Amazon delivery service partner is a dream job for any entrepreneur planning to start a business in this economy. Yes, Amazon promises that it would help to launch the business and get started. But, you cannot jump into something without thinking about the risk and return.
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A little about Amazon delivery service partner program
Amazon is looking for small businesses that can employ many delivery drivers and vehicles. Amazon wants the partners to take care of the supply chain of the delivery system. Primarily, the company is outsourcing its logistics and delivery department. According to an estimate by Amazon, the start-up cost will be around $10 K for a business with twenty to forty vans. The potential annual venues will be 1-4.5 million dollars and profit will be $75,000 to $300,000.
The ultimate aim of initiating the Amazon delivery service partner program is to enhance its delivery capacity. At the same time, the brand does not want to increase its infrastructure cost.
The advantages of choosing the program
The first advantage of this program is the low barrier to entry. In this economy, it is not easier to start a delivery business or any customer service related business. However, the Amazon delivery service partner option has a low entry barrier.
The first element is the low start-up cost with a huge brand association. On the other hand, Amazon offers to reduce any hurdles in initiating the business. However, the brand demands a contractual agreement to deliver only Amazon packages.
The second major advantage is the robust business infrastructure of Amazon. As Amazon continues to grow (it will), the potential of the Amazon delivery service partner business owners also increase. Amazon can include several third-party vendors and expand its scope, thereby making your small business grow.
What is it like to start a delivery business for Amazon?
If you look at the financial side, the start-up cost is considered average. This start-up cost is for owning twenty to forty vans and hiring forty to a hundred employees to work throughout the year. The primary objective is to serve several thousand customers around your locality.
The daily duties of the business under the Amazon delivery service partner are scheduling the vehicles and drivers, morning huddles, tracking deliveries, returns management, vehicle management, and facility management. One-time tasks of this business are securing a business license, legal preparations, and leasing or buying structure/vehicles. Moreover, the cost and responsibility of vetting, hiring, and training the employees are on-going.
The risks of the Amazon delivery service partner business
The daily operations and overheads look conventional. However, experts say that it is far from perfect. Amazon expects the partners to deliver thousands of packages every day, which implies a neck-tight schedule. Such a work culture requires constant motivation, an improved work environment, and better pay. Else, you will be spending more on hiring and training drivers. Amazon gives a three-week induction and training program and on-going support. Beyond that, it is up to your business skills to run the business.
If you are already in the customer service industry, this environment looks normal. However, according to industry experts, the profit potential of this initiative is quite small for the start-up cost and responsibility. Amazon has a load of strings attached to your business.
Amazon also has a cap on your growth. It has a fleet size limitation so that you will have little to no negotiation power in the business. Thus, your business will always remind under the control of Amazon and its long list of legal clauses and demands.
Your business is a part of Amazon and your fleet can only deliver Amazon deliveries. Yet, you are an independent business. Thus, you are not an employee or part of the Amazon workforce. In simpler terms, you will be responsible for your crew’s health benefits, legal battles, and more.
Why do people think it is a good option?
There are two reasons why new businesses find it a better option. The first is the steady revenue promise. Any new business will find it hard to stay afloat for a few months. The owner has to fight the waves, put his savings on the line, and strive to break even. However, Amazon offers its partners a fixed monthly compensation based on the fleet size, route length, and package delivery rate. This push-up will allow businesses to get on their feet, accumulate business resources and become competitive.
The second reason is the steady business. Amazon is here to stay, and there is a very minute chance that people will stop ordering from Amazon. Thus, your business will always have clients and work to do. There is always loads of work on your table. Thus, your resource will not be spending time or energy on sales pitches, cold calling, or client hunting. In short, Amazon is sharing its customer base with you.
What is the future for this business?
You can increase your fleet size, add routes to your business and grow your capacity. At your full capacity and covering 40 routes, you can aim to profit $300,000 per year. It might look huge, but for comparison let’s take the FedEx Ground delivery team. These businesses make $30,000 per year per route. This amount is thrice the cost estimated by Amazon, provided the estimate is accurate.
However, Amazon offers to take the uncertainty out of the chart and offer business intelligence, support, and constant business. Do you believe the low-profit margin is a good sacrifice for what Amazon has in the tray for you?
Today, Amazon pays $7.35 to FedEx and $6.5 to UPS for delivery per package. If it wishes to increase its profit, there would be a very little profit margin for the delivery partners. Why would Amazon try to cut corners in delivery? In 2018, Amazon’s net profit was $3 billion, and $22 billion was its shipping and delivery cost. Moreover, the overall cost of shipping and delivery handling is rising every year. Thus, it is natural for Amazon to find ways to reduce one of the major overheads.