support network that is clinically shown to prolong life. Unfortunately, the nation’s transportation infrastructure relies heavily on cars. Faced with long rides on multiple trains and buses with unpredictable schedules, many seniors end up just staying home.
But today’s seniors are also aging at a time of rapidly multiplying transportation options in the private sector, with ride-hailing companies like Uber and Lyft at the front of the pack. Those companies blossomed amid the millennial-oriented sharing economy, serving wired young urbanites accustomed to meeting all their needs via smartphone. For some seniors, they represent the same kind of lifeline—although they also pose some new challenges.
The companies themselves have recognized the business potential of tapping into America’s rapidly growing senior population: Uber and Lyft are both busily building partnerships with senior care facilities and hospital centers. It's not always easy, though, and their struggles are a window into the challenges of delivering tech-based solutions to a population that grew up in a very different world.
Godby uses a walker that folds up easily, not a wheelchair, which requires an entirely different kind of vehicle. And she uses a smartphone, but she’s in the minority—just 42 percent of Americans over 65 own a smartphone, compared with 77 percent of the general population.
To bridge that gap, some third parties, with names like GoGoGrandparent, have created hotlines seniors can call if they can’t or don’t want to use a smartphone to hail a ride—though they add a significant fee to the cost of each trip. Uber is sending representatives down to retirement homes in Florida to preach the gospel of ride-sharing to the senior set. All these are attempts to connect a useful mobility solution with a population that desperately needs one—but there’s still much to figure out.
TRANSPORTATION MIGHT SOUND like a secondary issue for older Americans, compared with massive needs like health care, but it's almost as essential and gets far less public investment and policy attention. Getting around often represents the single biggest challenge of being old. Resource hotlines for elders report that transportation is the No. 1 reason people call—and often, they’re desperately looking for a ride to the doctor the next day. Lack of transportation access is a primary reason older people move into assisted-living facilities, a life change many would prefer not to make.
Public transportation can sometimes be an option for seniors, but the great majority live in suburban areas that are poorly served by transit. Even for those lucky enough to have convenient public transportation options nearby, simply learning to navigate a transit system—including all its accessibility options—can be intimidating; so much so that some systems, like Washington, D.C.’s, WMATA, have started providing customized transit trainings for senior citizens and people with disabilities.
A handicapped woman with crutches waits at bus stop. Transportation is often a major problem for seniors, even if we don’t often think of it that way. Ridesharing companies like Uber or Lyft could be the solution. | Getty Images ______________________________________
Paratransit—on-demand, door-to-door minibus services run by transit authorities to supplement fixed-route bus and rail lines—is limited, expensive to run and generally doesn't extend far beyond existing bus routes. Riders don’t like paratransit much either, since rides usually need to be booked at least 24 hours in advance. Even just going through the process of getting approved to use the service can be an ordeal.
All of this is what makes private vehicles such an attractive option—and cities are taking notice. This doesn't always mean the newer ride-hailing companies: Last week, Washington, D.C., launched its “Abilities-Ride” service, which subsidizes taxi rides that people can use in place of paratransit. (The city chose the taxi companies over Uber and Lyft in part because of the better availability of wheelchair-accessible vehicles.) Arlington, Virginia’s, Area Agency on Aging also chose taxi companies—not ride-hailing companies—for its voucher program, selecting the companies it did because they had a track record of respectful customer service that went the extra mile for older customers, like helping people in and out of the car. Most importantly, though, they are willing to accept the vouchers, which don’t include tips.
But popular ride-hailing app-based services Uber and Lyft want a piece of the action, too. Lyft has staff dedicated to health care partnerships, and Uber has people focused on “mobility,” including access for the elderly and people with disabilities.
“On-demand transportation will really not just serve 18- to 25-year-olds who are out late at night," said Allison Wylie, an Uber employee who works to strengthen connections with the senior community. "It’s something that can improve the lives of people who lose their keys.”
Boston’s Massachusetts Bay Transportation Authority is supplementing its paratransit program by using Uber and Lyft, which it subsidizes for qualified riders who don't need the full assistance that paratransit provides. Riders who need help getting to or into the vehicle, or who use a wheelchair, are advised to stick with paratransit.
Those limitations illustrate the growing pains the ride-hailing companies are experiencing as they seek to serve a population with more complicated needs than the nimble young urbanites they’d grown accustomed to dealing with. Both companies provide wheelchair-accessible vehicles, but only in a very limited number of markets—and even those markets often have far too few vehicles. Uber, for its part, launched an UberAssist option in 2015 for people who need additional help, where specially trained drivers can help passengers in and out of vehicles, but it’s still operating at a small scale.
Lyft is working on ways for seniors without smartphones to use the service, but for now, the most widely available option is available only on the large-font, simple-screen Jitterbug phone target-marketed to the elderly. Riders press “0” on the phone to talk to an operator, who then orders the Lyft. The company clearly sees this as a growth area: It built a new platform, called Concierge, that allows the operators to request rides for others, and it has also brought the Concierge service to senior care centers and hospitals, making it easier for those facilities to request a ride on behalf of their clients. Similarly, Uber noticed that a lot of people were requesting pickups for a location other than their own—indicating that they were for someone else, often a parent or grandparent—and smoothed that process, a new feature it internally calls “UberBounce.” But neither of those are a full solution for app-averse seniors.
AFFORDABILITY IS ANOTHER barrier. Seniors often don't have much discretionary income, and paratransit is heavily subsidized. Ride-hailing services are often cheaper than taxis, but the costs still add up, limiting mobility in a different way.
Some medical facilities and health insurers have started trying to pick up the burden themselves. Older patients miss subspecialty doctor appointments as much as 30 percent of the time, according to AARP, which can lead to costly emergency-room visits and ambulance rides. Some health care companies believe that driving down those no-show rates is worth the cost of an Uber ride. Hospitals in New York City and the Washington, D.C., metro area have started facilitating ride-booking to non-emergency medical appointments, with Medicaid and other insurance plans sometimes picking up the tab. BlueCross BlueShield has identified “transportation deserts” where medical care is hard to access without a car and are offering patients in those areas free access to Lyft as a way to reduce the number of missed appointments.
A woman uses the Massachusetts Bay Transportation Authority's paratransit, service, The Ride. | Getty __________________________
The trend has been aided by a recent ruling by the Department of Health and Human Services that it’s not a “kickback” for hospitals to pay for patients’ transportation, which could dramatically increase the medical sector’s participation in paying for on-demand rides.
In a more ambitious experiment, AARP Foundation just announced a new pilot program with UnitedHealthcare, Lyft and the University of Southern California to give free, unrestricted rides to people at high risk of missing a medical appointment. Participants will get three months of free rides for any purpose—not just medical—and their physical activity will be tracked on a FitBit. It amounts to a bet that increasing mobility will have positive effects beyond just making the appointment. Similar pilot programs are being considered for Chicago and Atlanta next year, but as of now it’s just a tiny test group.
Uber has suffered a slew of PR disasters, including the devastating #DeleteUber campaign, giving the company an extra incentive to show some compassion by providing services to a more challenging population. But it’s not all charity: It sees expanding the service to serve seniors, a rapidly growing slice of the population, as a good business investment.
Is it sustainable? That's not clear yet; as big as they are, Uber and Lyft are still money-losing startups that compete with taxis by keeping their rates artificially low. For riders, those rates are a big part of the draw. The times she’s had trouble with the apps and ended up taking a taxi, Godby says she was floored by the high prices. And she finds that Uber and Lyft drivers almost always jump out to help her when they see her standing in front of the house with a walker.
