Monday, June 27, 2022

Amazon’s Surprising New Delivery Partners: Small Businesses Nationwide

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Since at least last summer, Amazon has been quietly recruiting mom-and-pop stores in rural America to participate in an experimental delivery program. The company pays participating small businesses a per-package fee to deliver Amazon orders within a 10-mile radius to their neighbors in states such as Nebraska, Mississippi, and Alabama.

The local businesses Amazon recruits range from florists to restaurants to IT stores, none of which require: previous delivery experience – only a commitment to deliver Amazon packages seven days a week, approximately 360 days a year, and a physical location to receive packages every morning.

As Amazon’s ambitions to accelerate delivery times and handle more of its own deliveries have grown, rural America has presented its greatest logistical and financial challenges. While delivery drivers in cities and suburbs can deliver perhaps two dozen packages an hour or more, the distance between homes in rural areas and other remote communities means drivers can handle only half that number or less, making delivery to these locations more expensive. As a result, Amazon has turned these deliveries over to partners, including UPS and, most notably, the US Postal Service, to handle the so-called “last mile” in tiny America.

The new beta test for local business delivery looks set to one day replace its existing partners as Amazon’s sales grow and the postal service takes on its own financial and operational challenges. Amazon hopes the new program can help the company gain more control over deliveries to customers in sparsely populated areas and improve delivery speed to those customers’ doors. The company has already tried versions of the program in a few international markets, including India since 2015, but testing in the United States is more recent.

The delivery program is just the latest example from Amazon offering small businesses the opportunity to generate new revenues by integrating with the tech giant’s growing ecosystem. From third-party sellers who offer inventory that supports Amazon’s vast online product catalog, to urban delivery companies that work exclusively for Amazon to transport hundreds of orders a day to Prime customers’ homes, Amazon has perfected the art of attracting small businesses with new customer opportunities, while at the same time making the Amazon product more attractive – while keeping enough distance from the partners so that they can avoid liability if something goes wrong.

In the case of the new delivery initiative, Amazon is only recruiting existing businesses, in part because they already have liability insurance, an Alabama small business owner who participates in the program tells them. Some of these small businesses are paid about $2.50 to $3 per package and have recently been able to convince Amazon to modestly raise their rates as gas prices have risen. One Amazon web page marketing the program says business owners can expect to earn $1,500 to $2,000 a week if they deliver 600 to 800 packages weekly. That works out to about $2.50 per package. Marc Wulfraat, a logistics consultant whose company follows Amazon’s warehouse network, told Recode he had expected the pay to be at least $3.50 per package to make the service attractive to businesses.

By positioning the opportunity as an afterthought for rural businesses rather than a major money maker, Amazon may be able to provide these businesses with just enough financial incentives to keep them happy with the gig while the tough economy of rural delivery works. But if Amazon’s history with small businesses is predictive of future relationships, some partners will find great success with the program, while others will leave disappointed or disappointed.

Amazon presents the initiative — currently referred to internally as the Amazon Hub Delivery Partner Program — as a way to generate additional revenue by processing a few dozen to a few hundred packages per day.

“All of our partners operate primary businesses and this program provides an opportunity to supplement their income,” Lauren Samaha, an Amazon spokesperson, said in a statement.

In return, the small businesses and their employees must commit to taking and delivering packages every day of the week, including Sundays, with just five days off a year, according to answers in a report. FAQ section of a web page that markets the program† In the past, Amazon has sometimes reduced the package volume destined for a particular small business if they don’t complete the deliveries. But the small business owner who spoke to Recode said the program has given his family a nice financial boost during the pandemic, as well as some of the neighbors he has hired.

“The appeal diversifies the business and also creates jobs for people in the community,” the Alabama business owner told Recode. The business owner requested anonymity to speak candidly about the program without Amazon’s permission. “That’s something we care about, and it’s been really good for my workmen.”

But the Amazon partner also warned that some small businesses found the commitment too demanding on top of their core business and pulled out.

“Seven days a week isn’t a big deal for me, because I’m in my shop every day,” they said. “But for some people it’s a big deal.”

Revelations about the new delivery program come as Amazon continues to take control of more customer orders from the time an order is placed on its app to the time it arrives at a customer’s doorstep. Amazon is doing this partly out of necessity, as online store volumes, especially during the holiday season, exceed the transport and delivery capacity of the country’s largest parcel carriers. Amazon would also like to offer its logistics services to other companies in the future as an extra moneymaker.

Through a division called Amazon Logistics, or AMZL, Amazon now oversees the Delivery of an estimated two-thirds of customer orders in the US, while the share of Amazon packages shipped via USPS and UPS continues to decline. Amazon’s share of parcel delivery has grown every year since AMZL’s inception, and Amazon’s global consumer CEO Dave Clark said Amazon is likely to be the largest delivery company in the country this year.

In cities and suburbs, packages sent through Amazon’s own AMZL delivery network are outsourced to thousands of delivery companies — referred to internally as delivery service providers or DSPs — created by entrepreneurs to serve Amazon exclusively with fleets of 20 to 40 vans. The employees or contractors hired by these companies typically drive Amazon-branded vans or trucks, wear Amazon-branded uniforms, and are monitored and judged by Amazon technology and performance expectations.

But Amazon is not recruiting entrepreneurs to start these businesses in rural areas because the volume of parcels in these regions has historically been unable to support standalone businesses. Enter the small business stores just looking to make extra cash as part of the new nationwide delivery program. These entrepreneurs and their employees use their own vehicles to handle the deliveries.

In job postings, Amazon’s hiring managers say the program will expand in 2022. The Alabama small business owner said Amazon representatives have told them the program is in its pilot phase and has been approved for larger investments. Samaha said the program is still in beta testing.

In a short webinar recorded online, Amazon said one of its first partners — a Nebraska florist — began delivering Amazon packages in July 2021. town hall style meetings. A public webpage says the company currently accepts business referrals in just 10 states: Alabama, Arkansas, Florida, Iowa, Michigan, Minnesota, Mississippi, Missouri, Nebraska and South Dakota.

Nearly a decade ago, Amazon began offering Sunday parcel delivery through a partnership with the US Postal Service to make the shipping benefits of the Prime membership program even more compelling. But even years later, the USPS doesn’t support Sunday delivery in every city in America, leaving a gap that these little mom-and-pop establishments are now being asked to fill.

“Small towns aren’t used to that,” said the small business owner in Alabama. “Customers are very grateful for that.”

National USPS mail carriers and postmasters also previously told Recode that the increase in e-commerce shopping during the pandemic has sometimes resulted in an overwhelming amount of Amazon packages on top of regular mail, causing routes to take significantly longer than the amount of time carriers are actually paid. .

Amazon’s other logistical endgame is to eventually make its delivery network available to non-Amazon companies, though the timeline for fulfilling that ambition has been pushed back by the pandemic. But if Amazon eventually wants to do that, it may need to prove that it can offer broader and more consistent delivery coverage than the traditional players do today.

“Amazon is trying to find ways to be smarter than the established ones” [shipping] carriers”, says Marc Wulfraat, logistics advisor. “They want to cover every zip code so they can go to the market and… [sell] their logistics as a service. The problem is that it is a huge cost to reach that last 15 percent of the population.”

But with mom-and-pop stores nationwide taking on some of that expense, Amazon may very well get there. Along the way, even more of the land will work for the Amazon labor machine.

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