I must confess that I hadn’t had a chance to look at how Amazon was planning to go into the freight business in competition with Fedex and UPS.
I was stunned to see that Amazon plans to prey on people who by all accounts are less desperate than the ones who wind up being warehouse workers. As I said in a message to Huber Horan headlined, Amazon’s freight shipper deal sounds worse than Uber: “And it’s aimed at businesspeople/investors who ought to be better at investment math than drivers.”
Here are the key points, hoisted from yesterday’s Water Cooler:
Shipping: “Amazon claims it doesn’t want to take on UPS and FedEx. So why is it introducing tons of its own Amazon delivery vans?” [ReCode. “The e-commerce giant is unveiling a program meant to fuel the creation of hundreds of new package-delivery businesses that can help Amazon handle the fast growth that its U.S. retail business continues to enjoy. Amazon says the program will offer new partnering delivery companies access to discounted rates on everything from fuel to vehicle insurance to delivery vans, as well as coaching from Amazon and an app to guide delivery people on which order should be dropped off when. As part of the launch, Amazon is also introducing its own Amazon-branded delivery vans that partner companies can lease, as well as uniforms that delivery partners can outfit their drivers with. Amazon claims that new partners can start up their business for as little as $10,000 — an amount that the company will reimburse to businesses founded by U.S. military veterans.” • Oh, great. More militarization…..
Shipping: “The company estimates that an individual operating a 40-vehicle fleet could earn up to $300,000 per year under this new program. Amazon said that they hoped for hundred of new partners to sign up for the program in more than two dozen states over the next 18 months. If the program is successful, the company expects to roll it out into more states and other countries going forward” [Freight Waves].
Starting up for as little as $10,000? When just incorporating if you have a lawyer relative or friend who was nice enough to do it at their cost was $400 in New York State in the 1990s, and I can’t think it’s any cheaper now. Starting with the truck cost alone, this is a capital intensive business, and if you aren’t putting up equity, you are taking on leverage, even if it is prettied up by being in the form of leases.
And what about all of those lovely Amazon discounts? They aren’t going to sell you anything at cost. So they’ll get a cut on provisioning the operation.
I hope Hubert will weigh in, but it turns out some alert readers had already shellacked the idea in comments.