Amazon is willing to pay its employees as much as $10,000 along with three months’ worth of compensation if they quit their jobs to launch delivery startups, according to The Wall Street Journal. Meanwhile, Uber, whose CEO recently compared the rideshare company to the e-commerce giant, is busy making excuses while its new stock continues to reel.
This expansion of Amazon’s delivery service partner program will help the company lower its Prime shipping time down to a day. Employees have the potential to earn as much as $300,000 in profits if they manage to increase their delivery fleets to 40 vehicles.
With this move, Amazon is on its way to creating thousands of jobs, boosting its delivery infrastructure, improving customer service, and increasing sales. Uber, on the other hand, can never deploy such a model to scale up its business.
UBER’S DAMAGE CONTROL
Uber CEO Dara Khosrowshahi is in damage control mode after the ridesharing giant’s IPO turned out to be a disastrous one. Uber’s stock tumbled out of the gate right after its IPO, and the losses accelerated on day two of trading.
But Khosrowshahi is putting up a brave face, telling employees in an email that the likes of Facebook and Amazon also had difficult starts and Uber’s stock could similarly recover.
The Uber CEO’s obsession with Amazon runs deeper than just the email. Last September, he said that he wants to make Uber the Amazon of the transportation business.
But that looks like a farfetched dream after Amazon’s move to tempt employees to quit their jobs to start their own delivery businesses.
WHY UBER IS NO AMAZON
Amazon is a far bigger company than Uber on the basis of employee strength. The e-commerce giant boasts more than 630,000 employees, while Uber has slightly more than 22,000.
So Amazon has the luxury of telling its employees to go and start their own delivery business. But Uber cannot tell its employees to quit their jobs, buy their own cars, and start making money. That’s because Uber doesn’t have an Amazon-like employee base, and the ridesharing business is not scalable like the delivery business is.
For a delivery business, an Amazon employee can buy a truck and make several deliveries. As Amazon notes, the employee can make a profit of $300,000 per year if he/she can scale up to 40 vans or $1,500 per van.
But Uber cannot follow Amazon’s example because it will have to pay employees much more than $10,000 to buy a car and start driving. That’s because the popular car models attached with Uber start at $20,000 and go higher depending on the model.
And even if they do get a car, they will have to work 833 hours, or 34 days, to make $7,500 in profit from one car; the take-home pay of an Uber driver comes to $9.21 an hour. But then, attrition is a big problem at Uber. It is estimated that Uber drivers generally cart around for 17 hours per week and work for an average of three months.
So, if the Uber employee wants to employ a driver, it will take much longer to generate profits after meeting minimum wage requirements, spending money on vehicle maintenance, and accounting for the idle time incurred if the driver leaves.
So for someone looking to start an Uber cab business, employee retention and sustainability would be a big problem given the economics of this market. This is why Uber can never do an Amazon. Khosrowshahi needs to stop making such claims to boost the stock and instead focus on saving his business from real threats.