In a Nutshell
*The service seeks to enlist entrepreneurs to start small businesses that would deliver Amazon packages to consumers.
* With a more robust direct delivery offering, Amazon could be able to provide less expensive shipping on branded merchandise sold through the site.
Amazon is launching a new delivery service that potentially presents a new competitive threat for the promotional products industry and third-party shipping providers like UPS, FedEx and the United States Postal Service.
The Seattle-based retailer this week announced that it wants to help would-be entrepreneurs start their own small delivery businesses. The businesses would be responsible for delivering Amazon Prime packages in Amazon-branded vans and uniforms from the company’s local sorting centers to consumers.
Amazon just did more in two days to shake up business as usual than some companies do in their whole llifespans:— Beth Williams Liou (@BWilliLiou) June 28, 2018
1) More moves in delivery 👉 https://t.co/jkdFmvJs7R
2) Pharmacy foray w/ PillPack 👉https://t.co/TPLcr2cxaa pic.twitter.com/x9GGroEN8k
Starting on June 28, prospective entrepreneurs can apply to be part of the expanding Delivery Service Partners programs. Amazon says it will provide technology and operational support to selected partners, helping them start, set up and manage their own delivery business. To help keep startup costs as low as $10,000, entrepreneurs will benefit from Amazon’s negotiated discounts on important resources, which include Amazon-branded vehicles for delivery, branded uniforms, fuel, comprehensive insurance coverage, and more. Amazon maintains that successful owners will be able to earn up to $300,000 in annual profits, while operating a delivery fleet of up to 40 vehicles.
Amazon has already beta-tested the model with some entrepreneurs, at least some of whom sang its praises. “I had prior experience running my own business but not in logistics,” Olaoluwa Abimbola, one of Amazon’s beta participants, said in a statement. “I was driving for Amazon Flex when I learned about the opportunity to start my own delivery company. Backed by Amazon’s resources and logistics experience, and its encouragement to ‘learn while I earn,’ this opportunity was a no-brainer. In just five months, I have hired more than 40 employees.”
While Delivery Service Partners would operate as their own businesses, Amazon is reportedly requiring that owners make workers full-time employees instead of contractors. The ecommerce company wouldn’t say if it expects a certain minimum wage to be paid, but it has been reported that business owners will be mandated to give drivers paid time off and other benefits.
As a former delivery driver for a independent contractor, this is huge. Amazon is slowly taking over pic.twitter.com/YR7zGf2gBD— Daniel S. Pierson (@DanielSPierson) June 28, 2018
Amazon maintains that the new delivery initiative won’t affect relationships with third-party shippers it delivers through, essentially saying that demand is so great that there’s enough to go around for everybody. Still, Amazon’s play seems fairly clear: It wants to establish a firmer grip on the supply chain, gaining greater control over the final stage of delivery in an effort to provide faster, more accurate package arrival.
Given that, it’s not difficult to envision Amazon and its vetted delivery partners acquiring expertise and quickly growing the fleet available from the “hundreds” of businesses Amazon currently says it is envisioning to more. Almost inevitably, some suspect, that will lead to a greater percentage of Amazon deliveries being made through partner delivery businesses. That could, of course, impact the bottom lines of shippers like UPS, FedEx and USPS.
As Amazon gains more control of the delivery process and shipping costs, there are potential headaches for promotional product companies. It’s no secret that Amazon is already in the branded merchandise game, with services like its expanding print-on-demand service Merch by Amazon, Amazon Custom, and the general availability of direct-to-end-buyer sales of products that can be customized online through its main amazon.com site. With a more robust direct delivery offering, Amazon could be able to provide shipping on logoed swag that is faster and less expensive than promo distributors who ship through providers like UPS, FedEx, and USPS. That could hinder distributors’ ability to compete against Amazon as it digs deeper into promo. Conversely, promo companies that sell through Amazon could, depending on how things play out, realize a benefit by being able to offer lower delivery charges on orders obtained through the ecommerce marketplace.
How do you think things will go? Tweet us your thoughts @ChrisR_ASI