From CNN Business:

"If you have $10,000 and want to be your own boss, Amazon has a deal for you.

Starting Thursday, you can apply to start your very own small business, delivering Amazon Prime packages in Amazon (AMZN) branded vans and uniforms.
The company wants to help launch small businesses in the United States dedicated to taking its packages on the last step of their journey: from local Amazon sorting centers to the customers who ordered them.
It announced the new program on Wednesday at a press event in Seattle.
It's the latest attempt by Amazon to gain greater control of the delivery network at the core of its Prime business, which ships 5 billion packages a year globally."

Link to CNN article:

http://money.cnn.com/2018/06/28/tech...ers/index.html

Link to Amazon page for fuller description:

https://logistics.amazon.com/marketing/opportunity

Okay, the buy in is at least $10,000.

From the above site:

"The startup cost figure includes the cost of items that we believe are essential to starting a delivery company that delivers Amazon packages, beginning with five delivery vans. Importantly, the startup cost figure assumes that a delivery company takes advantage of all third-party deals impacting startup costs that have been negotiated by Amazon in connection with this program, including with respect to delivery van leasing, insurance, mobile devices and data plans, and uniforms. While a delivery company is not required to pursue any of those third-party deals in order to participate in this program, the delivery company may not be able to achieve the startup cost figure without doing so."

What are your first impressions TwoPlusTwopreneurs?

I was wondering why there was a massive number of white vans being manufactured at a nearby GM plant.

I think it's going to turn into a brutal race to the bottom where everyone makes peanuts to keep Amazon's prices down. The whole reason they are doing this is to get the job done cheaper than Fedex/UPS/USPS. Fedex and UPS don't have that much fat on them. I wouldn't want to commit to beating them on price with home delivery. UPS doesn't make left turns ffs.

Bored nailed it.

Plus this is another way Amazon makes 3rd parties do their R&D for them. They're basically making you pay $10k for the privilege of being a low paid Amazon employee who they don't have to pay any benefits while they test out the feasibility.

You won't be able to do anything else w/ your equipment and uniforms and you'll be totally tied into what ever they say. They will continually squeeze you for more and more. They have a reputation for it with 3rd party sellers on their site but at least as a 3rd party seller you can sell on other platforms. I'd hate to be totally at their mercy.

If you've got 10k to start with there are much better opportunities.

Yeah...I do see a low barrier to entry but high barrier to exit situation...with tons of hard work...and having to compete with very efficient operators like FedEx and UPS...while being squeezed by Amazon on the other side.

Having said that, do you guys see any early mover or first mover advantages? Like maybe, access and control over the best territories if first or early to sign in, and other possible benefits of taking the risk early and becoming a guinea pig for amazon? Or maybe even selling the business to a later entrant for a nice profit?

Or is the late mover, let's wait and see, we'll decide to holdem or foldem later the clearer play?

It seems like an interesting opportunity. Wouldn't want to be a FedEx contractor today since the value of those routes just dropped by a few multiples with this announcement. Will be interesting to see how quickly prime territories are snapped up.

Amazon has obviously decided this is feasible but at who's expense? You're going to be competing against UPS, Fedex, USPS, and presumably Amazon drones in the near future. How can you compete with those services on price? As Bored said there isn't much fat on them. You know where the fat is? Employee benefits & protections. How do you cut that fat? "Hire" independent contractors under the guise of them running their own business. That allows you to do away with all employee benefits and fly under the radar with employee protections.

Once they've got these new "business owners" heavily invested and Amazon is their only customer they can just squeeze and squeeze until the "owners" have no other real choice but they're just barely getting by.

Fedex is making a strong profit and their drivers get paid along with the middlemen who own the drivers. Seems like there is plenty of fat here for a direct Amazon -> small business owner model, especially if they target the most profitable areas...a lot of cost in subsidizing delivery anywhere as opposed to the most profitable markets, a lot of cost in maintaining the large capital for planes, access, a sales/pickup system, etc.

