Amazon delivery partners are quitting the business due to dwindling profits caused by rising costs for insurance and vehicle maintenance, coupled with Amazon's increased performance demands, according to an investigation by Bloomberg's Spencer Soper.
Bloomberg interviewed 23 delivery partners who operated in 11 states around the U.S. and discovered that five quit the program because they were making less money each year and several others were contemplating quitting, while only four owners said they were happy with the program and their income was growing.
Amazon launched its Delivery Service Partner program in 2018, claiming that a $10,000 investment up front could earn entrepreneurs as much as $300,000 a year in profit. However that didn't prove to be the case for a lot of partners. Amazon recently announced a 20% hike to 12 cents for each package that partners deliver — the first increase since DSP's launch — but many partners said the gesture was too little too late, while others “saw it as a carrot to keep them working through the holidays when Amazon needs them most” since the increase doesn't take effect until January.
Bloomberg shared the story of an owner named Jake Clay who earned more than $200,000 his first year of running the business in 2022, but then saw his profits dwindle to nothing after one of his drivers was badly bitten by a dog and went on workers comp for a year, causing his insurances rates to quintuple to almost $500k annually. He contemplated laying off all his managers and running the business himself, but after determining that he would only clear about $75,00 in that scenario, he decided it wasn't worth it and quit.
Clay was able to speak to Bloomberg openly about his scenario after rejecting an offer from Amazon to sign an exit contract that would have paid him $75,000, but ban him from speaking publicly about the program. (My price to stop speaking publicly about Amazon is $1M.)
In September, I reported that Amazon paused a controversial plan to redistribute its fleet of delivery vans after encountering widespread resistance from its delivery service partners, who lease the vans from a fleet manager selected by Amazon and are contractually obligated to pay for repairs before returning them to the company for redeployment (of which they have no option to say no).
Some delivery service providers said they were hit with surprise repair bills totaling tens of thousands of dollars that have been impacting their profitability, but that they have no ability to challenge them without risking that Amazon cancel their contracts. Several company owners have chosen to close down or declare bankruptcy because they couldn't afford the repair costs.
Many Amazon delivery partners are finding themselves trapped in a business that has no exit.
Unlike other small business owners, they have no hard assets to sell given that they lease the vans and have no warehouse facilities, since the packages are stored in Amazon facilities. Selling the business isn't really an option either because it's tied to a one-year contract with Amazon, which can veto any prospective buyer.
Not a very sexy value proposition if you ask me.