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Why Walmart farms on the same day grocery delivery service low cost freelance drivers

ALPHARETTA, Ga. (Reuters) – Jeff Leonard slides behind the wheel of his burgundy Hyundai Accord, and the head to a Walmart near Inc store, where he picks up the package of messages waiting for him.

Jeff Leonard, a DoorDash driver, waiting to pick up an order at Walmart online shopping pick-up car park in Cumming, Georgia, united states, November 5, 2018. REUTERS/Nandita Bose

About an hour later, the 62-year-old provides vegetables, flavored water and detergent to a customer for the door. It is one of the almost 100 Walmart deliveries for Leonard since July, when he first logged on to the courier for the world’s largest retailer.

But he does not wear a uniform or collecting a traditional paycheck. He is not on the wal-mart staff.

Leonard is one of the hundreds of local independent directors for DoorDash, the San Francisco-based online delivery service that Walmart used for the processing of same-day delivery of groceries to shoppers’ homes outside Atlanta.

Leonard and his colleague of some 16.5 million American “gig” workers – people currently working in contingent jobs or on-call workers – come at a lower cost for Walmart than full-time employees, according to the interviews with directors, delivery companies and Walmart documents reviewed by Reuters. But their lack of loyalty when there are better paying deliveries that are out there, adding risk to Walmart’s latest attempt to win more online shopping customers.

“This offers me the ability to make my own hours,” said Leonard, who pays for his own fuel, car insurance and get no insurance, pension or other employee benefits. He and other performance drivers in the area, the collection of $7 to $10 per Walmart delivery. Walmart has deemed $11 an hour as the minimum wage for its own employees.

The world’s largest retailer, began the strengthening of the partnerships with third-party courier companies to reach consumers in 100 cities in the U.S. last year to better compete with Amazon.com Inc. The move came as it ended initiatives to use Uber and Lyft drivers, and struggled with the help of Walmart’s own employees to deliver packages.

Walmart told Reuters the benefit of the speed and the driver of the contacts of the seven companies involved, such as DoorDash. The move allows same-day shopping delivery service to 40 percent of the households in the United States, without the burden of hiring employees. The seller is able to keep costs low by negotiating pre-determined delivery the rates with the companies, namely by breaking down the costs of delivery by the zones in cities, according to three sources with direct knowledge of the situation who spoke with Reuters on condition of anonymity.

The amount the drivers are paid is largely determined by the distance of a store to the customer’s home or on location. For example, for all deliveries within 5 km of the pick-up point, the supplier agrees to pay a certain amount. It works the same way for distances of 10 or 15 km of the store as the pick-up point.

“That (payment) is defined for time and that is solved”, says a source, referring to the company’s agreement with Walmart. The retailer, the source said, then charges the customer a delivery fee.

The strategy will help Walmart avoid paying surge pricing – higher rates, when the demand for drivers spikes through the rush hour, bad weather or popular meal – which can greatly drive up the delivery costs.

Walmart spokeswoman Molly Blakeman said speed is a big factor in Walmart dependence on the delivery business, the existing contracts with management board members and technology to dispatch them on demand. “To develop that on our own in each market would give us much more to roll out,” she said.

Walmart’s partnership approach grocery delivery is in contrast to Amazon Flex, which taps freelance drivers directly when needed, and pays $18 per hour. Amazon is also launching her own brand of delivery service for Amazon packages, couriers provide access to the rented Mercedes vans and discount on insurance. Amazon has not responded to a request for comment.

By working with partners who hire drivers “on the question” if contractors, who also earn money from other outlets, Walmart is also able to have a lower risk of work-related driver lawsuits, which are growing in number around the United States.

Walmart is Blakeman said the drivers are paid by the delivery, not per hour, and the all-in average delivery time is 35 minutes. The delivery companies then make decisions about the payments to the directors and how they are distributed, ” she said.

In Georgia and Ohio, where these drivers supply for Walmart as well as local restaurants, Reuters found almost two dozen drivers to take in a fee of less than $11 am when the deliveries for Walmart. And what is found in less than the federal minimum wage of $7.25 per hour. All but one of the 22 deliveries, Reuters tracked, took more than an hour to complete.

In a statement, DoorDash Chief Operating Officer Christopher Payne said a majority of the directors earn more than $11 an hour, while the filling-in of the Walmart deliveries and a significant proportion of drivers earn over $15 an hour. Reuters was not independently able to verify the higher end of the wage scale.

Walmart partner Deliv paid drivers by the hour, the sources said. Reuters reported earlier this week that Deliv, one of Walmart’s partners in Miami and San Jose, ended the relationship completely.

MISSING LOYALTY

The risk for Walmart’s new strategy is driver of loyalty. None of the directors in Georgia and Ohio, Reuters interviewed said that they would commit to the handling of the Walmart deliveries for more lucrative gigs of the local restaurants, especially during busy hours.

Garrick Clark, a 44-year-old driver deliveries for Walmart in Alpharetta, said he would prefer to drop packets for Amazon about the delivery of groceries for Walmart because Amazon pays $18 to $24 hour for similar deliveries.

A source with direct knowledge of the reason why the relationship between Walmart and Deliv closed, said the supply of large orders over long distances is an obstacle to the tie-up. Walmart charges $7.99 to $9.99 delivery fee on a minimum order of € 30 for online grocery orders, and customers are willing to pay for the delivery on the same day often do not live near a Walmart store, the person said.

Further, many Walmart stores are in poor neighborhoods, which generated less online shopping orders for Deliv the delivery on the same day, two sources said.

Parking stall signs for Walmart online grocery pick-up are to be seen at a Walmart parking lot in Cumming, Georgia, united states, November 5, 2018. REUTERS/Nandita Bose

“For the drivers to agree to $7 or so to drive 15 miles to deliver 40 items was a big problem. Most of the drivers said: “We don’t want to do Walmart more,'” one of the sources said. According to Spend Management Experts, Walmart would have to spend at least $141.76 per employee, per day if they are hired to make deliveries for 8 hours at $11 hour in Atlanta. The cost of the analysis that the company performed on behalf of Reuters in December, what Walmart would pay for fuel, car insurance and car maintenance. But it does not include the costs of employee benefits.

Leonard, the director here in Alpharetta, said the get of a minimum wage delivery companies for the hours he logs would be a big help.

“But they do not and that is the nature of the beast,” Leonard said.

Reporting by Nandita Bose in Alpharetta, Georgia; Additional reporting by Jonathan Stempel in New York and Lisa Baertlein in Los Angeles; Editing by Vanessa O’connell and Edward Tobin

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