“I’m not the bravest when it comes to making a change,” Godby said. “I don’t have many apps; I don’t want many apps. But it works.”
Tanya Snyder is a transportation reporter for POLITICO Pro.
NBER Working Paper No. 23891 Issued in September 2017 NBER Program(s): IOLELSPE
Ride-hailing drivers pay a proportion of their fares to the ride-hailing platform operator, a commission-based compensation model used by many internet-mediated service providers. To Uber drivers, this commission is known as the Uber fee. By contrast, traditional taxi drivers in most US cities make a fixed payment independent of their earnings, usually a weekly or daily medallion lease, but keep every fare dollar net of expenses. We assess these compensation models from a driver’s point of view using an experiment that offered random samples of Boston Uber drivers opportunities to lease a virtual taxi medallion that eliminates the Uber fee. Some drivers were offered a negative fee. Drivers’ labor supply response to our offers reveals a large intertemporal substitution elasticity, on the order of 1.2. At the same time, our virtual lease program was under-subscribed: many drivers who would have benefitted from buying an inexpensive lease chose to opt out. We use these results to compute the average compensation required to make drivers indifferent between ride-hailing and a traditional taxi compensation contract. The results suggest that ride-hailing drivers gain considerably from the opportunity to drive without leasing.
How much do Uber drivers value flexibility? Daniel Pryor
Uber drivers often explain why they choose to drive for the company in terms of more flexible working arrangements. Last month, an independent poll revealed that 80% of Uber drivers in the UK would prefer to remain as contractors, but the unions campaigning to give these drivers worker status don’t seem to care about the views of the people they’re claiming to help.
In most U.S. cities, Uber’s ride-hailing model provides greater flexibility than traditional taxi models because (among other things) it doesn’t use a medallion system. Most taxi companies make money by renting medallions to drivers, who pay a daily or weekly fee for the right to drive. Instead, Uber charges a percentage commission on each journey, which means drivers who only want to do a few rides can do so without losing out. To assess how much drivers value the commission fee model over the medallion system, two MIT economists and an in-house economist from Uber offered 1,600 randomly selected Uber drivers in Boston the opportunity to lease a virtual medallion that eliminates Uber’s commission-fee. People might be sceptical of a working paper co-authored by an Uber economist, but their study was released on the reputable, non-partisan NBER last month. The other co-authors are also eminent, non-partisan economists.
The researchers offered Uber drivers a range of medallions at different prices, recording their opt-in rates and logging the amount they worked. Using this data, they were able to estimate how much these drivers prefer Uber’s commission model to a traditional taxi medallion system. This can be expressed in monetary terms as “compensating variation” (CV): how much money it would take for Uber drivers to be indifferent between the commission model and the taxi medallion system.
Using the most realistic estimates of wage gaps between Uber and taxi drivers, as well as medallion costs, the study finds that average CV is $437 per week. Boston’s Uber drivers place significant value on a more flexible commission model. For Uber drivers who don’t spend many hours working per week, this makes intuitive sense. The fixed cost of a medallion would outweigh the gains from driving fee-free. But even among drivers who would have expected to earn more per week with a medallion system, many did not opt to use it. This could be explained by a combination of loss aversion and risk aversion: the former being the idea that “the decision to buy a lease may be a gamble that drivers hate to lose” and the latter being drivers’ reluctance to gamble money upfront in exchange for uncertain gains during the week.
Drivers double-parked in a designated Lyft pick-up and drop-off zone outside the Barclays Center in Brooklyn. After focusing on Manhattan, ride-hailing apps are expanding in New York City’s other boroughs that are not as well served by public transportation or yellow cabs. Credit Dave Sanders for The New York Times __________________________________
Taxi or Uber?
It is not even a question for Samantha Forrest, 22, a single mother who sees so few taxis that she does not consider them an option. There is only Uber when she is late for her cashier’s job, lugging groceries home, or going to the doctor with her young son.
Ms. Forrest lives in the Soundview neighborhood in the Bronx, a working-class enclave that is one of the fastest-growing bastions of Uber riders in New York City. Uber pickups in the area surged to an average of 6,132 a week in August, from 1,189 the year before.
“Uber is everywhere,” Ms. Forrest said. “When I think of cabs, I think of Uber because that’s the main thing to take now.”
Uber has deployed thousands of black cars across Manhattan, going bumper-to-bumper with yellow taxis for passengers and fares in lucrative commercial and tourist areas. But the ride-hail app has increasingly shifted its focus to the city’s other four boroughs, where frustration over subway overcrowding and delays and fewer taxi options have made it the ride of choice for many.
As a result, Uber is booming in the other boroughs, with half of all Uber rides now starting outside Manhattan — up from one-fourth just two years ago — not including pickups at the city’s two airports in Queens. The growth has been so explosive that it has helped produce a milestone moment — for the first time, more people are using Uber in New York than the city’s fabled yellow cabs. In July, Uber recorded an average of 289,000 rides each day compared with 277,000 taxi trips.
While some of this growth is in freshly gentrified outposts filled with millennials and families priced out of Manhattan, it is also happening in more diverse neighborhoods, including some poor and minority areas that have long been shunned by yellow taxis.
An Uber driver along Flatbush Avenue in Brooklyn. Half of Uber’s trips now start outside Manhattan, a boom that has allowed Uber’s ridership to eclipse that of the city’s famous yellow cabs. Credit Dave Sanders for The New York Times __________________________________
“It gives safe transportation to people in communities where the cabs don’t stop, where the color of your skin prohibits you from access,” said the Rev. W. Franklyn Richardson, 68, who is African-American and a senior pastor of Grace Baptist Church in Westchester County. Many of his church members live in the city, and now arrive for service in Uber cars.
Reverend Richardson said that drivers of yellow taxis have sometimes refused to pick him up because they assume the worst about blacks — that they will rob a driver or jump out without paying. He said he has yet to be turned away by an Uber driver. (Nonetheless, Uber and other ride-hailing apps have been accused in other cities of refusing service to African-Americans.)
Uber has showered the boroughs with “neighborhood love” promotions such as free rides, $5 car pools within each borough and free pizza just for showing the Uber app. It has also opened driver support and recruitment centers, called “Greenlight Hubs,” in the Bronx, Brooklyn and Queens, while closing its only one in Manhattan this year. Much as it has done to New York’s yellow cabs, Uber’s popularity is coming at the expense of livery cars and green taxis that operate in northern Manhattan and the other boroughs.
Uber closely guards its ride data, but agreed to provide The New York Times with recent numbers that show its service expanding rapidly in 50 sample residential areas in the Bronx, Brooklyn, Queens and on Staten Island with limited access to public transportation. Uber made a total of 167,194 weekly pickups in these areas in August, nearly triple the 56,721 weekly pickups from the year before.
A similar pattern has emerged in other cities, including San Francisco, Chicago and Houston, with the demand for Uber service initially concentrated in the downtown or central business district and then spreading to outlying neighborhoods and suburbs. This has helped Uber continue building ridership amid a series of high-profile missteps and scandals that have provoked widespread condemnation and incited a global backlash against the company, with some riders deleting the app in protest. In a significant setback, London declined to renew Uber’s operating license, declaring that the company was not sufficiently “fit and proper.”
For many passengers, though, the bottom line is that Uber gets them where they need to go. Leo Martinez, 30, a sales agent who has taken Uber around Queens, said that while she has heard the concerns about Uber, what matters most to her is that it is cheap — usually less than $10 a ride — fast and reliable. “Every single company has complaints,” she said. “It’s not just Uber.”
