Amazon has been covertly recruiting rural mom-and-pop shops for an all new delivery program since last summer. The company pays small businesses a per-package fee to deliver Amazon purchases in Nebraska, Mississippi, and Alabama.
The local businesses Amazon is recruiting range from florists to restaurants to IT shops, and none of them requires any prior delivery experience — just a commitment to deliver Amazon packages seven days a week, about 360 days a year, and a physical site to accept goods each morning.
As Amazon aims to speed up delivery times and handle more of its own deliveries, rural America poses logistical and financial problems. While drivers in cities and suburbs may deliver two dozen packages per hour or more, drivers in rural and remote areas can only handle half that amount or less, making deliveries more costly. As a result, Amazon has previously outsourced the “last mile” of delivery to UPS and the USPS.
The new local business delivery beta test may replace existing partners as Amazon’s sales expand and the Postal Service faces financial and operational issues. Amazon expects the new program will enable them take greater control over customer deliveries in sparsely populated areas and increase delivery speed. Since 2015, the company has tested versions of the program in India and other international markets, but the U.S. testing has only recently commenced.
Amazon’s delivery program is the latest way it helps small businesses earn more money by joining its ecosystem and becoming a partner in part of the Amazon supply chain. Amazon has perfected the art of attracting small businesses with new opportunities while simultaneously making the Amazon product more attractive to brands and consumers. All the while, the eCommerce giant maintains just enough distance from its various partners to avoid liability if something goes wrong.
One Alabama small business owner argues that for the new delivery initiative, Amazon is exclusively recruiting existing businesses because they already have liability insurance. Some small businesses are paid $2.50 to $3 each package and have lately convinced Amazon to raise their rates as gas prices have risen. A page on Amazon promoting the program says business owners may make $1,500 to $2,000 a week if they deliver 600 to 800 packages weekly. That’s $2.50 per package. Marc Wulfraat, a logistics consultant whose firm studies Amazon’s storage network, told Recode he expects $3.50 per package to further entice the addition of more delivery partner businesses.
Amazon may be able to offer rural businesses just enough financial incentive to keep them happy while making rural delivery work. If Amazon’s past with small businesses is any indication, some partners will find success with the program while others may be disappointed or frustrated. Amazon is pitching the effort as a means to boost revenue by handling dozens to hundreds of packages a day – a revenue stream that these businesses would previously not have had.
“All of our partners run primary businesses, and our program helps augment their income,” an Amazon spokeswoman stated.
In return, small businesses and their workers must receive and deliver packages every day of the week, including Sundays, with just five holidays off each year, according to a FAQ page touting the program. In the past, Amazon has reduced a small business’s package volume if they didn’t deliver. One small business owner who talked to Recode claimed the program has helped his family and neighbors he’s hired during the pandemic.
Diversifying the business and creating jobs in the community is appealing, the Alabama business owner told Recode. The Amazon partner warned that some small businesses found the commitment too demanding and bowed out. But for the right existing business, seven days a week is no big deal as they are already operating every day. That said, critics of the program fear the program runs the risk of turning every small business into an Amazon fulfillment center first and foremost. As mom and pop shops receive more and more orders from Amazon, owners and operators prioritize their initial businesses and daily operations less and less.
Amazon’s new delivery program comes as the company takes control of more customer orders from the app to the door. Amazon is doing this partially because online shopping volumes, especially around the holidays, outpace the transportation and delivery capacities of the country’s main parcel delivery companies. Amazon may also offer logistical services to other companies as a moneymaker.
Amazon Logistics, or AMZL, currently delivers almost two-thirds of US consumer orders, while the share sent by USPS and UPS continues to decline. Since AMZL’s start, Amazon’s share of package delivery has grown each year. Amazon’s global consumer CEO Dave Clark said Amazon will likely become the largest delivery company in the country this year.
In cities and suburbs, Amazon’s own AMZL delivery network contracts out to thousands of delivery firms — called delivery service providers or DSPs — with fleets of 20 to 40 vehicles. Employees or contractors recruited by these organizations drive Amazon-branded vans or vehicles, wear Amazon-branded uniforms, and are monitored and graded by Amazon technology and performance requirements.
Amazon doesn’t recruit entrepreneurs in rural areas since the volume of packages hasn’t supported standalone businesses. Instead the company developed small businesses partnerships for businesses looking to boost their income through the rural delivery program. In these cases, business owners and workers utilize their own vehicles for deliveries.
Amazon hiring managers say the program will expand in 2022 as it leaves the pilot phase and is receives more funding. In recent months, Amazon has joined local chambers of commerce in rural areas to market the program. The program literature says Amazon will accept referrals in 10 states: Alabama, Arkansas, Florida, Iowa, Michigan, Minnesota, Mississippi, Missouri, Nebraska, and South Dakota.
Amazon is offering Sunday delivery of packages through a partnership with the US Postal Service to make the Prime membership program even more attractive. The USPS doesn’t offer Sunday delivery in every town in America, leaving a space that mom-and-pop shops can easily fill. One Alabama business owner remarked, “Small towns aren’t used to that.” “Customers are grateful”
Amazon’s other logistics goal is to make its delivery network available to non-Amazon businesses, but the pandemic pushed that back. Amazon may need to prove it can offer greater and more consistent delivery coverage than established players do today if it wants to do so.
Logistics consultant Marc Wulfraat claims Amazon is aiming to outsmart conventional [shipping] carriers. They aim to cover any zip code so they can sell logistics as a service. It’s costly to reach the last 15% of the population. With rural mom-and-pop shops helping out, Amazon may get there. Along the way, even more of the country will work for Amazon.