Lesson Learned From Delivery Models

Imagine this. You’ve ordered a package from Amazon. There’s a specific estimated delivery time of noon that day. Finally, when noon arrives your package is delivered to you via a drone carrier. As you look up at the sky there are drones sparsely scattered. Each one carrying a package for another person. Amazon can imagine that too. However, the imagination is where that scenario is going to stay for now. Amazon is instead investing in real people with the ability to transport packages themselves. This delivery model was first employed by FedEx when they began to expand to meet demand. These people are required to pay an upfront $10,000 fee to affiliate themselves with the eCommerce giant. Afterward, the new affiliates are trained by an Amazon employee to operate their new delivery businesses. Amazon offers them multiple delivery routes depending on the size of the company. Franchises under this method have steady growth and profits. Unfortunately, not everything is sunshine and rainbows for these independent couriers.

Amazon needs to be careful over how much control they use over these couriers. They’re technically not company employees. They’re their own entities. This is a business partner type relationship. Amazon is paying these companies for service. But, many of these couriers are being paid using Amazon dollars. Many of them need to be ok with the amount that they’re getting paid. Some drivers are already suing Amazon because of stingy wages. However, these business relationships give them better leverage when negotiating wages. Companies want to play ball with Amazon. They’re lead by the richest man on Earth and are still climbing higher. That’s tempting for anyone trying to start their own small business. It’s an opportunity that can’t be passed up.

Businesses that are part of this deal need to have a can-do attitude. Failure is not an option. Couriers need to go above and beyond the call of duty to succeed in this business. For example, a problem arises and more deliveries are needed. It’s the end of the day and it’s time to go home. The people that stick around and do the extra late deliveries are rewarded with better routes. Their businesses thrive more than those who do the necessary amount. Delivery partners are capped at 40 routes if they get big enough. Each route on average is worth $25,000. That’s a very good profit for the amount of money these companies used to buy into this partnership.

The routes are profitable and the people that initially buy into the partnership are benefitted. How are the drivers benefitted? Amazon pays these contracted drivers $30,000 to $40,000 a year, excluding overtime. This is lower than the median for any other transportation job companies like FedEx, USPS, UPS, etc. That’s not good. Amazon needs a can-do attitude from these drivers. But, what can-do attitude can you expect from someone that is underpaid? “The primary problem is finding people willing to do this work for $15 an hour who won’t hurl packages 30 feet towards a porch from the van window,” says Marc Wulfraat, president of the logistics consulting firm MWPVL International Inc. “It doesn’t matter how many entrepreneurs Amazon throws at this, that problem remains.”

For more information, follow us each week for the latest transportation industry news or contact AssetCo here.