An Uber driver center in the Bronx. The company has opened similar centers in Brooklyn and Queens, while closing its only center in Manhattan. Credit Hiroko Masuike/The New York Times
More than half of the 50 sample areas with increased Uber pickups were in Queens, a sprawling borough where many residents live far from the subway. In St. Albans, weekly pickups rose to 6,370 from 1,870 the year before, while neighborhoods including South Jamaica, Laurelton, Springfield Gardens, Rosedale, Bayside and Glendale also saw large increases.
In the Flatlands neighborhood in Brooklyn, which has no subway station, there were 13,380 weekly pickups, or nearly four times the 3,598 pickups the previous year. In Starrett City, a vast housing development, weekly pickups rose to 2,261 from 699.
Nine areas were on Staten Island, a borough where public transit is sparse, including Port Richmond, New Brighton, Westerleigh and Arden Heights. In the New Springville area, weekly pickups soared to 1,494 from 591.
“We really want to make sure we’re fulfilling the needs of New Yorkers wherever they live,” said Sarfraz Maredia, Uber’s general manager for the Northeast. “Taxis have long ignored some of these communities.”
Mr. Maredia said that Uber complements the public transit system, especially in “transit deserts” outside Manhattan where subway stations and bus stops are far apart. Uber cars ferry riders from their homes to the closest station, or provide a one-way alternative.
Other ride-hail apps, like Lyft and Via, are also finding customers beyond Manhattan. Just over half of pickups on Lyft, not including the airports, now come from outside Manhattan. It has stationed its operations staff in Queens, where it also has a driver support center, and hosts monthly social events for drivers in Brooklyn. Lyft is the official rideshare partner of Barclays Center, offering up to $10 off the first two rides to the arena. Other promotions have included 50 percent off 10 rides in the boroughs outside Manhattan.
Inside the Uber center in the Bronx where in one neighborhood, Soundview, Uber pickups grew to 6,132 a week in August from 1,189 the year before. Credit Hiroko Masuike/The New York Times ___________________________________________
Via, which started in Manhattan, has branched out to Downtown Brooklyn and Brooklyn Heights, Williamsburg and Greenpoint, and to Long Island City in Queens. It also has a driver center in Queens, and has dangled a $5.95 flat fee for rides between Brooklyn and Manhattan, $7.95 for rides between Long Island City and Manhattan, and $5 for rides within Brooklyn.
Meera Joshi, the commissioner of the city’s Taxi and Limousine Commission, said all these new choices have improved the transportation landscape. “More options expand mobility for passengers, and they become a greater part of our city’s social and economic life,” she said.
There are about 61,000 black cars providing rides for Uber, though they may also work for the other apps, too. In contrast, yellow taxis are capped at 13,587.
Though more for-hire cars means worse traffic in some neighborhoods, Bruce Schaller, a transportation consultant who has found that the ride-hail apps contribute to congestion, said that their expansion outside Manhattan was generally positive. “I think the incremental increase in traffic is way overshadowed by the improvement in mobility in these neighborhoods,” he said.
Just as the apps have upended the yellow taxi industry, their expansion has hurt the green taxis, which were started in 2013 to serve northern Manhattan and the other boroughs, and neighborhood livery services. Currently, there are 4,251 green taxis on the road; in July, the green taxis provided an average of 29,503 daily rides, down from 42,979 the year before.
Sergio Sanchez, who once owned five green taxis, said Uber siphoned off his drivers with hefty signing bonuses and other incentives, and won over riders with heavily discounted rides. “People were standing on the corners waiting for Uber,” he said. “The green taxis were invisible, like they weren’t even there.”
Uber has seen its ridership increase in many minority neighborhoods that residents say taxis have long shunned. Ride-hailing apps have also become popular in areas that are far from subway stations. Credit Dave Sanders for The New York Times _______________________________
Mr. Sanchez said he simply could not compete and his taxis were repossessed by his lenders. He now drives for Via.
Some livery services have banded together against the threat from Uber and the others, pooling their cars and creating a unified network to ensure that there is always a car available to pick up a passenger. Jose Altamirano, the president of the Livery Base Owners Association, said that may not be enough if the apps continue to rapidly expand. “If they go up, we’ll go down,” he said. “There’s only so many customers.”
The ride-hail apps have not only benefited passengers but also drivers, many of whom are immigrants with few good job options. At the Bronx driver center, which opened in February, 2,000 drivers come through the door every week.
Sabrina Ortiz, 28, earns about $800 a week driving for Uber, or twice as much as she did as a receptionist for an auto shop. Another benefit is that she can set her own hours and does not have to check with anyone to stay home if her two children are sick.
Ms. Ortiz said that she is aware of Uber’s scandals and strained relations with drivers who have criticized the company for underpaying them and cutting rates so low they cannot make a living. One passenger recently asked, “How can you work for Uber?”
“It does kind of bother me,” she said. “But at the end of the day, I haven’t had any experience like that.”
Ricardo Peña, 24, who lives in the Bronx, began hopping into Uber cars two years ago because he could not bear another packed bus or subway. Soon he was taking Uber up to 10 times a week. He eventually quit his job as a security guard and went to work for Uber as a driver.
“A lot of people need this form of transportation,” he said. “They need the convenience.”
A version of this article appears in print on October 13, 2017, on Page A1 of the New York edition with the headline: Uber, Booming In the Boroughs, Passes City Taxis.
Fair.com — an all-digital car marketplace that was co-founded by car industry vets Georg Bauer of BMW, Mercedes-Benz, and Tesla; Scott Painter of TrueCar; and Fedor Artiles of Mercedes-Benz, Chrysler, Volkswagen, and Tesla — has been largely operating under the radar since quietly launching its business earlier this year. But today, it’s coming roaring down the street, ready to take on the market of car ownership with its new, flexible model.
The startup has announced a strategic round of funding from BMW’s iVentures, Penske Automotive Group, and other investors; as well as debt funding from a group of investment banks and a Sherpa Capital entity, “set up to strategically fund innovative transportation models like flexible ownership and ride-sharing.”
The individual equity amount is not being disclosed, but the total amount of all funding is up to $1 billion, the company has confirmed to me. Currently the company is active in Los Angeles and has plans to expand to the rest of California by the end of 2017, “and to other select markets nationwide through 2018.”
There are a number of players in the world of car sales and car rentals, both online and offline. But what Fair is bringing to the table appears to be something more akin to a lease program with unfixed terms, and a range of very modern details: you use a mobile app to do everything, from searching for cars to authenticating yourself to paying; you need to give only five days’ notice before you decide to return the car; you get all-in monthly payments that include insurance; and AI-based pricing that Fair claims means users will only get “great deals.”
“It’s clear that technology is transforming how we buy and own our cars, and the consumer is the winner – with simpler, more flexible, and more cost-effective options than ever before,” said Scott Painter, founder and CEO of Fair in a statement. “Fair is on the forefront of making personal mobility more accessible for a new generation of customers.”
The name Fair may sound familiar to you. It was the company that last year was slated to acquire Beepi, a startup that raised $150 million for an all-online model to search and buy used cars. That sale fell through and Beepi was shut down and sold for parts (its domain, in fact, was picked up by another used-car hopeful, Vroom, which now picks up a redirection if you visit Beepi.com).
While there are a lot of online and offline car sales platforms in the market today, Fair is trying to tap into some emerging trends in the automotive industry.
