Main Street shops beware: Amazon wants you.
One of AmazonAmong its latest growth plans is recruiting 2,500 small businesses in 23 states to help deliver packages. Amazon says the initiative, dubbed “Amazon Hub Delivery,” could help Main Street businesses — like florists, coffee shops, hair salons and gas stations — generate up to $27,000 in additional revenue per year.
The Hub Delivery program is in some ways similar to Amazon Flex, which launched a few years ago and offered everyday people the ability to deliver packages for the business using their own vehicle. According to Amazon, this initiative is now in over 100 cities and communities in the United States. The new program is currently open to businesses in 23 states: Alabama, Alaska, Arkansas, California, Florida, Illinois, Indiana, Iowa, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, North Dakota , Ohio, Oklahoma, South Dakota, Washington and Wisconsin. Amazon said it expects to expand into more states and cities in the future.
The new delivery partnership model could prove viable for Amazon as it offers the potential for faster deliveries and greater customer satisfaction. “There are also significant benefits for companies selected to participate, namely the opportunity to expand and grow through an additional revenue stream,” said Shanton Wilcox, partner at PA Consulting, a strategy and operations firm. But companies also need to understand the potential cost of the obligation.
“It’s not a random decision where the company’s van is parked and not used a few days a week and we’ll see how it goes. It’s a business decision,” Wilcox said.
Here’s what small business owners need to know about the new Amazon program:
It doesn’t just apply to existing Amazon sellers
Amazon strives to work with all types of companies that are able to deliver packages on the company’s behalf. Amazon Hub Delivery partners selected through the application receive packages every morning and have the flexibility to make daily deliveries at their convenience, using existing staff when needed.
According to Amazon, companies deliver 20 to 50 packages per day, with an average of 30 per day. Deliveries are made seven days a week, excluding five major holidays. The program is available in very rural areas as well as in densely populated urban areas such as New York City and college towns. According to Amazon on its website, no delivery experience is required and there is no long-term contract. Amazon says it will provide training and guide companies through the process.
Small businesses must meet several criteria
The program only works if a small business meets Amazon’s criteria. For one thing, there must be a secure space to keep the packages. Small businesses wishing to apply must also have copies of relevant documents such as a state business registration number, sales tax permit, or registration or tax identification number.
You must also be able to meet Amazon’s delivery commitments. Businesses that are not open for seven days may also be eligible as long as they are able to receive and deliver Amazon packages on all required days.
Partners and drivers (if applicable) must have a criminal history, pass motor vehicle, OSHA, and Department of Labor exam verification. You must also have appropriate insurance. This means general liability insurance and, if required, workers’ compensation insurance. Businesses can learn more about insurance requirements through a webinar.
The economic advantages of an Amazon delivery partner
Becoming a supply partner isn’t attractive or applicable to every small business, but prospects should ask a series of questions to determine if it’s worth pursuing, said Santosh Sankar, co-founder and managing partner at Dynamo Ventures in Chattanooga, Tennessee , which invests in early-stage supply chain startups.
Companies need to run through the bill to figure out if a partnership makes sense for them, Sankar said. Amazon didn’t specify exactly how much it pays per package; but based on its earnings estimates of $27,000 per year, the price would be $2.50 per package, assuming 30 packages per day for 360 days. In this scenario, a company could make $75 a day.
The question then arises as to whether existing personnel can be used for the new endeavor or whether additional capacity is required and the labor and equipment costs will be incurred. This might make sense, for example, if a company is already paying a high school or college student $15 an hour and the worker has three additional hours of capacity and an available delivery vehicle. It might even be beneficial to hire an extra worker at that rate, Sankar said. However, if a business needs to purchase a company vehicle for deliveries or undertake major renovations to create a safe space, the extra investment may not be worth it.
Companies should also consider the long-term growth potential. “It’s not just about utilizing your existing capacities. It’s the potential for expansion that many companies are looking for, but it needs to become part of the decision-making process,” Wilcox said.
Where to get more information
There are local and virtual events for small businesses to learn more about the program. The next event is scheduled for September 6th in California. Owners can also contact Amazon directly to arrange a face-to-face meeting.
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