I don''t buy that this is necessarily a bad idea. Could be a worthwhile business. It's a rapidly growing area.

The next recession is going to bend you over, however. You'll be out of a job holding the bag for your investments in a bad job market.

This is the most optimistic possible reading. I think all of that reduced cost is going to be taken and then some by Amazon honestly. Most of these 'do a physical task' gigs are pretty exploitative. I say this as a massive massive beneficiary of the gig economy.

If you have 10k you have enough money to self fund your way through to getting your CDL. That job pays 70k a year immediately and isn't more work than running an entire parcel delivery service. That's 70k with good benefits where your employer is very much coping with a tough market for replacing you.

Amazon is less than 3% of Fedex's business. Amazon has also switched very heavily towards USPS over the last 2 years. Amazon gets multiple price benefits from their existing shipping structure:

1. They've been able to squeeze UPS on pricing because UPS is the most dependent on Amazon's business.

2.Amazon benefits greatly because these delivery services already have existing infrastructure and routes which service the entire country. They also get the benefit of the shipper's other customers helping subsidize the cost of these routes. USPS already literally goes to every home & business 6 days per week.

3. You have to compete w/ the USPS who's mandate is to not turn a profit but to deliver to everyone at break even.

I'm not seeing how a direct Amazon> small business owner model is any more efficient than Amazon>large business owner model. The cost for planes, trucks, systems and logistics isn't going away.


ETA:

Bored makes another good point. Additionally if you don't like the trucking company you're working for in his example there are dozens of others to choose from as opposed to being solely invested in working for Amazon. Anytime another company has total control over your company you're going to wind up exploited.

I think it's important to also consider what you're likely to be delivering. Amazon isn't hiring you to deliver 1lb packages that can already be delivered for $2. They're going to want you to deliver the items that they think they're being the most overcharged for.

What items do the other delivery services charge exorbitant rates for? Oversized, overweight packages. The cost to deliver over weight packages is incredibly high due to the health effects on the employees , and the additional time it takes to get the item from the truck to the house.

Want to deliver 100 lb boxes, mini fridges, and futons without health insurance or workman's comp? This sounds like the gig for you.

Hahahaha I hadn't thought of that but of course it's true.

I don't think Amazon is setting out to make it bad for their new partners. That would be dumb business, and make it much harder to build out their own distribution network long term, which is their obvious end goal. You guys are probably right on it not being the best business, but way too bearish.

Tooth,

That is exactly Amazon's business model and has been for years. It's exactly how they built out their product line and distribution network to this point. They built out their product line by allowing any 3rd party to sell on their platform. Once they get you hooked on doing high volume they either continually squeeze you or they take over themselves. Their goal is to make it as hard/bad for their partners as you're willing to accept. If you're not willing they simply jettison you and there are 100 others to fill the void.

Amazon is well known for using 3rd party vendors and contractors to do the R&D. Amazon then takes all of the metrics you're forced to provide (up to and including invoices so they can see who you buy from and your cost) and can easily figure out your bottom line. They then either continually squeeze your margins or if the product is deemed profitable enough they begin selling it themselves. How do you think Amazon determines which products they should sell themselves?

To be successful as a seller you want to make some money but not too much. If you come up with a product that sells large volume with good margins you can bet your ass Amazon will be selling that product themselves within months. Of course the 3rd party vendor can't compete w/ Amazon directly so they're often left holding the bag with unsellable inventory.

For the last 2 years Amazon has been continually sending out surveys and other bs asking sellers if they're interested in being able to completely run their businesses on Amazon's platform (even more so than they force you to do now). They want you to be able to input all of your costs including goods, labor, shipping (they already have), packaging, marketing ( they already have) so that you'll be able to see your margins and exact bottom line right on their platform. Of course there are a bunch of idiots eating this up as a total solution that will help sellers. What do you think Amazon is going to do with all of that information?

Of course they want to deliver heavy **** cheaper and faster than the next guy. But Amazon isn't recruiting laborers, they want business managers. It says in the OP the program starts with five vans.