The first of these is how people are getting around these days. Transportation-on-demand services like Uber and Lyft have been leaning on technology like apps (and a lot of funding-fuelled price subsidies) to make it significantly easier for people to order rides when they actually need them; and for those who don’t have to use their cars every day (and even in some cases when they do), they are finding that these transportation on demand services work out to be cheaper and easier than owning their own vehicles.
That situation, some believe, is set to become even more acute in the future. The thinking goes like this: as autonomous cars, and those cars with other “smart” features, start to hit the market, many of them will be well out of the price range of average consumers. That will lead to people using more transportation services where they do not own the cars themselves. This potential outcome is one that others are also considering, including major car companies like GM.
The idea with Fair is that, in fact, we don’t need to wait until the day of overpriced autonomous cars to see this getting played out. When it comes to actually driving yourself somewhere, many people today already want something longer than rentals and shorter than outright ownership.
“Fair offers a completely new customer experience,” said Ulrich Quay, BMW i Ventures Managing Director, in a statement. “The company allows users to access vehicles without a fixed term. This appeals in particular to younger generations who want more flexible usage models.”
It’s notable to see Penske also putting in investment here. The company has a business that ranges from truck rental to car dealerships and logistics, and it implies that Fair might potentially expand its services to more than just consumer car leasing.
“Penske is committed to be on the leading edge of technology, and our investment with Fair reflects that commitment,” said Penske President Robert Kurnick. “The potential appeal of the Fair app to consumers is compelling while keeping our company at the forefront of bringing mobility solutions to the marketplace.”
Lyft raised $1 billion in a new investment led by CapitalG, the venture arm of Alphabet. Credit Stephen Lam/Reuters _______________________________
SAN FRANCISCO — In an escalation of its ride-hailing war against Uber, Lyft has begun to explore going public in 2018 and is trying to strengthen its position by raising more capital, including $1 billion in new financing led by an investment arm of Google’s parent company.
Lyft has had talks with investment banks about an initial public offering next year, according to two people briefed on the discussions, who asked to remain anonymous because the conversations are confidential. Lyft has not decided which bank may become its lead underwriter for an I.P.O., the people said.
To bolster itself ahead of any public offering, Lyft on Thursday said it had raised $1 billion in financing led by CapitalG, a venture investment arm of Google’s corporate parent, Alphabet. The funding values Lyft at $10 billion before the introduction of new capital — a significant jump from the company’s last valuation of $6.9 billion.
The new investment further complicates the convoluted web of financial relationships in the ride-hailing industry, where companies like Lyft and Uber have hauled in enormous amounts of funding from firms that often put money into competing companies.
But the financing also gives Lyft a new and formidable partner in Alphabet. As part of the deal, David Lawee, a venture partner at CapitalG, will take a seat on Lyft’s board of directors. The investment round, which includes other undisclosed participants, remains open.
“Less than 0.5 percent of miles traveled in the U.S. happen on ride-share networks,” John Zimmer, president of Lyft, said in a statement announcing the deal. “This creates a huge opportunity to best serve our cities’ economic, environmental, and social futures.”
Alphabet’s investment ratchets up the high-stakes battle for supremacy in the ride-hailing industry.
Uber, which is valued at nearly $70 billion and is the industry’s dominant force, has been grappling with scandals over its corporate culture and business practices. A group of investors forced out Travis Kalanick, Uber’s co-founder and former chief executive, earlier this year over concerns that he was not fit to lead the company. Uber has appointed a new chief, Dara Khosrowshahi, and is now trying to learn from its missteps while pursuing his goal of taking the company public in the next 18 to 36 months. It is nearing a deal to sell a significant stake of itself to SoftBank, a Japanese conglomerate, which would include about $1 billion in new capital.
Lyft has benefited from Uber’s series of high-profile stumbles in recent months to lift its own profile. The two companies are locked in something of a race for which can go public first; whichever company does will most likely set a benchmark for Wall Street for the valuation of a public ride-hailing company.
Investors trying to position themselves for the best returns have put money into competing entities, creating murky allegiances.
SoftBank, for example, is also a major investor in Didi, a ride-hailing company that was once a major competitor to Uber in China and is itself an investor in Lyft. And CapitalG is a sister company to GV, formerly known as Google Ventures, which is a major investor in Uber.
Those relationships are further complicated by how Uber is dealing with a lawsuit filed by Waymo, the self-driving car unit owned by Alphabet. Waymo has accused Uber of stealing trade secrets after it hired a former Google employee.
Lyft must also balance a delicate relationship between itself and a group of technology partners who are working with it on self-driving technology. In July, Lyft unveiled a large Silicon Valley headquarters for its Open Platform Initiative, a coalition of automakers and technology start-ups that are working together on software for autonomous vehicles. That group includes General Motors, Ford and Nutonomy, as well as Waymo.
“Ride-sharing is still in its early days,” Mr. Lawee, a partner at CapitalG, said in a statement. “We look forward to seeing Lyft continue its impressive growth.”
“We want to change behavior around ownership on the planet,” says Omni co-founder Thomas McLeod. First, it built an on-demand storage business, where you can get things picked up from your place in as little as two hours, pay a monthly fee to store them depending on their size and get them temporarily returned to you for free whenever you need them. Now it wants to help you earn cash or offset your storage costs by renting out your stuff to other users and splitting the revenue with Omni 50/50.
“The storage business is good. The marketplace business is great. We had to build storage first,” says McLeod. Omni was already working pretty well with 100,000 items in its keep. I’m a user and the quality of service is incredible. I have them store all my camping gear, and drop it back to me whenever I’m hitting the woods for the weekend, and it all works so smoothly it’s like having some massive closet in the cloud.
That’s partly because all 48 Omni employees, including the brawny ones hauling your stuff, actually have stock in the startup. That pushes them to deliver an exceptional experience so the company keeps growing. Its warehouses reach operational profitability when they hit around 40 percent capacity, and all the recurring storage revenue makes its unit economics for pick-ups and drop-offs much better than startups in verticals like food delivery which expend resources for one-off payments.
The three-year-old startup has now raised $14.7 million from investors like Highland Capital Partners, which sees a future where people own and buy less while renting more.
Omni’s now available in the San Francisco Bay Area, from Berkeley to Stanford, and I’d recommend it if you have bikes, boxes or other giant objects cluttering your home. It’s often cheaper than renting an actual storage unit, with flat monthly costs of $3 per large item and $7.50 per closed container. Still, considering you have valuable stuff sitting around in the dark, it’d be nice to squeeze some money out of what you store.
That’s how Omni rentals works. Earlier this year the company allowed you to designate friends who could borrow your stuff, but now you can charge strangers. You just pick one of your items Omni is storing, set a price you think is reasonable, and Omni lists it for you on its rental marketplace. Anything you rent out is covered by a $2,000 insurance policy, and Omni takes photos before delivery, at pick up and at its warehouse so it knows who’s responsible if there’s any damage.
If you need a drill for some home improvements, a nice road bike for a long ride or a Halloween costume, Omni can rent it to you for much cheaper than buying, and you never have to leave your house. You can even rent that Snapchat dancing hot dog costume for $20 a day instead of buying it for $80.
Price ranges for Omni rentals
“Omni is more convenient than Amazon Prime,” said an Omni spokesperson. “You can search for something you’re considering buying and see if it’s available to rent first.” And even Amazon’s free two-day delivery doesn’t beat Omni that can get stuff to you in hours for $3 dollars in convenience fees or free the next day. Eventually Omni wants to give owners rental pricing suggestions to help them maximize their take, taking the guesswork out of matching supply to demand.
