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By Jennifer Smith and Kimberly Chin 

Amazon.com Inc. will pay its employees to quit and help them start their own local package-delivery businesses, as the e-commerce giant competes for delivery drivers in the tightest U.S. labor market in 50 years.

Transportation operators, from long-haul truckers to retail chains like Walmart Inc. to startups such as Deliv, are increasingly competing for people to help them carry the millions of packages that are moving each day around the country. Demand for so-called last-mile delivery is booming as more Americans shop online.

Amazon has been expanding its own logistics and delivery operations, although it still relies heavily on the U.S. Postal Service and others to take most of its orders to people's homes. In an effort to handle more of those packages itself, the company announced a program last June that invited entrepreneurs to form local delivery operations with dozens of drivers in leased vans bearing the Amazon logo. So far, about 200 such firms have been created, Amazon said.

On Monday, seeking to create several hundred more, Amazon said it would give its existing employees as much as $10,000 each for startup costs as well as the equivalent of three months of gross salary if they start their own delivery businesses. Even if 500 employees took the offer, it would be a modest investment for the company, which has about 650,000 full- and part-time workers around the globe.

The new incentives suggest the e-commerce giant is "finding they need to add people faster, and to do so they need to provide additional incentives to come on board," said Satish Jindel, president of ShipMatrix Inc., which analyzes package-shipping data.

As the program grows, Mr. Jindel said, Amazon is likely to cut back on the amount of last-mile business it gives to the other big competitors, directing fewer packages to United Parcel Service Inc., FedEx Corp. and the Postal Service. He estimates providers in Amazon's program could handle an estimated half of the company's last-mile volumes by 2022.

A spokeswoman for Amazon said "customer demand continues to grow," adding, "I wouldn't think about it as one or the other, it's really more like all of the above."

FedEx and UPS have consistently played down the threat of Amazon delivering more packages itself, saying the online giant still needs to use the established delivery giants to ship many of its packages. FedEx earlier this year said Amazon made up 1.3% of its revenue in 2018, an unusual disclosure.

Targeting Amazon employees to help handle those deliveries makes sense, Mr. Jindel said, because they already have been vetted and have a record with the company.

The employee incentive program could indicate Amazon isn't recruiting as many small partners as it expected, said Cathy Roberson, an analyst with Logistics Trends & Insights LLC. "What kind of response are they not getting from the original delivery-service partner program?" said Ms. Roberson.

The spokeswoman for Amazon said tens of thousands of people have applied to the program since its launch last year, and that the incentives are part of "a long history of providing help to our employees."

The employee incentive program was in the works before Amazon announced it was moving to one-day delivery for Prime members, she said, adding that "this will be part of our efforts to continue to speed up delivery to our customers."

As it ramps up recruitment, Amazon is building out a network of delivery stations to help speed parcels to consumers. Packages are sorted by route and then handed off to local delivery partners, said Marc Wulfraat, president of supply-chain consulting firm MWPVL International Inc.

The company is expanding those stations beyond the big cities and moving into smaller markets such as Gary, Ind., and Youngstown, Ohio. "They've already conquered all the big cities," said Mr. Wulfraat, whose firm estimates Amazon already has about 115 such locations in metropolitan areas, and has about 10 more in the works.

Employees who opt to start a new delivery business would have to quit Amazon, the company said, but it would provide them with a consistent delivery flow from the company, access to its delivery technology, Amazon-branded vans for delivery, as well as branded uniforms and insurance.

The company requires candidates to have liquid assets of $30,000 to ensure they can cover startup costs and living expenses, according to answers to frequently asked questions about the program on Amazon's website. That number will be scaled back for employees participating in the incentive program "given that we are helping them cover the startup costs," the spokeswoman said.

"Now we have a path for those associates with an appetite for opportunities to own their own businesses," said Dave Clark, Amazon's senior vice president of world-wide operations, in prepared remarks.

Write to Jennifer Smith at jennifer.smith@wsj.com and Kimberly Chin at kimberly.chin@wsj.com

(END) Dow Jones Newswires

May 13, 2019 12:49 ET (16:49 GMT)

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