In June, Amazon announced a new business it says almost anyone with enough savings and a desire to be their own boss can do: staffing and operating a fleet of delivery trucks for the e-commerce giant.
It's a program called Delivery Service Partners, and Amazon is hoping it will solve the problem of last-mile delivery. With an initial investment "as low as $10,000," according to Amazon, an entrepreneur can start a business that hires drivers and leases up to 40 vans to deliver packages from warehouses to homes.
Since it was announced June 28, tens of thousands of people have applied to the program and Amazon has put in an order for 20,000 Mercedes-Benz vans from German automaker Daimler, according to The Wall Street Journal.
"We have been humbled by the tens of thousands of individuals who have applied for the program," an Amazon spokesperson tells CNBC Make It.
For the program, drivers will wear Amazon-branded uniforms and the vans will sport Amazon Prime logos — but the business will be owned by the entrepreneurs themselves and contracted by Amazon to complete deliveries, according to Amazon. (The company won't allow vans with Amazon branding to be used to service competitors, according to The New York Times.)
To keep the start-up costs low for interested owners, Amazon is providing access to third-party deals on costs like leasing the vans, getting insurance and buying mobile devices with data plans. Although the newly formed businesses aren't required to use the deals through Amazon, they "may not be able to achieve the start-up cost figure [estimated as low as $10,000] without doing so," Amazon discloses in a brochure about the program.
For "successful owners" operating with 20 to 40 vans, Amazon estimates potential annual profits will range from $75,000 to $300,000, although those numbers will differ by city and the individual business' costs, according to the brochure.
So how do you apply to become a part of the program? First, interested entrepreneurs have to be vetted and approved by Amazon.
In its initial application listed online, Amazon gives five qualifications for the Delivery Service Partner program:
- "Experience hiring and developing great teams"
- "Ready to commit to being a hands on DSP owner full-time"
- "Available liquid assets of at least $30,000"
- "Strong credit history"
- "Previous business ownership preferred, but not required"
In addition to your basic contact information, the application only asks a few "yes or no" questions about your experience, past bankruptcies and current financial assets. After you express interest (and confirm that you have $30,000 in the bank), there is a longer application Amazon will ask you to fill out, according to the website. Then, it can take anywhere from one month to six months to get started as a Delivery Service Partner, according to the application.
For those accepted into the program, the power of Amazon's brand shouldn't be underestimated, New York University Stern School of Business professor Anindya Ghose tells CNBC Make It.
"Associating yourself with the Amazon brand, even if you are one of several hundred delivery companies, is extremely powerful," Ghose explains. If you start your own low-cost small business on your own, "then, it's just your brand. And it's going to take forever for anybody to establish their own brand. I think that, for me, is the biggest difference."
Of course, no business is foolproof. Don't just quit your job hoping to make $300,000 your first year out. Even Amazon provides a broad range of potential profits per year — and lots of fine print.
Plus, the branding connection will mean you're beholden to Amazon in some ways, explains Jeremy Kagan, an adjunct professor of marketing at Columbia Business School and the managing director of The Eugene Lang Entrepreneurship Center. And that can limit your ability to scale.
"When you go through all of the trouble of setting up a business, usually it will be in the later years when you've gotten established, you've got your employees, you've got your business, that you start really reaping the rewards of growing it, and maybe ultimately selling it," Kagan says. But with a business that depends on another brand as its primary (or only) customer, "I don't know that you have a lot of ability to grow from there."
This is an updated version of a previously published article.
Don't miss: This veteran went from bankruptcy to starting a junk-hauling business bringing in millions
Like this story? Subscribe to CNBC Make It on YouTube!
No comments:
Post a Comment