Omni will have to foster a whole new e-commerce behavior pattern to get rentals off the ground. And it must maintain quality assurance as a few lost storage or broken rental items could scare users away. But tests found that 60 percent of renters weren’t already storing stuff with Omni, so it could become a powerful sales lead generator. And long-term, as self-driving cars, warehouse robots and logistics systems improve, Omni’s profits should grow.
McLeod imagines one day that a musician could get their start by renting gear instead of buying it, lowering the barrier to entry to new hobbies and even professions. And he thinks people might seek to buy higher-quality stuff for their own benefit and to score taller rental fees. McLeod tells TechCrunch, “I don’t think we’ll ever stop the fact that people own some things, but there should be a democratization of access.”
Lyft Set to Claim Third of U.S. Market in 2017, Document Shows
By Mark Bergen and Eric Newcomer Bloomberg November 10, 2017
-- Projections see Lyft sales rise, losses of $600 million
-- Fidelity, another Uber backer, may join Alphabet in new round
Lyft Inc. has gained significant ground on its rival, Uber Technologies Inc., and is expected to grab more market share in the U.S., according to a private Lyft investor document obtained by Bloomberg.
A major investor is projecting Lyft will have boosted its share of U.S. ride-hailing business some 61 percent by the end of the year, climbing to about a third of the market. The gains come as market-leader Uber’s reputation is in tatters following a string of scandals that culminated with the resignation of its chief executive officer in June.
Projections outlined in the document depict a company that’s benefiting from the missteps and management turmoil that distracted Uber, its main rival, for most of the year. Lyft is not only gaining market share, but also boosting sales and getting closer to profitability, the document indicates. Even so, Lyft is seeking additional funding and ramping up spending -- making it unlikely to reach break-even as quickly as the company had predicted in the document, according to people with knowledge of the matter.
The document shows that Lyft projected it would escape the red for the first time next year. The San Francisco-based company was forecasting that its earnings, excluding expenses such as taxes and interest, would increase to $500 million in 2019 and $1 billion in 2020. However, Lyft has been spending at a faster rate than expected to take advantage of Uber’s weaker position and now is telling investors the company won’t break even by the end of next year, said the people who asked not to be identified discussing private financial information.
This year, Lyft is on pace for $1.5 billion in net revenue -- the amount of money it generates after paying drivers -- on losses of $400 million, according to the document, which was prepared at the end of the second quarter. Since then, Lyft has spent heavily on a nationwide marketing campaign, including TV spots with actor Jeff Bridges. Investors are now anticipating losses of close to $600 million in 2017, two people said.
Lyft is getting another injection of cash to maintain its growth trajectory -- some of it coming from backers of its arch-rival. Fidelity Investments, an Uber investor, is in talks to participate in a $1 billion financing round led by Alphabet Inc., another investor in Uber, that values Lyft at $11 billion, according to people familiar with the matter. Existing investors KKR & Co., Janus Capital Management LLC, and AllianceBernstein Holding LP also are planning to join the round, the people said. Lyft, KKR and Fidelity declined to comment.
Before this year’s crisis at Uber, Lyft’s share of ride-hailing spending in the U.S., the only country where it operates, was stuck in the low-to-mid teens, the investor document shows. Those estimates include some financial information on parts of Uber’s business, such its food-delivery service, that Lyft doesn’t have, according to a person familiar with the figures. Removing those sales, Lyft’s market share for 2016 was closer to 20 percent, said the person, who asked not to be identified discussing private matters.
Uber’s internal U.S. market share numbers relative to Lyft show Uber starting the year off at about 80 percent. Now Uber believes it has around 70 percent market share, according to a person familiar with the company’s analysis.
Uber’s new CEO Dara Khosrowshahi said at the New York Times DealBook conference Thursday that he believed his competitor was “spending very aggressively to gain share.”
“The U.S. is very competitive right now, between us and Lyft, so I don’t see the U.S. as being a particularly profitable market for the next six months,” Khosrowshahi said.
Khosrowshahi has said that he wants to move his company closer toward profitability with the hopes of taking Uber public by the end of 2019.
In 2016, Lyft lost $606 million on $708 million in net revenue, the documents show. The Lyft investor document predicts the company will reach $2.5 billion in net revenue next year, $3.5 billion in 2019 and $6 billion in 2020. The firm confirmed the document’s authenticity, but asked not to be identified because the financial information is private.
Uber, which operates globally, generated more than $3.3 billion in net revenue with losses of $1.4 billion in the first six months of the year, according to publicly released financial information.
Uber hasn’t publicly disclosed its third-quarter financial information and it’s not clear whether Khosrowshahi will continue the practice of releasing them publicly. Lyft, also a closely held company, has never publicly released its financials.
Uber and Lyft are in the middle of high-stakes financing rounds. Uber is trying to sign a deal with the Japanese technology conglomerate SoftBank Group Corp. The firm, along with a slate of other investors, is expected to invest at least $1 billion in Uber directly while spending billions more buying shares from existing investors. Lyft’s latest investment round has not closed.
Uber Approves SoftBank’s Multi-Billion Dollar Investment Offer
By Eric Newcomer Bloomberg November 12, 2017
-- Uber, investors close in on sale of up to $10 billion in stock
-- Benchmark agrees to put suit against Uber co-founder on hold
Uber Technologies Inc. approved SoftBank Group Corp.’s offer to buy a multibillion-dollar stake in the ride-hailing company, setting the stage for one of the largest private startup deals ever.
The agreement lets SoftBank and other firms invest up to $1 billion in Uber and proceed with a tender offer in coming weeks to buy up to $9 billion in shares from existing investors. The deal could still fall through if there aren’t enough interested sellers. The deal also includes Uber governance changes.
“We’ve entered into an agreement with a consortium led by SoftBank and Dragoneer on a potential investment," Uber said in a statement. "We believe this agreement is a strong vote of confidence in Uber’s long-term potential. Upon closing, it will help fuel our investments in technology and our continued expansion at home and abroad, while strengthening our corporate governance.”
The terms were negotiated for weeks, according to people familiar with the matter who asked not to be identified talking about private deliberations. Uber’s board was briefed on the terms Saturday and lawyers had been working to complete the language of the agreement, the people said.
As part of the deal, venture capital firm Benchmark agreed to put its lawsuit against Uber co-founder Travis Kalanick on hold and drop the complaint when SoftBank’s investment and the governance reforms kick in, the people said. Kalanick is agreeing to give Uber’s board majority approval over the board seats he controls should he ever need to fill them again, the people said.
The pact gets Uber closer to clearing a major hurdle as it tries to overcome a series of scandals, leadership turmoil and executive departures. SoftBank, a well-connected Japanese technology company, could help Uber strike deals with competitors in India or Southeast Asia. SoftBank is a major investor in Ola and Grab, Uber’s rivals in those regions.
Uber’s board already approved a slate of governance reforms that restrict Kalanick’s role at the ride-hailing company, including equalizing the voting power of different share classes and increasing the size of the board to 17 to allow for new independent directors. Those changes are contingent on the SoftBank investing in Uber.
After a long negotiation with Uber, SoftBank agreed to buy shares at a single price as long as sellers were barred from working together to push up the price. Then Kalanick threw a wrench in the deal, insisting that Benchmark put a hold on its lawsuit against him before he would approve it. Finally, this week, Benchmark relented after Uber’s new Chief Executive Officer Dara Khosrowshahi and other board members urged the firm to do so, two of the people said.
