Source: Amazon Logistics
Amazon calls on entrepreneurs to help deliver its packages
Amazon.com has introduced a program to help entrepreneurs with little to no logistics experience start their own businesses delivering packages sold on the e-tail giant’s site.
Those interested in the program, called Delivery Service Partner, can count on the “built-in demand” of delivery volume from Amazon and access to its sophisticated delivery technology and hands-on training. To help keep startup costs as low as $10,000, Amazon is offering a variety of discounts including breaks on Amazon-branded vehicles customized for delivery, branded uniforms, fuel and comprehensive insurance coverage. Leased vehicles can only be used to deliver Amazon packages.
Amazon claims successful owners can earn as much as $300,000 in annual profit operating a fleet of up to 40 delivery vehicles. Over time, Amazon hopes to “empower hundreds of new, small business owners to hire tens of thousands of delivery drivers across the U.S,” according to a statement.
The start-ups will complement traditional carriers and other small-and-medium-sized delivery companies.
“We have great partners in our traditional carriers and it’s exciting to continue to see the logistics industry grow,” said Dave Clark, Amazon’s SVP of worldwide operations. “Customer demand is higher than ever and we have a need to build more capacity.”
The new program is in line with the way Amazon has helped more than 140,000 small-and-medium-sized businesses with more than $100,000 in sales annually reach third-party buyers through its Marketplace. Kindle Direct Publishing and Amazon Web Services (AWS) have likewise supported small business ventures for authors and developers.
The service has been in test mode. A microsite, logistics.amazon.com, features stories of entrepreneurs, many former Amazon Flex drivers, successfully launching delivery businesses.
Some retail observers see the launch of Prime Air, Amazon Flex and other delivery initiatives as signals that Amazon intends to eventually replace UPS, FedEx and other carriers with broad in-house delivery capabilities to keep costs down.
A fleet of Amazon trucks could also help customer service. Upgraded features introduced earlier this year allow customers to track packages coming from Amazon’s logistics on a map, contact the driver or change where a package is left. Some Amazon couriers are sending images to customers to show where they left packages.
- Wanted: Hundreds of Entrepreneurs to Start Businesses Delivering Amazon Packages – Amazon.com
- Delivery Service Partner – Amazon.com
- Amazon reveals new way to deliver more packages – CNBC
- Amazon is advertising massive profits up to $300,000 to anyone who wants to start a delivery company – Business Insider
- Amazon is taking its package-delivery tracking to the next level – Quartz
Discussion Questions
DISCUSSION QUESTIONS: Do you see Delivery Service Partner as a major or minor component in Amazon’s delivery growth strategy? Will the program hold high appeal for entrepreneurs?
Poll
BrainTrust
Mohamed Amer, PhD
Independent Board Member, Investor and Startup Advisor
Ricardo Belmar
Retail Transformation Thought Leader, Advisor, & Strategist
I am involved in several online forums for Amazon sellers and Amazon-related business groups. From the discussions, this DSP program is attracting a lot of attention from young entrepreneurs that fit a specific profile. Primarily, the people who are driving Uber and Lyft cars.
Amazon is working to control its distribution through the entire supply chain. They do not want to be dependent upon another company’s inefficiencies. Delivery and on-time delivery is extremely important to the Amazon brand. So they want to make sure they do it right.
As Amazon adds additional stores, this will become an even more efficient delivery flywheel. The USPS, UPS and FedEx have something to worry about.
Amazon’s attempt to engage entrepreneurial types to complete the delivery process could complicate its administrative tasks. Communicating with one UPS and one FedEx is simpler than communicating effectively with hundreds, if not thousands, of independent carriers. Let’s wait and see on this one.
For years merchants have complained about the service and dominance of FedEx and UPS. Now Amazon is doing something about it by enabling entrepreneurs to start their own Amazon-branded delivery services. I doubt most people will develop 40-vehicle fleets, but there is money to be made and the bar to join is low. Leave it to Amazon to shake up another segment of the business.
Amazon isn’t just interested in being a disruptor of consumer-facing businesses like books, pharmacy and food — but is clearly laying the groundwork for being equally disruptive on the supply-chain side. Phil got it exactly right by comparing the Amazon delivery profile to the Uber/Lyft profile — another case of an industry disruption that seems more and more commonplace today.
Every service partner program ultimately offers greater benefit to the enterprise. Think Uber, Sears appliance repair and a hundred others. When partners realize they are but sharecroppers in an agreement over which they have limited revenue certainty, turnover is the natural result. One cannot blame Amazon for attempting this, but I do not see it being the solution to their last mile problem.
Once again, Amazon is testing alternative delivery modes and in doing so, it is raising the bar on customer expectations and forcing competitors to constantly try to catch up. The idea of a recognized giant in the industry teaming with entrepreneurs is classic. Remember when Bezos was the entrepreneur and Amazon was the fledgling business? The quote “success breeds complacency” certainly does not apply to Amazon. As for entrepreneurs, Amazon’s track record of working with and helping entrepreneurs succeed is well documented.
The launch of Amazon’s DSP program at a time of U.S. driver shortages is indicative of the company’s strategic view. Deliveries are core to Amazon’s success and, as it grows, it must secure resources to maintain that signature element of its brand. The DSP program is a step in that direction. Amazon’s entire trust model is tested with every single delivery and the company will ensure they have a full compliment of proven options in how that is executed.
As to entrepreneurial appeal, heck yeah!
