Photo: Amazon
Why is Amazon paying employees to quit their jobs?
Amazon needs to build its fleet of delivery vehicles and is looking to its own employees to help put trucks on the road. On Monday, the e-tail giant announced an expansion of its Delivery Service Partner (DSP) program, which helps entrepreneurs with little or no logistics experience start their own businesses delivering packages sold on Amazon’s site.
The new initiative offers to pay current Amazon employees including warehouse workers up to $10,000 to fund startup costs and the equivalent of three months of their salaries to quit their jobs and join the DSP program.
Amazon said the initial response to the launch of DSP has been “overwhelming” and that many of its own employees were those who expressed interest in trying the entrepreneurial life. When the program launched, Amazon claimed that owners could earn up to $300,000 in annual profit operating a fleet of up to 40 delivery vehicles. To date, Amazon reports, more than 200 new small businesses employing thousands of drivers have been set up as part of DSP.
“We’ve heard from associates that they want to participate in the program but struggled with the transition,” said Dave Clark, Amazon senior vice president of worldwide operations, in a statement. “Now we have a path for those associates with an appetite for opportunities to own their own businesses.”
Upon acceptance to DSP, employees will need to resign their positions with Amazon. The e-tail giant will provide them with training on how to start their own package delivery businesses, discounts on customized Amazon-branded vans and access to the company’s tech. Importantly, Amazon is promising “consistent delivery volume” for all former employees who join DSP.
Amazon is billing the new initiative as a further indication of its focus on helping employees to achieve their personal career goals.
Discussion Questions
DISCUSSION QUESTIONS: What impact might having former Amazon employees join its Delivery Service Partner program have on delivery efficiency? Do you expect other large retailers to primarily rely on their own fleets, internally-associated vendors (similar to DSP) or independent third-parties (FedEx, UPS, USPS, Uber, etc.)?
Poll
BrainTrust
Rob Gallo
Chief Marketing Officer, Impact 21
Cate Trotter
Head of Trends, Insider Trends
Winning the last mile is the cornerstone to future success. DSP is something you would expect from Amazon’s innovative mindset. What sounds good on paper may not work so great in practice. Employees do not necessarily make great entrepreneurs or efficient delivery partners.
Wow. Impressed by the fresh concept that Amazon is taking. Given the driver shortages, why not use some of your own best people? People who know, live and breath the Amazon philosophy and culture. That’s creative. Fix the market shortfall for yourself.
Although this is a very creative, out-of-the-box idea, I just don’t see too many other retailers following suit. I think now there is a good opportunity for the traditional DSPs to step up and position their own capabilities and expertise – unlike the stream of new, small startups.
Yes, Charles, I too think this is a great concept for Amazon — people who already have some training in logistics and inventory movement rather than out-of-the-box entrepreneurs. Good head start. Not to mention they come with some loyalty for Amazon and want them to succeed. Can they make it work? Will others follow? I do think there is a win in there however they need to get some learning behind them first. I’ll stay tuned in to see, for my 2 cents.
The next-day fulfillment competitive landscape between Amazon, Walmart, Target etc. is heating up. Amazon has to vertically integrate the fulfillment operations under their umbrella, and the Delivery Service Partner program is a step in that direction.
Amazon has depended on third-party shipment operations, yet their new commitment to next-day delivery requires some creative thinking. Perhaps this entrepreneurial approach will contain some of the significant shipment costs, and at the same time provide current Amazon employees a chance to run their own delivery business.
It will be very interesting to see how this plays out. Also, what will be the impact to both FedEx and UPS as Amazon focuses on their own delivery fleet?
I think this is good for those who want to get out of the warehouse but still be connected to the mother ship. The challenge will continue to be how to deliver in congested cities like NYC. Adding more vehicles will only exasperate an already chaotic situation. Uber, Lyft and other services have rendered NYC virtually impossible to navigate. FedEx, UPS and all the other delivery services including those on bikes have added to the misery. A more nimble delivery mechanism is needed for Amazon and other e-tailers to continue to deliver the two-day or same-day promise.
It’s a hybrid incubator/franchise model. They have fertile ground of people who are willing to take the (huge) leap, but are lacking the funds to do it. Amazon certainly has the funds to invest to get these DSPs up and running. The question is whether “consistent delivery volume” is enough to run a profitable business. I would lean toward it working at least better than the hourly wage some of them are currently earning. Amazon has a vested interest in the success of the program as you wouldn’t want these all to fail and deal with the backlash.
Shocking: Amazon implements another innovative and creative way to solve a problem. I see only upside in this idea for both Amazon and the drivers, and I see little risk to delivery efficiency. Amazon has far too much at stake to not ensure these new entrepreneurs are well-trained and supported as they get on their feet.
There are no rules in this game (only some laws). This is a great way to transform the delivery market and empower their people. 100% agree that Amazon only stands to gain to make sure that everyone that steps into this program wins.
I find this to be innovative, out-of-the-box, evolutionary thinking. Sounds like it might accelerate the implementation of DSP. Populating DSP with existing employees sounds like it will integrate DSP versus create it as a bolt-on. Yet another rule book Amazon is rewriting.
