The drivers of USPS, UPS and FedEx had better watch out because Amazon is starting to build its own last-mile delivery service. What does this exactly mean for the ecommerce giant and competitors? Amazon wants to control every aspect of its operations, because it frankly believes it does a better job as everyone else.
This most well-known e-commerce company recently announced that it will start the new Delivery Service Partners program. This is a program that lets entrepreneurs have their own local delivery networks to run. Each network will have up to 40 vans, each stamped with Amazon Prime logos.
The delivery units will start on their first day at over 75 different Amazon locations in the United States. They will be delivering parcels that were ordered from is parent company. Drivers with Amazon-emblazoned shirts and iconic black hats will drive these new vans and deliver the packages from their delivery stations to the other delivery partners. Partners can also include FedEx, UPS, and the United States Postal Service.
Amazon is Using Local Delivery Drivers to Help Meet Surging Demand
The senior Vice President of Amazon Worldwide Operations stated that the program is “all about scaling cost effectively”. This new program will meet the growing e-commerce demands that the company has been facing. So far, it’s been outpacing the growth of the delivery providers. The need to control and increase the speed of delivery has become more urgent in recent years.
This year alone, it is estimated that more than 40% of all e-commerce purchases will originate from Amazon.com. That amounts to billions of packages each year and a huge logistics operation that is one of the most complex in the world.
Amazon has great working relationships with all of its current external delivery partners. They simply use everything they have in order to meet the growing scale and needs, especially those demanded by the customers. The new delivery drivers will need to get their own commercial vehicle insurance. According to directautoinsurance.org full coverage can be purchased for about $120 per month for qualified drivers.
Amazon is taking a Risk using contract Delivery Drivers
The last 10-K filing that Amazon did was noted to have some risk associated with the reliance on outside partners. Affiliations with UPS or FedEx could result in problems that would negatively impact operations, finances and the customer experience.
When they filed this latest tax form, Amazon reported that their shipping costs rose from $11.5 billion to $21.7 billion over the course of two years. Some of Amazon’s biggest shipping costs include: sorting, delivery center locations, transportation expenses and packaging.
Costs are predicted to increase over the next year or two. That’s why this new delivery program is so important, as it brings more customers under its control in order to better affect the e-commerce rates.
Amazon Encourages Entrepreneurship within the Company
Amazon believes that this new delivery initiative will empower hundreds of small business owners, by hiring thousands of new drivers across the entire country. Since there is currently a shortage on truckers in the U.S, businesses only have increased transportation costs. This new program might be able to get them out of this rut.
Unfortunately, Amazon won’t elaborate with an estimate on how long it will take to get more delivery stations built. These new stations are needed in order to deliver packages to thousands of delivery drivers that are joining the program.
Here’s how the program will work
Every Delivery Service Partner will start a business with as low as a $10,000 investment. Once Amazon vets and approves the business, they will lease them some Prime-branded vehicles. The entrepreneur is in charge of hiring drivers, however. Amazon will of course provide discounts for the costs of transportation and other expenses like fuel and insurance benefits. They predict that successful Delivery Service Partners will be able to make up to $300,000 in profit per year.
There’s a great example of this program in action, Mr. Olaoluwa Abimbola. He has been running his own delivery service in Denver, CO as a beta tester for the past few months. He is loving his new business, and he has already hired over 40 employees who work regular hours for him.
This newest delivery program will be an additional feature added to Amazon Flex, which is a new delivery system already in place. Amazon Flex exists in over 50 U.S. cities and it works like Lyft or Uber, letting workers deliver parcels out of their own car. They can make anything from $18 to $25 an hour with usual delivery times.
The Amazon Delivery Service partner program is an additional part of the company’s logistics network. Since they already have over 7,000 of their own trucks and even 40 airplanes, they can make it work. They shipped over 5 billion Amazon Prime items last year alone.
Although Amazon is being a stickler about releasing financial information, they will say that their main goal is to increase customer experience and meet overall growth. They believe this new delivery program will be cost effective and will help them meet and possibly even exceed their goals. Who knows what the future holds for Amazon but it will surely be innovative and exciting.
