business news in context, analysis with attitude

Vox reports that "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 … 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."

KC's View:

I certainly understand why Amazon wants to do this, and even can understand why some of these businesses might decide to get in bed with a company that ordinarily might be seen as the competition.  It is a matter of risk-reward.

The question is whether the juice is worth the squeeze.  The story notes that "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, which translates to about $2.50 a package.  One logistics expert thinks that this is about a buck less than he would've expected would be necessary to make the deal attractive to local businesses.

At the high end, this is about eight grand a month, or 96 grand a year … which is a lot of money.   I wonder, however, if even that kind of money is worth all the time-consuming effort (not to mention the cost of gas) to deliver, at the high end, 3,200 packages a month or more than 38,000 packages a year.  Plus, when you think about it, is it even possible to have that kind of volume - by definition, these are remote areas.

Bottom line - I suspect this program will be better for Amazon than for the businesses with which it makes deals.