Doesn’t this sound a heck of a lot better than that program Walmart conceived by utilizing employees as delivery drivers on their trips home after work? You would expect a lot more from Amazon with this type of delivery program, and this is it. Today it is hard to control so many independents who represent the company, and the scarcity of available players is tight. By employing this opportunity for Amazon associates, it will create a closer bond of understanding between all parties, and I believe performance at the street level. And Amazon benefits from more efficient operations in delivery.
While this may seem like a great initiative and one designed to help employees achieve their goals, it could be a high risk for Amazon. Ultimately Amazon must have its own agenda looking to reduce its distribution costs. There are hundreds even thousands of professional companies out there that have been running distribution companies for years. How many of these Amazon employees are going to be able to manage to compete with them and make a profit as Amazon tries to drive down delivery costs?
The risk to Amazon comes from having large numbers of drivers, vehicles and operators out there that are not experienced with the Amazon name on their vehicles. This is their brand and they are putting it at risk if customers have a bad experience.
With the recent announcement of one-day shipping for Prime customers, and with increasing automation in its fulfillment centers, paying its employees, especially warehouse employees, to start their own DSP business helps solve the shortage of delivery drivers and potential excess of warehouse workers.
This type of innovation is not unexpected from Amazon, what remains to be seen is if their employees can transition to be successful business owners. Depending on their previous position it may be a very different skill set.
This is Amazon we are talking about! So what would make us think it would be anything but successful? Amazon has found a way to reduce cost in the distribution centers. At the same time it has found a way to increase its delivery fleet. Amazon is the leader. So watch for others to follow.
Winning the last mile is a serious retail competition and Amazon is taking this seriously. Offering employees incentives to join its Delivery Service Partner program is a creative approach. It will be interesting to see if the $10,000 is a big enough incentive for employees to take the entrepreneurial risk of starting their own delivery business. It is a helpful financial incentive, but it will take a lot more to get their business off the ground and it is not a risk-free endeavor.
It will be difficult for other retailers, except maybe Walmart, to tackle an initiative to develop their own delivery fleets. Amazon continues to be a disruptor.
Why not try? This is just the type of innovative program that one expects from Amazon. Seems like seeding an industry with former employees who already know Amazon might just succeed. But not sure this would work for other companies.
It’s definitely an interesting move, but one that perhaps plays into coming trends. If warehouses are to become more automated in the future, then it’s likely that less staff may be needed. This programme provides a way for some employees to shift out of the warehouse and stay within the Amazon world. I think for employees it probably seems like an attractive deal too, but it’s important that they’re thinking things through properly — the entrepreneurial life is not for everyone and quite different to just being an employee!
This seems good for Amazon, but $10K won’t get you very far, and making $300K a year profit on 40 vehicles is a stretch as well. To end up with 40 vans, you would need at least $800K to buy used ones at $20K ea. How much is Amazon going to pay these business owners to deliver the goods? Is it by the mile, the package, or some sort of Uber pay scale, which isn’t creating much wealth for the drivers? Not much detail in this, and is upkeep on the vehicles factored in?
Yeah, I’m skeptical on this venture, as I make catering deliveries, and it is not cheap to make deliveries even in my small county. Where do these folks park in the big cities, and is there a parking charge? I hope these new business owners find a really good accountant, to figure out the details, and if the profit numbers are true.
I wish these business ventures work out as their success will enable more folks to have their own business, and that is always a good thing.
From the sound of it and the fact that the DSP was announced over a year ago, pushing employees in this direction sounds more like a PR-enabled severance package to reduce workers in warehouses, not engage them for last mile delivery.
There might even be some cost savings by limiting employees to 3 months pay, certainly not enough time to launch a solid delivery business. If there’s any increase in delivery efficiency, it won’t be from warehouse workers delivering goods. In the course of a year only 200 business were formed for DSP, so even a 10x increase in businesses started will cost Amazon almost nothing.
This is all PR and employee relations. There’s no indication that other retailers will follow suit, nor is it in their best interest to move more vertically, as costs and time would be overwhelming.
Who knows the Amazon philosophy better than Amazon employees? And when Amazon sets them up in business, they will “go to the mat” to meet, if not exceed expectations — of both Amazon and their customers. Amazon has had a relentless focus on the last mile.
While it’s been a concern for other retailers, I don’t see companies like Walmart buying fleets of vehicles to set up private delivery businesses, at least not in the near future. They will still depend on third parties.
Only 200 small business started up in the year this program was announced with “thousands of drivers”? That doesn’t seem nearly as impressive as Amazon would need, to really make a dent in last mile delivery. This certainly sounds like a better program than the one Walmart tried to get their associates to deliver packages after their work hours with their personal vehicles.
I expect they will have some success with this program, but it’s hard to see how much of a dent it will make in their efforts to control last mile delivery. I agree with Ananda that this is more of a PR play than anything else (it is Amazon, after all!). A year from now, when the articles are published of Amazon putting more robots in their warehouses, we’ll all be looking back at this announcement to see where all the people went that used to have those robots’ jobs!
It’s faster (and cheaper) for Amazon to make someone else figure this out, and buy them later. Similar to their approach with Private Label via the their Manufacturer Accelerator Program.