If you are considering breaking into the logistics and last-mile delivery business, you might wonder what option is better: FedEx Ground vs. Amazon Delivery Service Partners. But the true answer is that it depends on you, how much you have to invest right now, your long-term goals, and your preferences.
The reason is both simple and complex. While they appear similar on the surface, when you go deeper, you will see that these are two very different business models with two very different methods to get started. Let’s take a deeper look.
Initial Investment Costs
When looking at FedEx Ground vs. Amazon Delivery Service Partners, one of the first questions is, “How much does a business cost?” The answer is not as simple as it first appears. For a while, the only way to get into an Amazon Delivery Service Partner business was to purchase one from Amazon. The company subsidizes the startup costs and the cost of leasing vehicles.
However, as more routes have been created and purchased, purchasing an Amazon Delivery Service Partner route from a private businessperson is now possible. In that case, the cost is not subsidized and, depending on the business size can be either more or less than a FedEx Ground Route.
A FedEx Ground Route has a price set based on revenue and territory of the route, what is included in the sale (equipment and vehicles), and other factors. So it can either be less expensive than an Amazon Delivery Service Partner business, but most of the time, the initial costs will be more.
This is partly due to legal fees and closing costs often associated with the type of business loan typically used to purchase the business. But it is also partly due to the differences in how FedEx and Amazon’s business models work.
Route Ownership vs. Contracted Delivery
FedEx Ground Routes consist of an area you have the right to deliver in. There is a set geographic boundary, and the stops in that area are predictable. Over time, you can spot seasonal trends, note when new businesses and neighborhoods are being built, and forecast what your year will look like, factoring in for growth.
Amazon Delivery Service Partners, however, do not have a set geographic area, and that can change from week to week, depending on Amazon’s needs. This means that income can vary greatly and is much harder to predict. So while some owners report making more income initially, it is a challenge to forecast if that trend will continue.
This does not mean one is better than the other. When averaged out annually, there is sometimes little difference between comparable routes. But it’s important to note from a cashflow perspective in that with an Amazon Delivery Service Partner business, you will need to keep a much closer eye on that.
This leads us to another key difference between FedEx Routes and Amazon.
Income vs. Equity
Amazon businesses can make income quickly, and due to startup costs that are typically lower than FedEx, a return on investment can come sooner. However, due to the stability of a FedEx Ground Route, a rise in income can happen more slowly, but building equity and value happens faster.
This does not mean an Amazon Delivery Service Partner route does not build equity. It just takes longer to build than with a FedEx Route typically. But if you are in the route business for the long term, this may not matter to you. The faster income gains may make this option the best one for you.
DOT Regulation and Operation
Another key difference is the way both companies handle DOT regulation. FedEx Ground Route owners operate under the FedEx DOT number but, as a result, are held to a high standard of compliance. This also means that since owners do not have their own DOT numbers (typically), they can only deliver for FedEx, as the DOT number does not cover other activities.
Amazon Delivery Service Partner owners must have their own DOT numbers and operate under their own business name. This has some advantages but some risks as well. Suppose a company loses its DOT number for any violation. In that case, they are out of business immediately and are unlikely to be able to get another one or have the original number reinstated.
This can also lead to increased insurance and other costs, eating into those profits significantly. It’s essential to look at those differences, but also at the potential benefits of owning both types of business.
Owning Both: FedEx Ground vs. Amazon Delivery Service Partners
The thing is, so far, neither company has exclusive agreements. As an independent contractor, technically, you can operate both types of business if you have your own DOT number. However, there may be restrictions on the vehicle making deliveries and the signage on that vehicle. This does not, of course, mean you cannot own two sets of vehicles, employ enough drivers to operate them, and run both.
There are some pros and cons to this. Both types of routes require a certain amount of hands-on work, and the administrative burden of running both is potentially high. However, you get the good side of both types of routes at the same time, and drivers could conceivably cross over, and you could have a more flexible fleet and shared costs.
This is a significant commitment and one that should be undertaken with seriousness, but one that is possible.
Final Thoughts: FedEx Ground vs. Amazon Delivery Service Partners
Unfortunately, there is no definitive answer about which business is right for you. FedEx Ground has advantages, and so do Amazon Delivery Service Partner routes. Choosing can be a challenge. At Route Advisors, we are here to help you make that decision.
We want to be your route broker, and we can help you find the right route for you at the right price, in the right place, and at the right time. Contact us today. We would love to help.