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Amazon’s Surprising New Delivery Partners: Rural Small Businesses

Since at least last summer, Amazon has been quietly recruiting mom-and-pop stores in rural America to join an experimental delivery program. The company pays participating small businesses a per-package fee to deliver Amazon orders within 10 miles to neighbors’ homes in states like Nebraska, Mississippi and Alabama.

The local businesses that Amazon recruits range from florists to restaurants to computer stores, and none of them are required to have prior delivery experience – just a commitment to deliver Amazon packages seven days a week, approximately 360 days a year, and a physical location to receive packages each morning.

As Amazon’s ambitions to speed up shipping times and more manage its own deliveries have 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 communities and other remote communities means that drivers can only manage the half that amount or less, making deliveries to those localities more expensive. As a result, Amazon has outsourced these deliveries to partners, including UPS and, most notably, the US Postal Service, to handle the so-called “last mile” in small US towns.

The new local business delivery beta test looks set to perhaps one day replace its existing partners as Amazon sales increase and the Postal Service tackles its own financial and operational challenges. Amazon hopes the new program could help it better control deliveries for customers in sparsely populated areas and improve delivery speed to those customers’ doorsteps. The company has already tried versions of the program in a few international markets, including India since 2015, but testing in the United States is more recent.

The delivery program is just the latest example of Amazon offering small businesses the opportunity to generate new revenue by integrating into the tech giant’s growing ecosystem. From third-party merchants offering inventory that bolsters Amazon’s massive online product catalog, to urban delivery companies working exclusively for Amazon to deliver hundreds of orders a day to Prime customers’ homes, Amazon has perfected the art to attract small businesses with new business. opportunities, while making the Amazon product more attractive – while keeping enough distance from 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 have liability insurance, said an Alabama small business owner who participates in the program. Some of these smaller companies are paid between $2.50 and $3 per package and have recently been able to persuade 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 earn $1,500 to $2,000 a week if they deliver 600 to 800 packages a week. This equates to approximately $2.50 per package. Marc Wulfraat, a logistics consultant whose company tracks Amazon’s warehouse network, told Recode he would have expected the pay to be at least $3.50 per package to make the attractive service for companies.

By positioning the opportunity as a secondary hustle for rural businesses rather than a grassroots money generator, Amazon might be able to offer those businesses just enough financial incentive to satisfy them with the gig while doing operate the difficult economic conditions of rural delivery. 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 come away disappointed or disenchanted.

Amazon is launching the initiative – currently called the Amazon Hub Delivery Partner Program internally – as a way to generate additional revenue by handling a few dozen to a few hundred packages per day.

“All of our partners operate primary businesses and this program provides the opportunity to help them supplement their income,” Lauren Samaha, a spokeswoman for Amazon, said in a statement.

In return, small businesses and their employees must commit to accepting and delivering packages every day of the week, including Sundays, with just five holidays per year, according to answers in an FAQ section of a webpage marketing the program. In the past, Amazon has sometimes reduced the volume of packages destined for a given small business if it did not complete deliveries. But the small-business owner who spoke to Recode said the program had provided a good financial boost to his family during the pandemic, as well as to some neighbors he had hired.

“The call is to diversify the business and create jobs for community members,” the Alabama company owner told Recode. The business owner requested anonymity to speak candidly about the program without permission from Amazon. “It’s something that’s close to our hearts, and it’s been really good for my jobbers.”

But the Amazon partner also warned that some small businesses found the engagement too demanding on top of their core business and backed off.

“For me, seven days a week is not a big deal because I’m at my store every day,” they said. “But for some people it’s a big deal.”

The revelations of the new delivery program come as Amazon continues to take control of more customer orders from the time an order is placed on its app to the time it arrives at a customer’s doorstep. Amazon does this in part out of necessity, as online shopping volumes, especially during holiday seasons, exceed the shipping and delivery capabilities of the nation’s largest package delivery companies. Amazon would also like to eventually offer its logistics services to other businesses as an additional source of revenue.

Through a division called Amazon Logistics, or AMZL, Amazon now oversees the delivery of about two-thirds of customer orders in the United States, while the share of Amazon packages sent via USPS and UPS continues to decline. Amazon’s share of parcel delivery has grown every year since AMZL’s inception, and Amazon’s global CEO Dave Clark said Amazon will likely become the nation’s largest delivery company this year.

In cities and suburbs, packages shipped through Amazon’s own AMZL delivery network are outsourced to thousands of delivery companies – internally referred to as Delivery Service Providers or DSPs – which are set up by entrepreneurs. to exclusively serve Amazon with fleets of 20 to 40 vans. Employees or contractors hired by these companies typically drive Amazon-branded vans or trucks, wear Amazon-branded uniforms, and are monitored and judged by Amazon’s technology and performance expectations.

But Amazon isn’t recruiting entrepreneurs to start these businesses in rural areas because the volume of packages in those geographies hasn’t always been able to support self-sustaining businesses. Enter the small businesses just looking to make some extra cash under the new rural delivery scheme. These business owners and their employees use their own vehicles to make the deliveries.

In job postings, Amazon hiring managers say the program is expanding into 2022. The Alabama small-business owner says Amazon representatives told them the program was coming out of the pilot phase and had been approved for a larger investment. Samaha said the program is still in beta testing.

In a short webinar recorded online, Amazon said one of its first partners — a Nebraska florist — began delivering Amazon packages in July 2021. In recent months, Amazon has joined local chambers of commerce in the rural communities and launched the program in town hall type gatherings. A public webpage says the company currently accepts referrals from businesses in just 10 states: Alabama, Arkansas, Florida, Iowa, Michigan, Minnesota, Mississippi, Missouri, Nebraska, and South Dakota.

Almost a decade ago, Amazon began offering Sunday package delivery through a partnership with the US Postal Service to make the shipping benefits of the Prime membership program even more attractive. But even years later, the USPS doesn’t support Sunday delivery to every city in America, leaving a void that these small, family-run establishments are now being asked to fill.

“Small towns aren’t used to this,” said the Alabama small business owner. “Customers have been very grateful for that.”

Postal carriers and rural USPS postmasters have also previously told Recode that increased online shopping during the pandemic has at times led to an overwhelming amount of Amazon packages in addition to regular mail, resulting in considerably longer routes than the time the carriers are actually paid.

Amazon’s other logistics end game is to make its delivery network available to non-Amazon businesses, though the timeline for achieving that ambition has been pushed back by the pandemic. Still, if Amazon eventually wants to do this, it may have to prove that it can offer broader and more consistent delivery coverage than traditional players do today.

“Amazon is trying to find ways to be smarter than the workbench [shipping] carriers,” said Marc Wulfraat, the logistics consultant. “They want to cover any postcode so they can go out to market and [sell] their logistics as a service. The problem is…it’s a huge expense to reach the bottom 15% of the population.

But with rural family stores taking over some of those expenses, Amazon could very well make it happen. Along the way, more of the country will end up working for the Amazon labor machine.

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