Amazon is a name that everyone is familiar with in 2022. Everyone has or knows of someone who has used Amazon to have packages delivered to their doorstep. One might assume that all of those parcels are transported via the usual suspects like FedEx, UPS, etc. However, Amazon is creating its network for last-mile delivery: from the warehouse to your location.
There is very strong emphasis from Amazon on the fact that a Delivery Service Program (DSP) location is not a franchise, it is a business opportunity. The DSP program has expanded to nine countries, creating 158,000 jobs at 2,500 DSPs, according to Amazon.
A DSP will start with up to 5 delivery vans and drivers. Training on how to run a DSP will be provided by Amazon where you will train with other owners. The drivers will move packages between the warehouses and the locations where the parcels need to go.
The vans will be leased from Amazon which will come in Amazon paint jobs and the employees will wear Amazon-branded uniforms.
Amazon estimates that if you make use of all the this-party deals that impact startup costs, it should cost $10,000 to start a business. “This is not a fee paid to Amazon but represents our estimate of what it will cost to cover key startup costs including legal entity formation and licensing, professional services like accountant and lawyer fees, set up supplies such as a laptop and timekeeping software, recruiting costs such as job postings, drug tests, and driver training, and your travel for owner training.” They also note that the upfront costs for delivery vehicles are excluded from our estimate as there is no upfront cost for delivery vehicles procured through the delivery vehicle leasing program negotiated by them.
Unlike a franchise, Amazon provides no financial data regarding their DSP locations and expects every owner to build their own profit and loss statement and cost model. The following graphic lists some of the expected costs:
The application, however, requires that you submit documentation demonstrating access to $30,000 in liquid assets. “This ensures you have sufficient funds to cover both the estimated business startup costs of $10,000 and to cover your personal expenses while you are training and launching your business,” says Amazon.
Candidates submit an online application sharing information about previous work experience, leadership, financial health, community engagement and integration, and geographic preferences. Additionally, a credit check, background screening and motor vehicle record checks are also conducted. If selected to progress for further consideration, the next steps include a screening interview, an opportunity to ask questions of a current Amazon DSP owner via live webinar, and then a final round of virtual interviews. Once Amazon provides an offer to become a DSP, candidates have the opportunity to discuss specific details about stations, routes, and financials before a final decision is reached.
Amazon does not provide exact figures on how much a median owner would make, reemphasizing the need for business owners to create their own models. However, the following graphic contains some information that Amazon shares.
Amazon notes that these figures are for a 5 vans business whereas the typical owner has between 20-40 vans.
The short answer is: We don’t know.
Amazon does not provide enough financials for us to comment on the viability of such a venture. We encourage you to talk to other DSP owners and communicate with Amazon to figure out whether you want to invest in one.
What we can tell you is that existing routes are usually in the 20%-40% range when calculating the asking price as a percentage of revenue. We recommend building your own financial plan after speaking to existing owners in your area. Additionally, owners selling their routes might disclose more financials at your request.
|For the Year Ended December 31,|
|Other comprehensive income (loss):|
|Net change in foreign currency translation adjustments:|
|Foreign currency translation adjustments, net of tax of $(5), $(36), and $47||78||561||(819)|
|Reclassification adjustment for foreign currency translation included in “Other operating expense (income), net,” net of tax of $29, $0, and $0||(108)||–||–|
|Net foreign currency translation adjustments||(30)||561||(819)|
|Net change in unrealized gains (losses) on available-for-sale debt securities:|
|Unrealized gains (losses), net of tax of $(12), $(83), and $72||83||273||(343)|
|Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $0, $8, and $13||(4)||(28)||(34)|
|Net unrealized gains (losses) on available-for-sale debt securities||79||245||(377)|
|Total other comprehensive income (loss)||49||806||(1,196)|
Amazon has been posting huge profits for a while. Its previous CEO and founder, Jeff Bezos, is the second richest person in the world. With $32 billion in income in 2021, almost 300% of its 2019 income, Amazon has very strong financials and is not going anywhere for a while.
The above graph compares the total return on the NYSE Technology Index, the S&P 500, and the S&P 500 Retailing Index. Amazon has outperformed all three.
If you are looking to run a full-time business that will not have consistent returns year-round and are open to subjecting your business to outside factors like business cycles and natural disasters, this might be the business for you. With its low advertised startup cost, a DSP location presents an enticing business opportunity.
All of this has a layer of controversy too. While DSPs are technically independent, many owners and drivers have reported their frustrations with the program. Reports of drivers not having time for bathroom breaks or not using seatbelts to increase efficiency have been doing rounds of the news for a while.
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