Amazon mixes debit rewards, future work to entice gig drivers

Ahead of a holiday shopping season that should focus heavily on e-commerce, Amazon is updating its rewards program to keep delivery drivers interested in handling its packages.

The e-commerce giant is reportedly building incentives into its Flex driver service that provides easier access to future shifts based on prior work they’ve done for Amazon. Amazon is also adding a Flex Rewards program for all U.S. drivers that includes a cash back debit card and discounts for financial services.

Flex is about five years old, and its role in Amazon’s overall delivery network is variable, with sudden spikes in hiring that follow social-driven reports that Flex work is declining. Amazon used about 75,000 drivers in 2019, according to Business Insider, though not all of them were Flex drivers, some work for other third parties that are Amazon Partners. Amazon Flex drivers also deliver for Whole Foods. Amazon did not return a request for comment by deadline, though numerous wire services reported the new incentive program for Flex drivers.

Even with the slow economy, contract drivers should be in demand in the near future. E-commerce set records in 2019, with higher volume for the holiday shopping season, demonstrating a fast maturation of digital shopping. 2020 has brought several trends together that have boosted e-commerce even more.

The pandemic has caused a dramatic rush to online shopping and delivery, as stores closed or shoppers turned to online ordering to avoid exposure to the coronavirus. The 2020 holiday season promises an even greater focus on e-commerce, though more robust growth may be tempered due to economic softness.

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The gig economy is also adjusting to the likely loss of a California gig economy law that mandated most contract workers be treated as employees — a law that was rejected in a referendum in last week’s election and will probably deter other states from moving forward with similar laws.

Uber and Lyft lobbied against the law, creating a battle among gig economy companies to make sure they have enough drivers, or a large enough pool of potential drivers to manage changes in demand.

“As Amazon competes for drivers, particularly through the holidays, this can help them attract and retain workers,” said Sarah Grotta, director of debit and alternative products advisory service at Mercator Advisory Group, adding the card’s 6% cash back for gas — a key perk for delivery drivers — is better than most reward credit cards.

The Amazon program could be a way to compete against companies like Earnin, DailyPay, Even, Branch and others that provide the ability to access wages outside of normal payroll windows. These companies have grown as the economic crisis created a need for faster access to payroll to manage personal expenses.

“If Amazon also offers the opportunity to put earned wages on the card and allow the wages to be accessed after each shift through an earned wage access program, that’s a truly competitive worker advantage,” Grotta said.

Amazon has invested billions in its fulfillment, particularly on the end of the trail, over the years as it tries to master the last mile. Its moves include spending more than $1 billion to acquire Ring, as well as a similar company called Blink. It also built Amazon Key, technology designed to safely allow delivery people into consumers' homes.

Amazon has additionally made numerous tweaks to its delivery strategy to compete with Walmart and to extend its Whole Foods franchise. Its Flex delivery service competes for drivers with the third parties Walmart engages for delivery, as well as Instacart and the broader competition for contract drivers for ride-sharing and related services such as Uber Eats.

“In a tight job market, incentives and services are a great way to both target and acquire workers without necessarily increasing wages,” said Tim Sloane, vice president of payments innovation at Mercator Advisory Group. “This is independent of worker status and operates as effectively for 1099 workers as it does for payroll employees.”