Amazon’s surprising new delivery partners: Rural small businesses
Since at least last summer, Amazon has quietly been recruiting mom-and-pop shops in rural America to join an experimental delivery program. The company is paying participating small businesses a per-package fee to deliver Amazon orders within a 10-mile radius to their neighbors’ homes in states like Nebraska, Mississippi, and Alabama.
The local businesses Amazon is recruiting range from florists to restaurants to IT shops, and none of them are required to have prior delivery experience — just a commitment to deliver Amazon packages seven days a week, around 360 days a year, and a physical location to receive parcels each morning.
As Amazon’s ambitions to speed up delivery times and handle more of its own deliveries has grown, rural America has posed the thorniest logistical and financial challenges. While delivery drivers in cities and suburbs might be able to deliver two dozen packages per hour or more, the distance between homes in rural and other remote communities means drivers can only handle half that amount or less, making deliveries to these locales more costly. As a result, Amazon has handed off these deliveries to partners including UPS and, most notably, the US Postal Service, to handle the so-called “last mile” in small-town America.
The new local business delivery beta test seems aimed at perhaps one day replacing its existing partners as Amazon’s sales grow and the Postal Service navigates its own financial and operational challenges. Amazon hopes the new program could help it take more control over customer deliveries in sparsely populated areas and improve the delivery speed to these customers’ doors. The company has already tried versions of the program in a few international markets, including India since 2015, but the testing in the United States is more recent.
The delivery program marks just the latest example of Amazon offering small businesses an opportunity to earn new revenue by integrating with the tech giant’s growing ecosystem. From third-party merchants offering up inventory that bolsters Amazon’s massive online product catalog, to urban delivery companies working exclusively for Amazon to ferry hundreds of orders a day to the homes of Prime customers, Amazon has perfected the art of attracting small businesses with new business opportunities, while simultaneously making the Amazon product more attractive — all the while keeping enough distance from the partners so 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 possess liability insurance, one Alabama small business owner who is participating in the program says the company told them. Some of these small businesses are being paid around $2.50 to $3 per package, and have recently been successful in persuading Amazon to add modest increases to their rates as gas prices have soared. An Amazon webpage marketing the program says business owners can expect to make $1,500 to $2,000 a week if they deliver 600 to 800 packages weekly. That amounts to roughly $2.50 per package. Marc Wulfraat, a logistics consultant whose firm tracks Amazon’s warehouse network, told Recode he would have expected the pay to be at least $3.50 per package to make the service attractive to businesses.
By positioning the opportunity as a side hustle for rural businesses rather than a core money-maker, Amazon might be able to offer these businesses just enough financial incentive to keep them satisfied with the gig while making the tough economics of rural delivery work. 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 disenchanted.
Amazon is pitching the initiative — currently called the Amazon Hub Delivery Partner program internally — as a way to bring in supplemental income by handling anywhere from a couple of dozen to a few hundred packages a day.
“All of our partners operate primary businesses and this program provides opportunity to help supplement their income,” Lauren Samaha, an Amazon spokesperson, said in a statement.
In return, the small businesses and their workers have to commit to accept and deliver packages every day of the week, including Sundays, with just five holidays off each year, according to answers in a FAQ section of a webpage marketing the program. In the past, Amazon has at times cut back the package volume earmarked for a given small business if they don’t complete the deliveries. But the small business owner who spoke to Recode said the program has provided a nice financial boost for his family during the pandemic, as well as some neighbors he’s hired.
“The appeal is diversifying the business and also creating 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 jobbers.”
But the Amazon partner also warned that some small businesses have found the commitment too demanding on top of their core operation and have backed out.
“Seven days a week for me is not a big deal because I’m at my shop every day,” they said. “But for some people, it is a big deal.”
Revelations of the new delivery program come as Amazon continues to take control over more customer orders from the time an order is placed on its app to the moment it arrives at a customer’s door. Amazon is doing this partly out of necessity as online shopping volumes, especially during holiday seasons, outstrip the transportation and delivery capacities of the country’s largest parcel delivery companies. Amazon would also eventually like to offer its logistics services to other companies as an additional money-maker.
Through a division called Amazon Logistics, or AMZL, Amazon now oversees the delivery of an estimated two-thirds of customers orders in the US, while the share of Amazon packages sent through USPS and UPS continues to decrease. Amazon’s share of package delivery has been growing each and every year since the inception of AMZL, and 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, packages shipped through Amazon’s own AMZL delivery network are contracted out to thousands of delivery firms — referred to internally as delivery service providers or DSPs — that are created by entrepreneurs to exclusively service Amazon with fleets of 20 to 40 vans. The employees or contractors hired by these firms typically drive Amazon-branded vans or trucks, wear Amazon-branded uniforms, and are monitored and judged by Amazon technology and performance expectations.
But Amazon doesn’t recruit entrepreneurs to start these companies in rural areas because the volume of packages in these geographies hasn’t historically been able to support standalone businesses. Enter the small-business shops looking to just make supplemental money as part of the new rural delivery program. These business owners and their workers use their own vehicles to handle deliveries.
In job listings, Amazon hiring managers say the program is expanding in 2022. The Alabama small business owner said that Amazon reps have told them the program is emerging from the pilot phase and has been approved for greater investment. Samaha said the program is still in beta testing.
In a short, taped webinar online, Amazon said that one of its earliest partners — a florist in Nebraska — began delivering Amazon packages in July 2021. In recent months, Amazon has been joining local chambers of commerce in rural communities and pitching the program in town hall-style gatherings. A public webpage says the company is currently accepting business referrals in just 10 states: Alabama, Arkansas, Florida, Iowa, Michigan, Minnesota, Mississippi, Missouri, Nebraska, and South Dakota.
Nearly a decade ago, Amazon started offering Sunday delivery of packages through a partnership with the US Postal Service to make the shipping perks of the Prime membership program even more attractive. But even years later, the USPS does not support Sunday delivery in every town in America, leaving a hole that these small mom-and-pop establishments are now being asked to fill.
“Small towns are not used to that,” the Alabama small business owner said. “Customers have been very thankful for that.”
Rural USPS postal carriers and postmasters have also previously told Recode that the increase in e-commerce shopping during the pandemic has at times led to an overwhelming amount of Amazon parcels on top of regular mail, resulting in routes taking considerably longer than the amount of time carriers are actually being paid for.
Amazon’s other logistics end game is to eventually make its delivery network available to non-Amazon businesses, though the timeline of fulfilling that ambition was pushed back by the pandemic. Yet if Amazon eventually wants to do that, it may need to prove that it can offer wider and more consistent delivery coverage than the traditional players do today.
“Amazon is trying to figure out ways to be smarter than the established [shipping] carriers,” said Marc Wulfraat, the logistics consultant. “They want to cover any zip code so they can go out to market and [sell] their logistics as a service. The problem is… it’s a huge expense to get to that last 15 percent of the population.”
But with rural mom-and-pop shops taking on some of those expenses, Amazon may very well get there. Along the way, even more of the country will end up working for the Amazon labor machine.