Nevermind.

I can't really keep talking without potentially irritating people with actual power.

Who's then going to recruit the laborers and pay for the extra associated costs of those laborers? Have you met many small business owners/managers who weren't also laborers especially to start out?


If you're looking for positive possible spin on this "business opportunity" the one area I could see Amazon going into that could make this profitable and worthwhile is if they expand into enhanced delivery. By enhanced delivery I mean you deliver an item, take it in the house, assemble it, set it up, mount it on the wall or whatever. Basically services that other delivery companies don't already provide.


ETA:

Also consider that starting with 5 vans is exactly the worst way to start out. Businesses struggle w/ 5-10 employees. You need to be small or you need to get large quick. 5-10 employees is exactly that spot where you start paying the expenses of having a large company without the revenue. You need to get to 20+ employees pretty quick.

The business owner is responsible for hiring drivers, managing the business, choosing to be an active or passive investor. Since they mentioned delivery vans, the drivers probably won't need a special license to operate.

btw, other delivery services offer to do those tasks. When you buy something like a fridge or any other large appliance from a local store and get it delivered, there is usually an upcharge or promotion for assembly and installation.

Amazon is awful to its business partners. I'm surprised to see you of all people missing that story.

Other sellers are competitors. Drivers aren't. While they build out the network they're not going to screw people. They might once it's well established and there's enough competition. By that time you've made a nice bit of cash.

I don't buy the notion that this is automatically certainly going to be a bad idea. The analysis you guys are offering is way too shallow. You'd need a much deeper look to be sure this is bad. I agree the starting line is probably on the "find something else" side, though.

I know full well who'll be hiring the drivers. It was rhetorical. Who wants to drive for a startup company delivering the ****tiest, heaviest packages at the lowest cost for a startup with no benefits? A company who'll require 80+hrs per week from November 1st thru January, including weekends and Xmas eve and then probably cut you back to 20 hrs per week the rest of the year? (Also rhetorical questions). UPS is always hiring and they have good benefits, they're not going to go out of business and you're paycheck will never bounce.



I'm basing the following off of only what I've read in this thread for details.

1. You're going to start a delivery business by leasing 5 delivery vans, and everything necessary to start a company for $10k? That means a very bare bones minimum of 7 drivers plus support staff. You'll have ongoing costs of fuel, insurance, workman's comp, maintenance, employee benefits, etc..

10k is no where near enough money to start a business like that. I mean, yes it can actually be done but if you have the skills to pull that off there are so much better opportunities than subcontracting for Amazon.

Does it make sense to you that you could start a business like this with 10k and be more competitive than the major shippers who have decades of experience, infrastructure, large discounts, economy of scale, and retail customers. UPS and Fedex don't make their money from Amazon and USPS runs at a loss.



I'm aware that enhanced delivery services exist already. That's why I mentioned it as one possible value added service that would be best served by subcontractors that might explain Amazon's possible motives. Enhanced delivery such as assembly & installation is best served by subcontractors to limit the companies liability and gives them a degree of separation while still collecting fees. It's a proven business model for big box retailers and I'd imagine Amazon would like a cut of that. It's also something I'm sure the major shippers want no part of.



Tooth,

Amazon has a long history of screwing everyone. Do you believe that UPS and Fedex believe Amazon isn't out to screw them? UPS and Fedex have both made huge concessions for Amazon over the years and Amazon has pitted them against each other and the USPS in a race to the bottom.

Amazon has a history of screwing 3rd party sellers who aren't competitors (meaning there was never any risk Amazon would be in direct competition with them). Amazon has a history of treating employees terribly to the point they have to piss in Gatorade bottles at work.

Does it make any sense to you that they'd want a network of unreliable unproven Joe Shmoes putting up 10k to lease 5 delivery vans and that it'll somehow be a better system than than UPS, Fedex, or USPS?

Do you really think randos who can come up with 10k to lease 5 delivery vans are going to be able to perform on par with UPS? Do you think they can compete on price?