SoftBank, along with Dragoneer Investment Group and General Atlantic, are expected to invest at least $1 billion in Uber and purchase up to $9 billion worth of Uber shares from existing investors. The initial price for the tender offer may not be set for more than a week, a person familiar with the matter said. SoftBank is expected to buy shares from Uber at the company’s current valuation of nearly $70 billion, but the price of the secondary stock sale -- in which existing investors sell -- is expected to be lower.
Investors TPG, Tiger Global, DST Global and the Chinese company Tencent Holdings Ltd. may also buy Uber shares as part of the deal, the people said.
There’s still a lot of jockeying to be done before a tender offer goes through, and at least one existing Uber investor is already pushing for a rich valuation.
"There is value to fixing the governance problems, but that value should not be given to new outside investors through an undervalued tender offer," said Glen Kacher, president of Light Street Capital Management LLC, which owns stock from Uber’s Series E financing round.
The transaction may make Kalanick a cash billionaire if he decides to sell a large enough chunk of his stake in the company. The deal could also be the largest private stock sale ever, and will create a host of new San Francisco millionaires as early employees sell shares.
Uber plans to run newspaper ads informing investors about the share purchase. Then SoftBank will propose a price at which it will buy stock. Uber shareholders will then have to decide if they want to sell and how many shares they want to offer. If SoftBank doesn’t get enough buyers, it could propose a higher price or walk away.
Who delivers Amazon orders? Increasingly, it’s plainclothes contractors with few labor protections, driving their own cars, competing for shifts on the company’s own Uber-like platform. Though it’s deployed in dozens of cities and associated with one of the world’s biggest companies, government agencies and customers alike are nearly oblivious to the program’s existence.
In terms of size, efficiency, and ruthlessness, Amazon has few equals. The least publicly accountable of the big tech companies— Google, Apple, and Facebook face considerably greater scrutiny—Amazon’s stock is one of the most valuable on the market, it’s among the fastest-growing companies in the United States. Atop its vast empire, CEO Jeff Bezos commands the single largest personal fortune on the planet. Estimates place Amazon as the recipient of approximately one third of all dollars spent online. Control over the manufacture, storage, sales, and shipping of an extraordinarily diverse set of products has led the company to expand into film and TV production, web hosting, publishing, groceries, fashion, space travel, wind farms, and soon, pharmaceuticals, to name just a few. It’s a new kind of company, the likes of which the American economy has never before seen and is legislatively ill-prepared for.
Ingenuity alone doesn’t account for Amazon’s dominant position. The company’s Economic Development Team works hard to secure state and local subsidies, which research from watchdog group Good Jobs First indicates surpasses $1 billion, a figure which the advocacy group’s executive director, Greg LeRoy, freely admitted to Gizmodo is far from comprehensive. Infrastructure in the company’s home base of Seattle has strained to keep pace with Amazon’s meteoric growth, and the city has experienced massive increases housing costs. While North America’s metro areas—including Seattle—scramble to offer attractive incentives to host Bezos’s second headquarters, researchindicates that when Amazon comes to town, it might be killing more jobs than it creates.
The majority of consumers, however, either don’t know or don’t care. Strip Amazon to its most familiar elements, and it’s a devilishly simple everything-store with limitless stuff-supply. You buy it. It shows up. Fast.
.”Near the very bottom of Amazon’s complicated machinery is a nearly invisible workforce over two years in the making tasked with getting those orders to your doorstep. It’s a network of supposedly self-employed, utterly expendable couriers enrolled in an app-based program which some believe may violate labor laws. That program is called Amazon Flex, and it accomplishes Amazon’s “last-mile” deliveries—the final journey from a local facility to the customer.
While investigating the nature of the program, we spoke to 15 current or former independent drivers across nine states and two countries whose enrollment spanned between a few weeks and two years, as well as three individuals attached to local courier companies delivering for Amazon. Their identities have all been obscured for fear of retribution.
A great opportunity to be your own boss
To understand the issues faced by the independent contractors handling last-mile delivery for Amazon requires some knowledge of how Flex works.
When Amazon selects one of its facilities—what drivers refer to as a Fulfillment Center* (FC)— for participation in Flex, it blankets Craigslist and other sites with local ads describing Flex as “a great opportunity to be your own boss,” sometimes as many as twelve ads a day. Each FC is distinguished by three letters and a number—DLA5, for instance, refers to Riverside, California—and many of the over 50 cities Flex operates in have more than one.
An interested driver goes a through preliminary screening online and finishes their application through the app, passes a background check allegedly administered by a company called Accurate Background. Accurate Background did not respond to multiple requests for comment and Amazon declined to comment on which companies or services it uses for this purpose, but claimed the check pulls from, among other signals, court records, the sex offender registry, and data analysis from US and global organizations. One driver told Gizmodo he was approved in under four hours. Others wait over a month. According to a Flex contract furnished to Gizmodo, the only requirements to entry are modest: be 21 or older, pass Accurate Background’s vetting, own a smartphone with Flex installed, and have access to a car, bike, or public transportation. No company cars. No uniforms. Just a non-photo ID badge.
The training is similarly minimal. One driver attended an optional hour-long training at an FC. A veteran driver alleged he was asked to participate in a conference call. The consistent element reported to Gizmodo was being made to watch approximately 20 videos which fresh Flexers view from the comfort of their phones. “Watch videos of their expectations of you and their rules, agree to the rules,” a Georgia-based driver said. “That’s about it.” No drivers reported being trained on matters of workplace safety, and as one UK-based driver succinctly put it, “honestly it seems they take on anyone.” Amazon declined to describe its Flex driver training except to say that videos were among the materials used in onboarding.
Work is secured by grabbing “blocks” through the app, measured in hours, with an associated route and payout. Flex’s blocks cover multiple local arms of Amazon—including Fresh and Restaurants—but the two most common, based on individual testimony and online posts, are Logistics, which covers standard packages, and Prime Now which handles same-day purchases. Regardless, the procedure is largely the same once a driver lands a block: get in line behind the other cars at the FC, check in, receive a pre-sorted rolling cart or shelf of goods for the route, scan and pack them into the car, then follow the Flex app’s “suggested” driving directions to each stop.
A driver sharing his experience with and tips for Flex on YouTube _________________________________________
Block length and package count vary considerably between Prime Now and Logistics: Prime Now blocks can be as little as two hours, while five hour blocks have reportedly been offered to Logistics drivers with larger vehicles; 15 packages for a slim Prime Now block and as many as 90 on a Logistics run. Amazon’s own Craigslist ads show compensation varies by location, but among the drivers Gizmodo spoke to, pay averaged $20.50/hr—not bad by the standards of the gig economy. And similar to Uber’s “surge pricing” in the rare event that blocks go unclaimed, Amazon will sometimes increase to incentivize drivers to accept it. Still, all but three drivers we spoke to did not consider Flex their primary means of income, and of those who did one also contracts with UberEats and Grubhub, another was seeking additional work, and the third alleged to have been deactivated by Amazon despite delivering through floodwaters in the wake of Hurricane Irma.
A driver’s view after Irma ________________________________
Arguably Amazon Flex, like Uber, is best used as supplemental income, and for many drivers it works well for that purpose. For others it’s a necessity. In major cities like New York and San Francisco—coincidentally located in the states that employ the largest numbers of couriers—Uber can be a living. Flex can’t.
A difficult road
Despite being able to fulfill hundreds of millions of orders per year, drivers report Amazon’s data at the local level can be lacking, leading to misalignments between block times and package numbers. “The block that I signed up for was four hours, but when I got to the facility they were struggling to find something for me to do, so I only ended up having three packages to deliver,” a driver told Gizmodo of a recent block picked up from a newly-opened FC. But according to a more veteran driver, Amazon’s bad bets cut both ways. “They won’t pay you for working over your allotted block time,” he told Gizmodo. “They said it evens out because when you work a three hour block and finish in two they still pay you for three, but it doesn’t even out.” Another alleged that Amazon’s systems struggle to estimate door-to-door time or handling large apartment buildings, leading to a “99% probability that you will exceed your block end time.”
