Amazon.com, Inc. (NASDAQ:AMZN) has a problem with delivery. It has more Prime members than ever and they buy a lot of products. Both of these things are great for Amazon stock. Increasingly, though, delivering all those purchases is getting tougher.
Added to the challenges is a President who has been threatening to take action on Amazon’s use of the U.S. Postal Service for deliveries.
In response, Amazon is rolling out what amounts to a turnkey delivery fleet opportunity for entrepreneurs: Amazon Delivery Service Partners.
Amazon Delivery Service Partners
Amazon Prime has been a runaway success, and Prime customers are buying products from Amazon.com an average of 24 times per year. That’s a lot of revenue, but also a lot of deliveries.
To solve its ongoing last mile delivery problem, Amazon turned to solutions like the Flex program, that paid individuals to use their own cars for deliveries.
So far, that hasn’t been enough ensure Prime customers get their packages in time.
Making the situation worse for Amazon, President Trump has been pushing the U.S. Postal Service to double the rates it charges Amazon for delivery of packages. So far the threat hasn’t hurt Amazon stock, but there is the worry that it might.
Recently, at an event in Seattle, the company announced a plan that would let it gain more control over those last mile deliveries, and at a bigger scale than individual drivers: the Amazon Delivery Service Partners program.
The Service Partners Program and Amazon Stock
In a nutshell, Amazon is offering a program that would help entrepreneurs start up their own delivery business from scratch.
The company says that as little as $10,000 in cash is required, no logistic experience is required and it is also committing $1 million toward funding veterans’ startup costs.
Amazon claims fleet owners with 20 to 40 vans on the road can earn up to $300,000 in annual profit. So what is actually included in the Amazon Delivery Service Partners program?
- Low lease rates on Amazon-branded delivery vans
- Amazon branded uniforms
- Discounted fuel, insurance
- Three weeks of hands-on training
- “Comprehensive toolkit” to run a business, including classes on taxes and payroll
- On-demand support including driver assistance for on-road issues
In other words, Amazon has put together what amounts to a turnkey delivery fleet operation. Get together $10,000 in startup funding, apply through Amazon and the company will help you to start your own business.
The catch? Besides the fact that Amazon Delivery Service Partners will be responsible for recruiting and hiring their own drivers (and ultimately managing the business), those Amazon-branded delivery vans can only be used to deliver packages for Amazon.
Amazon also did not say what it actually pays program participants for those deliveries. Obviously, it would be less than the company pays the USPS and couriers for deliveries, or the program wouldn’t make financial sense.
Speaking of which…
The Amazon Deliver Service Partners program would effectively put Amazon in direct competition with not only the Post Office, but also United Parcel Service, Inc. (NYSE:UPS) and FedEx Corporation (NYSE:FDX).
Those courier services were down recently, losing 1% and 3% respectively.
Competition for online shoppers is heating up as Walmart Inc (NYSE:WMT) continues to boost its web presence.
Amazon has been constantly fine-tuning its delivery options in an attempt to stay ahead of e-commerce rivals, including Amazon Key in-home, and the recent Key In-Car delivery services that take convenience to a new level.
The Bottom Line on Amazon Stock
With the new Amazon Delivery Service Partners program, the company is aiming at gaining more control of last mile delivery on a large scale.
If successful, that will pay off with greater control over delivery costs. Amazon would also gain exclusive delivery services instead of competing for available delivery windows with packages from rivals.
It’s all part of ensuring Amazon Prime membership continues to be an important driver of Amazon revenue and Amazon stock.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.