But even with all the help they get, Amazon points out that these will be independent parcel delivery companies. On the other hand, geography could work in favor of Amazon Delivery Service partners. The first map of delivery partner routes available above shows that these companies will operate in many of the country`s most populous cities and regions, where the delivery economy is often stronger due to population density and business volume. All of this will sound familiar to anyone familiar with the company`s legendary leadership principles. Amazon says a key feature of successful delivery partners will be resilience and the ability to deal with “the ambiguity of a rapidly evolving and ever-changing business” while delivering results with a “positive attitude.” But with the creation of this program, Amazon can establish an entirely new set of economic realities with delivery partners of its own manufacturing. This is part of Amazon`s broader push into logistics and delivery. The Seattle-based tech giant is increasingly busy shipping and delivering items purchased on its website, leveraging everything from its fleet of Prime-branded aircraft to its growing retail presence. “We expect new Amazon delivery providers to primarily capture additional order volumes until at least 2020, suggesting that it will still be some time before Amazon`s expanded fleet of entrepreneurs potentially reaches the desired scale,” they write. “We also believe that the level of profitability that entrepreneurs will achieve remains a question mark.

Bottom line: Once established, a delivery company could make annual profits of $75,000 to $300,000 – if it succeeds and Amazon`s forecasts are correct. “I think there`s a huge opportunity here, but only for the right person,” said Tony DiNitto, a former Austin-based FedEx route manager who negotiates delivery buying and selling routes and analyzed the Amazon program on his road business consulting site Tycoon Delivery. DiNitto acknowledges that it is aligned with the value of FedEx Ground contract transactions compared to other deliveries. However, the comparison with FedEx Ground provides important context for Amazon`s new initiative. Our goal was to better understand Amazon`s strategy and the potential risks and opportunities for these new delivery entrepreneurs. “We do not guarantee results of any kind, including the fact that what a delivery company earns exceeds the owner`s investment in their business,” reads the fine print of the Amazon brochure. “The results of each delivery business will be different, and the results will depend on a number of factors, including the efforts of the owner and expense management, as well as the size of the business.” DiNitto, which closely tracks Data on FedEx contract sales, estimates that the average FedEx contractor controls between 5 and 15 routes per day. Acquisition costs average between $700,000 and $950,000 to buy a business that consists of multiple FedEx Ground routes. One of the first service partner delivery business owners who participated in an Amazon pilot program says the impact of these revenues has been significant. Olaoluwa Abimbola, an immigrant from Nigeria who previously piloted in the Amazon Flex delivery program for individual contractors, hired 40 employees at his parcel delivery business in Aurora, Colorado, in the first five months. In other words, Amazon is leaving the less lucrative business of delivering rural parcels to FedEx, UPS, and the U.S.

Postal Service. Based on Amazon`s projections, “there is a real possibility that people could work twice as hard for half the salary as owning a FedEx route,” said DiNitto, the FedEx delivery business broker. “We won`t know for sure until we see the program come together a little more to see how much time and stress it takes to successfully run an Amazon fulfillment business.” UPS and FedEx are already reducing Amazon listings for shipping, leaving little room for additional savings for the company if Amazon wants its delivery partners to be profitable, analysts Jonathan Root and Robert Jankowitz of Moody`s Investor Service wrote in a July 2 research note evaluating the impact of Amazon`s new program. This independence is crucial from a legal point of view. A series of costly lawsuits followed FedEx Ground`s program, challenging the company`s claim that FedEx Ground operators were independent contractors, arguing that they should have been classified as employees. FedEx is moving from its previous approach as a contracted service provider to a new independent service provider model that establishes new requirements for program participation while providing additional flexibility for contractors. We passed this profit comparison on to Amazon, but the company refused to speculate on the profit potential of an Amazon delivery company versus the FedEx program. Of course, the definition of “route” can vary depending on the situation, and it`s hard to make an apple-to-apple comparison between an established program and a program that`s just getting started. But Amazon`s last-mile delivery economy also promises a challenge for these new businesses. “Assuming discounts of 20% or 15% we estimate that Amazon pays a price per package of about $6.50 to UPS and about $7.35 to FedEx for ground services,” they wrote. “We believe these prices would leave a small profit margin for other providers if Amazon tried to improve its net shipping costs by reducing the per-package fees it will pay to its local delivery companies.” “Instead of Amazon saying, `We need 100 drivers today,` Amazon will tell 3-4 operators, `We need each of you to get us 25 drivers today,` and the responsibility for staffing and managing drivers rests with four contractors, not all at Amazon,” said James Thomson, partner at Buy Box Experts, a consulting company for third-party Amazon sellers. Thomson previously oversaw Amazon`s recruitment of third-party vendors as general manager of Amazon Services.

Delivery service partners also benefit from an Amazon delivery station, which reduces or eliminates the need to operate their own facilities. In the weeks following Amazon`s announcement on June 27, we looked at the economy of the program. We spoke to logistics and delivery experts, asked the company questions, read the fine print in the application documents, and compared the new program with similar delivery companies. Right now, Amazon says it`s not trying to replace UPS, FedEx, the U.S. Postal Service or other delivery services. Instead, the company sees the need to expand its “last mile” delivery capabilities. Some delivery and logistics veterans focus on these financial estimates. In online forums popular with UPS and FedEx drivers, the question arises as to whether existing delivery companies could improve their economy and operational efficiency by delivering packages from the same trucks for FedEx Ground and Amazon`s Delivery Service Partner Program. Asked about this possibility, an Amazon spokesperson said the company`s branded delivery vehicles can only be used to deliver Amazon packages. “When we started our multi-year planning a few years ago, we realized that given the growth of e-commerce and the growth of our business in general, we really needed to look at how we would leverage our capability over the long term,” said Dave Clark, Amazon`s senior vice president of operations.

announcing the new delivery initiative at a media event in Seattle. And this is where the implementation of Amazon`s new program is particularly interesting. Delivery service partner companies will hire drivers as their own employees, including healthcare services, effectively shifting the burden of direct employment from Amazon to independent delivery companies, giving a new twist to their small business economy. This is an important finding of the Amazon Delivery Service Partner Program`s GeekWire analysis. This program is another attempt by the tech giant to spark the creation of hundreds of small businesses across the country. Amazon, which was launched with his help, hopes these companies will eventually employ tens of thousands of delivery people in Prime-branded blue vans and uniforms. And finally, Amazon makes it clear that its revenue and profit forecasts are unproven estimates. The company says the numbers are informed by its experience working with similar delivery companies and additional research, but says actual results will vary. But even with Amazon`s help, it will take an immense amount of work and effort to make their new parcel delivery business still moderately profitable. The company promises its delivery partners a fixed monthly payment based on the number of vehicles they operate with Amazon, a separate rate based on the length of their routes, and a price per package based on the number of packages they successfully deliver.

Amazon has also worked with established delivery companies in the past that have larger fleets of unbranded Delivery Vehicles. In addition, the company contracts with individual drivers to deliver packages through its Amazon Flex program, which is often compared to Uber for parcel delivery. .