It's a little like the belief that Musk can hand build cars in a tent and put the auto makers out of business.

You mention the opportunity to make "a nice bit of cash" before Amazon screws you. Please define a nice bit of cash. The bigger problem with this "business opportunity" is you're basically buying a job working for a company with a bad reputation, with a capped upside and a finite lifespan.

As for the depth of analysis, I'd love to hear your deeper analysis. You have to understand it makes absolutely no sense as a business model for Amazon. Given that, you have to think ahead and try to come up with their end goal. It isn't to have a bunch of randos driving around delivering packages. The biggest problem they have w/ 3rd party sellers is reliability so why would they want to turn over the delivery portion to unreliable small 3rd party vendors?

The answer is likely, in part, data collection as R&D for whatever their long term goal is in a couple of years. Something similar was floated, without gaining any traction, a few years ago where Amazon was interested in having large 3rd party sellers handle local warehousing and delivery. That model made considerably more sense because many vendors already have existing infrastructure, warehouses, and support staff. It didn't fly.

Personally my bet is the data collection from the drivers will be extensive and include a lot of data the major shippers don't collect or won't share.

According to the articles in the OP and elsewhere, Amazon is leasing the vans directly to the new businesses and also providing subsidization or incentives to cover the major startup expenses. Think Amazon wants this to work? That was rhetorical

So you think it makes longterm sense for Amazon to have a bunch of small operation randos driving around the city delivering packages like pizzas, and that'll be more efficient than using existing services, who have established routes going to all of these locations, who already deliver for Amazon at break even or a loss?

I have no doubt Amazon wants something new to work and this is their way of getting guinea pigs to pay for the privilege of collecting data and helping Amazon to further squeeze major shippers. Subcontracted 3rd party delivery by small operators isn't their endgame.

I've explained where the major pain points will be for people who get into this. Will Amazon make it work for as long as they want to? Absolutely. Is it a good business opportunity? Absolutely not.

Combine that with the fact Amazon is already doing major R&D on drone and automated delivery. When you add all of those things up I don't think this is any better business opportunity than the idea below.

I decided to actually read the info on Amazon's site. Some of my assumptions were wrong.


Here are what I see as the key points evaluating the opportunity purely on the information Amazon provides.

1. Amazon nowhere lists starting with 5 vans but the CNN article says you can start with 5 but have to ramp up to 20+ delivery vans. Everything on the Amazon website says 20-40 vans. This isn't for your average entrepreneur or anyone who can come up with 10k.

2. No where on Amazon's site does it say they'll subsidize any of the cost. It does say you can get started for as little as 10k but I don't see how.

They list startup costs as:
Business formation, accounting & legal fees,setup supplies, employee recruiting costs including hiring, drug and background checks, and driver training as well as the costs for 3 weeks of training including a week of travel to Seattle.

They list operational costs as:
wages,payroll, benefits,insurance, vehicle leases, fuel, maintenance, damages, incidentals (uniforms, etc.)

If you can do all of that and operate for the first month with 10k in startup capital more power to you.


Other Key points directly from Amazon:

1. As an owner, you will operate with 20-40 vans and have 40-100 employees

2. ensure the successful delivery of packages in a 7 days/week, 365 days/year operation.

3. Serving thousands of customers daily isn’t easy, but the smiles are incredibly rewarding


Before we get to their revenue and income projections:


Now the important part! How much can you potentially make for operating a business with 40-100 employees 7 days per week, 365 days per year completely dependent on the whims of a single customer?

Annual revenue potential: $1M-4.5M

Annual profit potential: $75K-300K + endless rewarding smiles

Caveat:

In summary:

If you have the capital to lease 40 delivery vans & accompanying infrastructure, along with the ability to hire and manage 100 employees you have the potential to earn between negative dollars and $300k while being 100% dependent on a single customer known for pitting vendors against each other in a race to the bottom. If you make the very top of their projection range you're netting less than 7%.

This does not seem like a good business opportunity for someone capable of starting and running a business with 100 employees.