I’m going through the application process as this is just that interesting to me. This will attract a huge pool of applicants as any business with the Amazon name attached adds instant credibility and presumed support. I see this making a huge dent into the standard delivery services over time
This appears to be Amazon’s version of how some FedEx operations operate. Plus there is a little Uber added in to the mix. Anytime Amazon wants to get into a business you can bet they know what they are doing and it will be a success. Personally, I like it anytime someone does something to improve and enhance an entrepreneur’s chance for success.
The concept is very interesting however it leaves me with so many questions. Nowhere have I read that Amazon will be providing software to create truckloads and routes for these guys running 40 trucks. Or do they simply start with one and grow it themselves? This, to me, is such an unknown and I’m not so sure an unknown is what Amazon wants for their delivery arm. The concept of using independent drivers to cover the last miles has a lot going for it but building a delivery business out of the gate has lots of hurdles and possibilities to fail. For my 2 cents.
I do believe the DSP will be a major component in Amazon’s growth strategy, but the entrepreneurial appeal is merely part of their marketing package as far as I’m concerned. Uber tried to present itself as an entrepreneurial choice, largely based on the the “work when you want” mantra — which in reality isn’t entrepreneurial in the slightest. Call me cynical, but it will be interesting to see (like Uber) at what point Amazon’s DSP grows to the supply scale needed until they revise the terms of the program.
Having intimate knowledge of young people’s thoughts on jobs they think are “easy,” this has been the number one topic lately. They could really be on to something.
Amazon may be establishing a long-term component for delivery growth. And there are entrepreneurs who will jump on this opportunity.
That said, this doesn’t solve Amazon’s far more difficult delivery problem: cost. The last numbers I saw showed Amazon with an annual loss of around $7 billion from shipping products.
Given Uber’s continued massive losses ($2 billion annually) (a somewhat similar approach), it’s unlikely that this will offer a cost cutting solution — it seems designed entirely to increase volume.
This announcement is a reminder that Amazon may dominate the headlines, but behind the scenes they’re scrambling because they don’t have a business model that works yet (to generate a profit — their business model works great for driving up stock price).
As the concept of “home delivery of everything” continues to grow, the demand for logistical support also grows. Adding to the “gig economy” with entrepreneurs seeking to start their own logistics companies is an amazing opportunity that Amazon is offering. I want to do a little more research to get the specifics, but from the overview in the article it looks like a benefit to the consumer and the economy.
Walmart changed logistics when they purchased their own trucks and created their own logistics processes. Amazon has been experimenting with different forms of logistics as it strives to shorten delivery time while keeping the system reliable. The investment in training, leased vehicles and insurance coverage makes it possible for more entrepreneurs to get involved while maintaining standards. It is another in a series of experiments by Amazon that deserves watching. The opportunity for entrepreneurs is an interesting way to tap into the work force and to make the process work for smaller brands. This is an interesting experiment to watch.
The logic behind Amazon’s new Delivery Service Partner program is very sound. It helps them control the last mile delivery process at a cost they control. I’m not sure that the value is there for the owner-operators of the service or how pleased their customers will be with it.
As other have pointed out the process for both parties has lots of details that have to work right to provide the customer service Amazon has provided by UPS, FedEx and USPS.
I’m not sure the math was meant reflect this but if a partner operates 40 trucks and can make as much as (interesting choice of words) $300,000 then if you operated one truck would you make $7,500? That’s certainly not enough for it to be a full-time position. It will be interesting to see how this works out for all concerned.
This depends on a couple of factors. The drivers themselves must meet the standards Amazon sets or it’s bye bye. They also must be compensated to make a good living, so Amazon must provide a very good commission to attract hard working drivers. If not then it simply will not work. It is an opportunity and it could be good for both parties.
The Delivery Service Partner program is the easiest and fastest way for Amazon to replace UPS and FedEx for the last mile of delivery. However, it comes with some potential pitfalls.
Relying on an army of entrepreneurs for delivery gives up control of the level of control a giant like Amazon needs to maintain its reputation. It is difficult to ensure consistent levels of services from independent partners. From an entrepreneur’s perspective, they should be careful about investing too much in a “fleet of vehicles,” as Amazon could shift gears and decide to do the last mile of delivery with their own team or they may acquire a transportation company.
It appears Amazon’s end goal for all major metro areas is to provide same-day delivery, and the only way to do that is through having more drivers and a dedicated service they can rely heavily on. Additionally, if these startup Delivery Service Partners are strategically launched locations in need of resources, the big delivery companies should get some much-needed relief for their drivers.
This disruption will create innovation and allow more individual based business to flourish. I think both Gen Z and the over 60 crowd has entrepreneurs just itching for an opportunity like this!
This could be a very interesting experiment for Amazon and in their usual fashion, it’s disrupting yet another industry. FedEx and UPS are ripe for disruption and who better than the Amazon juggernaut to disrupt it in the analogous way that Uber and Lyft disrupted the taxi industry. It’s not clear to me that the ratio of delivery cars (and associated costs for drivers, etc.) to expected profit as indicated will be attractive enough to acquire enough entrepreneurs to make a dent in Amazon’s relationship with FedEx, UPS, and the USPS. But it certainly will raise some eyebrows and there most likely are a number of people who will apply simply because the Amazon name is on it. Will this help improve Amazon’s overall shipping costs? That remains unclear, but I’m sure that is part of what will be measured in this experiment, and yes, I am calling it an experiment!
This is a great initiative to offer entrepreneurs the opportunity to gain hands-on business experience, while also promoting job creation. I am eager to see the outcome of this program, and hope to see entrepreneurs, consumers and job seekers positively impacted by Amazon’s Delivery Service Partner program.