Additionally, two drivers in completely different regions of the US both claimed Flexers’ hours are capped at 40 hours per week. “As [independent contractors], we should be able to work as much as we wish since we take the blocks we want to work. It used to not be this way when I first started working for them,” the San Antonio-based driver bemoaned. But lately, drivers at a number of FCs have found it harder and harder to secure enough hours for 40 hours to be a meaningful limitation. A Philadelphia-based driver told Gizmodo, “Last year when I started it was easy to secure two four hour blocks a day and I was complaining that they would put us on payroll locks so I wouldn’t exceed 40 hours a week. How times have changed!”
Amazon would not comment on whether it caps drivers’ hours, but characterized the program as a part-time opportunity. It claimed, in a statement to Gizmodo, that it “received overwhelmingly positive response[s] from drivers participating in the program.” The company also suggested that workers seeking more traditional full-time arrangements are encouraged to apply elsewhere within Amazon.
The boilerplate did-not-receive email _____________________________________
A number of drivers have alleged they’re reprimanded by FC workers if their vehicles are unable to fit all the packages for a block, and fear being “ticketed” for returning packages they weren’t able to deliver. One reported getting written up by one FC employee for following the explicit instructions of another.
While in and of themselves these incidents tend not to have serious repercussions, as little as two incidents have led to drivers being deactivated. Amazon told Gizmodo that it has performance expectations for its contractors which it expects them to meet or exceed, and sometimes those metrics are used to justify a termination. Other times, being notified your time with Amazon Flex has ended comes as a vague boilerplate email about violating the program’s terms of service.
A Flex contract provided to Gizmodo states that drivers “may provide Amazon with data about your use of such Licensed Materials, your geo-location and related tracking data, including your location, movements, speed at which you are traveling, and other personally identifiable information,” and that “if you choose to deny Amazon access to this information, this could affect the availability and functionality of the Amazon Flex App and your participation in the Program.” Presumably, this data is used to increase the company’s own routing efficiency. While Amazon does not pay drivers for work if it exceeds a given block’s time, it’s unclear if Flex continues to track drivers while off-hours.
Lack of oversight and scarcity of work through Flex have caused cheating to proliferate. Drivers turn to auto-tap applications like FRep and Repetitouch to scoop up blocks much faster than human fingers are capable of, and once these practices become widespread at an FC, more scrupulous drivers either stoop to these methods or accept that regular hours won’t be possible. Though nearly every Flexer we contacted was familiar with the use of these types of software only one admitted to using it personally. “Most drivers at my warehouse are using some form of bot or macro to secure blocks, including myself,” he wrote. “Though Amazon recently sent out a threatening email regarding their use (threatening to terminate us for using them). That email is the main reason why I’ve cut back on my own use of them.” Video uploaded to YouTube even appears to show one such app running on an iPhone left charging inside inside a Fulfillment Center, screen blinking away at a feverish pace. Amazon told Gizmodo such software violates its Terms of Service.
Neither FRep or Repetitouch were built specifically for Flex, according to their respective creators. “From what I heard, there are people who heavily rely on it for their income and apparently there’s a lot of competition for jobs in general. Thus, I’m not surprised that some Flex drivers try to get an edge,” Erwin Goslawski, the German student behind Reptitouch told Gizmodo. “I can imagine that this makes it rather difficult for other users to grab jobs, however, which makes it more likely that more and more users decide to use such tools.” Despite the enormous amount of access Amazon is afforded to its drivers’ phones, “botting” remains popular and poorly policed. At least one device was built specifically to increase the likeliness of landing blocks—the Flexbot. It’s creator, a former driver named Tim McDaniel who suffers from arthritis, claims to have made it “just to level the playing field to able-bodied folks,” though certainly some of the customers who have paid $130 for the contraption—a pair of Arduino-controlled mechanical fingers—do so to avoid detection by Amazon’s software. Unlike software alternatives, Amazon told Gizmodo that Flexbot does not violate its terms of service. McDaniel originally sold Flexbot 6 on Amazon, but had his account shut down after he “fell behind on customer relations.”
Add to this a general sense of disorder, from simple issues of whether or not Flexers are allowed to drive with passengers, to integral aspects of the gig like when new blocks become available. “When Flex first started all blocks were released at 10 PM. Then they changed to all blocks being released exactly 24 hours in advance. Now they have changed to completely random times,” one driver told Gizmodo. “This causes us to have to constantly use our phone to look for blocks and waste time that we are not being paid for just to find work.”
There’s no easy way for this disposable workforce to have their problems addressed. While drivers are given a support number, Flexers claim its only purpose is to assist during the course of a block—to get the door code to an apartment building, for instance. “There’s no liaison, just hot-headed warehouse managers that will terminate a driver for anything they want,” a driver reported. And from other testimony, terminations occur frequently and with little explanation. Boilerplate emails reprimanding drivers for supposedly missed packages contain little information: only the date of the infraction, but not the package or address. Whether the package was stolen or an unscrupulous customer merely took advantage of Amazon’s willingness to offer refunds, it’s the courier who takes the fall. “It’s frustrating because Amazon will always believe the customer,” a driver claimed, echoing the sentiments of many others. “Even with photo or bodycam evidence. We have no support. And one customer too many and we’ll get that termination email.”
A termination email __________________________________
To combat confusing rules—due both to changes in the program over time and quirks of individual FCs—drivers tend to share information over closed Facebook groups, Reddit, and gig economy forum Uberpeople. The largest of these boasts a membership of over 20,000. According to a moderator of one such community, a change in the Flex program takes place approximately every six weeks, sometimes buried inside a Terms of Service update. Many of the posts in these digital break rooms can be summarized as: Here’s what happened to me. Is this normal? But no matter how experienced, the advice of other, equally powerless people can only go so far in certain situations.
So where can a driver go to resolve an issue or dispute their termination? That leaves one final option: Flex’s reviled support email line.
“It’s as if they scan it for keywords and then have a copy-and-paste type response to everything,” a Detroit-based driver told Gizmodo. “Literally I got the same email twice.” Unfortunately this appears to be a common occurrence.
Flex, as part of a pilot program Amazon is rumored to be using to take on UPS, Fedex and others, is a constantly shifting set of systems with a number of redundancies. Besides drivers, some cities also employ motor scooter couriers and—in Manhattan at least—“Johnny walkers” who gather around delivery trucks and roll their packages to buildings on foot. But by far the biggest threat to self-employed Flexers (and vice versa) are “white vans”—third-party local couriers Amazon also contracts to do last-mile work.
Joining the fleet
The arrangement is virtually the same as Flex, only scaled up to accommodate bigger vans and larger package counts—as many as 270 per run, according to one source—and with pay going to the company to distribute as it sees fit, rather than to individual drivers. The major draw for Amazon—though it declined to comment on most aspects of these local business arrangements—appears to be the ability to count on a reliable number of couriers all capable of hauling an equally reliable volume (300 cubic feet or large is the required van size) of parcels.
