You’ve seen those Amazon trucks driving around, the big Prime sign on the side, but what you may not have known is that, like FedEx Ground routes, each truck may be part of a small business run by an independent contractor. That is thanks to Amazon’s Delivery Service Partner Program.
Here’s what you need to know if you are considering purchasing an Amazon Delivery Service Partner business.
How Did the Amazon Delivery Service Partner Program Start?
In 2018, Amazon announced the Amazon Delivery Service Partner Program (DSP) designed to offer small business owners the opportunity to enter the last mile delivery space with a lower barrier to entry than some other delivery businesses.
The principle was a simple one: if Amazon wanted to scale their delivery arm quickly and into areas where it might not otherwise be able to reach, a contractor system much like that launched by FedEx was the answer. Of course, Amazon wanted to do things their way and put a different spin on the business model.
What Does a DSP Owner Do?
Unlike a single FedEx Ground route owner, usually Amazon DSP owners own up to five trucks. Their primary responsibility is to manage these routes and drivers. In this case, Amazon branded trucks must be used to make deliveries, so these must be purchased or leased from them as a part of the business plan. Drivers must wear Amazon branded uniforms as well.
Secondly drivers must be employees of the DSP company and cannot be independent contractors. This means time spend vetting and hiring employees, developing a fleet of vehicles to cover each route, and ensuring al the business insurance and other licensing obligations of any startup in your state are met. This is not a franchise, but a separate entity, so you must develop your own cost sheets and profit and loss statements, manage your payroll, any HR related tasks, and customer service issues.
However, as the program is a mature one at this point, there is a lot of data out there about how much Amazon Delivery Service Partner businesses make, what profit margins are, and tips to effectively run these businesses.
How Does This Program Work?
There are two ways to get into the Amazon DSP market. First, you can apply on the Amazon website for a DSP in your area. The process is a lengthy one consisting of no less that eight steps. They include:
- Reviewing informational videos
- Assembling your paperwork
- Filling out the application itself
- Completing the screening process.
- Joining the Future DSP waiting list
- Receive an offer when a route becomes available
- Complete a couple of weeks of onsite training
- Set up your business and develop the team you will hire
This process can be quick, but it often takes longer depending on what routes are available in your area. Even then, there are no guarantees if there is more than one Future DSP near you.
The second alternative is to buy an existing Amazon DSP. This is more appealing to a lot of potential owners because:
- Although your initial expenses are higher, you can take over almost immediately after training
- The business is established, and you have a lot of data about profit, loss, and ROI
- Often trucks and personnel are already in place. Leases just need to be transferred, and you’ll have to add the employees to your payroll instead of the previous owner’s.
- You have a better idea of workload, and you some DSPs are eligible for SBA financing.
Of course, if a route is for sale in your area or an area you are interested in, you don’t have to wait for something to become available through Amazon.
Is an Amazon Delivery Service Partner Business a Good Investment?
The short answer is yes, for most people. You get a business that is backed by one of the largest and most renowned companies in the world with a customer service record to match. Yes, this does put a certain amount of pressure on you to perform, just as any other business would.
You also get to control your expenses and how you run your delivery business. Similar to other similar delivery businesses, there are certain guidelines and standards you must follow, but as long as you meet those, the rest of your business is yours to manage.
Like any other last mile delivery business, an Amazon DSP route is hard work. However, that hard work will pay off, and you’ll even be able to expand your business if you want to.
Curious about an Amazon Delivery Service Partner business? Contact us here at Route Advisors. We’re here to help you through every step of the process.