Amazon Spurs Delivery Startups With Shot at $300,000 Profit
(Bloomberg) -- Amazon.com Inc.’s ever-expanding retail empire is going to need more workers and vehicles to get millions of packages to shoppers’ doors. Taking more control over that growth, the web retailer offered to help anyone who wants to start their own delivery businesses.
The e-commerce giant is seeking to assist hundreds of new small businesses to employ tens of thousands of delivery drivers across the U.S. by providing discounted vehicles, fuel, insurance, uniforms and access to “sophisticated delivery technology,” the Seattle-based company said in a statement Thursday. Startup costs can be as low as $10,000, Amazon said, with an entrepreneur running 40 trucks making $300,000 a year.
Amazon is exploring ways to expand its delivery capacity, from leasing its own cargo planes to experimenting with drones. It’s also trying to figure out how to move merchandise directly from merchants to consumers to avoid overwhelming its own warehouses with inventory, according to documents reviewed by Bloomberg.
While Amazon has long relied on the U.S. Postal Service, United Parcel Service Inc. and FedEx Corp., it has also sought more control over the logistics of package delivery, using its own technology and data-crunching abilities, as well as facilities and transport, to move packages more efficiently.
“Customer demand is higher than ever and we have a need to build more capacity,” Dave Clark, Amazon’s senior vice president of worldwide operations, said in the statement. “We are going to empower new, small businesses to form in order to take advantage of the growing opportunity in e-commerce package delivery.”
UPS said by email that it’s “confident in its strategies and believes there is tremendous opportunity” in consumer deliveries, though declined to comment on how Amazon’s move might affect its business. FedEx didn’t immediately respond to a request for comment.
UPS fell 2.4 percent to $105.74 at 12:16 p.m. in New York trading while FedEx dropped 2.1 percent to $224.90.
Amazon has used independent contractors in the past to handle packages, especially during busy holiday shopping periods. Individuals can also sign up for a program called Amazon Flex to deliver merchandise using their own vehicles, earning $18 to $25 an hour. With the new startup initiative, the online store will be able to boost its shipment capacity while putting Amazon-branded vehicles and uniforms on the streets.
The latest initiative is particularly important as more customers sign up for Prime Now, stoking demand for two-hour deliveries, said Colin Sebastian, an analyst with Robert W. Baird & Co., in a note to clients.
Amazon is also offering qualifying military veterans $10,000 in reimbursements to get their own delivery business started.
Partnering with an array of entrepreneurs would reduce Amazon’s dependence on traditional carriers such as the federal post office while allowing for more control over delivery times, Sebastian said. The move comes as President Donald Trump has complained about the postal service undercharging Amazon to deliver packages.
“While tweets from President Trump around a potential reset of USPS shipping rates are likely more bark than bite, developing a partner delivery network also provides additional carrier diversification, a key positive,” Sebastian said.
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