Amazon considers these companies, just like individual Flexers, to be contractors, though drivers still have to run Amazon’s software while working, and still have to pass a check from Accurate Background. “We have to background check the guys [that deliver Amazon packages]. We have to use their background check company. They won’t even tell us what the criteria is,” a California-based courier business owner said with clear frustration. A dispatcher for another last-mile courier claimed that applicants who don’t pass Accurate Background’s vetting simply aren’t hired by the company he works for. UPS spokesman Dan McMackin told Gizmodo that Amazon is not a threat to UPS—whose drivers are both full employees and the single largest contingent of long-lived Teamsters labor union—because “ecommerce is bigger than one customer.” In his opinion, good courier work requires a skilled, consistent workforce, and retaining that pool of labor means providing solidly middle-class wages and benefits. However much he claims to dislike doing business with large, often pushy customers,the California courier said he finally agreed work with a company like Amazon because, “the writing’s on the wall that Amazon’s gonna take over the whole delivery industry in the next ten years.”
Worryingly, courier company owners allege their drivers can be individually deactivated from using the Flex app. “They tier people out, it’s called, because you get a tier one offense, you cannot log into the app anymore,” the California boss claimed. “Amazon does fire people.” But deactivation is only the most extreme action within a larger scheme of control. “Fulfillment center managers control [...] what drivers can come, what can’t,” a New Jersey courier company owner told Gizmodo. “If you make a mistake in there, if you have a mouth on you and use curse words, they don’t allow that whatsoever, and they’ll take you out in a heartbeat. They’ll even take out the whole company if they want to.”
That capriciousness, coupled with having significantly more at stake, also explains why, of the many dozens of courier companies advertising for Amazon route drivers, only three spoke to Gizmodo about working with Amazon. One company owner, who did not agree to answer questions about his relationship with Amazon, wrote back in an email that “anything Amazon related is really not up to me to accept on interview or not.” Asked if such companies are under non-disclosure agreement, Amazon declined to comment.
Worse still, Amazon has a history of contracting courier services that themselves subcontract their drivers, which led to it being named in lawsuits in 2015 (against Scoobeez) and 2016 (against Courier Logistics Services.) The complaints in these suits included failure to pay minimum wage, failure to compensate overtime, failure to provide meal periods, employee misclassification, and violations of the unfair competition law. Still, at least one recent hiring ad on Craigslist from a courier company explicitly sought independent contractors to run Amazon routes.
Technically, all drivers in these arrangements are required by Amazon to be full employees of those local delivery outlets, not contractors like individual Flexers. Yet Amazon’s background check policy insinuates itself into the hiring decisions these companies are able to make—especially if Amazon is provides the lion’s share of work for these local outfits—and testimony around pushy FC workers and app deactivations suggests Amazon also wields the power to functionally fire drivers as well. Amazon declined to comment specifically on any facet of its arrangement with third-party couriers, except to confirm that they are subject to the same background checks.
Over the limit
“I do think that Amazon is breaking the law. I think it’s breaking the law in a pretty widespread way,” Shannon Liss-Riordan, an attorney well known within courier circles for representing drivers from Lyft, Grubhub, Uber, and more recently few Amazon Flex, told Gizmodo. Though Amazon would likely disagree, the legality of the relatively new mass-contractor model remains an open question.
The way Liss-Riordan sees it, the issue at hand is labor misclassification: Amazon and similar companies pay drivers to do the work of employees, but treat them as independent contractors, denying them basic amenities like health care, benefits, and workers’ compensation in the event of an on-the-job injury—something which two of the drivers we spoke to reported experiencing. As Catherine Ruckelshaus, general counsel and program director for the National Employment Law Project, explained, the determination of whether a worker is doing the job of a contractor or employee comes down to a few key factors: among them, the right to control how the work is done, its permanence, the level of specialization required, and how integrated it is into the business paying for it.
Some of the drivers we spoke to had run deliveries for Flex for up to two years, which suggests continuing rather than gig-based work. And where integration is concerned, the Prime Now arm of Flex is particularly suspect, in Ruckelshaus’s opinion. “If Amazon’s promoting one-day delivery, that’s likely to be found to be integrated to Amazon’s overall products or services that it’s providing to customers,” she said.
Most damning though is Amazon’s apparent level of micromanagement. “If something’s relatively low-skill, you don’t have to show that the company, like an Amazon, told them exactly ‘take a left here, take a right there, drop this package off first,’ they mostly just want you to go from A to B, get this thing done, they don’t tell you how to get the thing done,” Ruckelshaus said. “So if Amazon is actually taking that amount of detailed oversight and control, that’s very powerful, strong evidence that it has the right to control because it’s actually exercising control over pretty minute details of the job.”
If Amazon has been engaging in misclassification on a massive scale, why haven’t there been lawsuits? Beyond the expense of retaining legal representation, Flex’s terms of service also include an arbitration agreement which waives drivers’ rights to a class-action lawsuit against Amazon. It’s a common practice for comparable gigs, affecting some 25 million contracts. And though the version of the Flex contract made available to Gizmodo gives drivers the ability to opt out within two weeks of signing, it seems few do. Individual drivers looking to escalate an issue can’t bring it to court, keeping whatever ruling might have resulted from becoming valuable case law.
“These companies have been very effective at wielding their arbitration clauses,” Liss-Riordan said. The result, in Ruckelshaus’s view, is that “the company doesn’t feel the heat because it doesn’t have to pay off all of its drivers, it only has to pay off the ones that bring their claims, and then nobody else knows—Did that guy win? What happened? It’s harder to change the practices across an entire company when it’s individual private arbitration.” While drivers are free to opt in to Liss-Riordan’s current Flex suit, the class-action gag keeps her from sending notice to driver who might benefit from joining.
Compounding the difficulty of driver going up against a powerful and well-insulated company, of the governmental and regulatory regulatory agencies Gizmodo reached out to for comment on Amazon’s business practices, few seem to have ever heard of the Flex program or have an official stance on it. Even the National Labor Relations Board, which by its own description “acts to prevent and remedy unfair labor practices,” declined to comment on Flex, and further declined to comment on whether or not Flex even fell under the purview of the agency. Mounting regulatory pressure against Uber may have led Instacart to start walking back it’s contractor model, but no such outrage is directed at Flex, one imagines, because so few people even know it exists.
Both lawyers seemed most troubled to see these practices employed by a company of the size and wealth of Amazon. “It’s too bad that Amazon is continuing to pursue these structures, because it doesn’t have to. All it has to do is pay the minimum wage, that’s all,” Ruckelshaus said, sounding defeated. “It seems like they’re jumping through a lot of hoops to avoid being an employer for not really a good economic reason.” Similarly, Liss-Riordan, pointing to structural legal issues, said that “difficulties in enforcement are leading a company like Amazon, which is a major player and obviously could afford to do it right, to lead it to shift to a system where more and more of its drivers don’t have the benefits of employment.”
“It’s too bad that Amazon is continuing to pursue these structures, because it doesn’t have to.”Flex is indicative of two alarming trends: the unwillingness of legislators to curb harmful practices of tech behemoths run amok, and a shift towards less protected, more precarious opportunities in a stagnant job market. Under the current administration, it’s unlikely either will receive the attention it deserves. There is a glimmer of hope for Liss-Riordan and the scores of Flexers she hopes to help though. On October 2nd, the US Supreme Court’s new term began. Among its cases is one which will determine the legality of arbitration clauses like the one Amazon uses to shield itself against the drivers it refuses to acknowledge as employees.
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*While Fulfillment Center was the most common terminology used by drivers, these facilities were alternately or interchangeably referred to as warehouses, and rarely “pickup centers.” Amazon claimed these facilities are called “delivery stations” but requested that Gizmodo defer to the experience of our sources.