Independent or Dependent? Use of Contractors Exposes Courier Companies
Need a cab? No problem! Need a driver? Let me get back to you.
The local delivery and courier industry’s shift toward using independent contractors as drivers has had unexpected results. The movement started because owners wanted to increase flexibility, avoid tax, and reduce insurance costs. But as a recent article in the San Francisco Chronicle pointed out, the shift to an independent contractor model has combined with a mobile app to create a highly flexible and available workforce that is no longer captive.
With the rise of Uber, Lyft, and others, taxi companies in the San Francisco Bay Area are losing access to their independent contract drivers at an alarming rate. Many taxi companies are unable even to put cabs on the road, since so many drivers have switched to the upstart providers. Gone are the days where drivers were forced to work for taxi companies to get access to fares.
The non-captive nature of the independent contractor workforce in the taxi industry made it ripe for disruption. When the ride-sharing services launched, they never had to endure the huge costs of hiring employees to match up supply and demand. Once consumers had new options, they moved toward the new providers, and the drivers followed.
The local delivery industry is about to experience exactly the same disruption. In fact, this industry is even more ripe for disruption, since it is a larger market ($46 billion), it has no national branding (the taxi industry at least has Yellow Cab), and the model has already been proven with the ride-sharing services.
So what can courier companies do? One bit of advice is for local delivery owners to embrace, participate in, and potentially even lead in these changes. Taxi companies fought the changes, and as a result may be going the way of local bookstores and video rental outlets.