Amazon Taps Small Brick-and-Mortar Shops for Storage and Delivery

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Amazon has figured out how to make use of the few parts of the retail industry it doesn’t already control.

In an attempt to speed up order fulfillment and create new partnerships, the retail behemoth plans to partner with local businesses to act as low-capacity warehouses and delivery services. While this could be a lifeline for struggling mom-and-pop stores, it could also be the next step in Amazon’s retail domination.

Get in the Van

Amazon wants to control every aspect of retail. Since its inception in the early-1990s, it’s always acted as a digital storefront, and over the years, it’s added distribution centers, in-house brands, and delivery trucks to cut out middlemen like FedEx and UPS. But the stretch of road between a distribution center and a customer’s door is the most expensive — and time-consuming — part of the equation. Insider Intelligence reported that last-mile delivery accounts for more than 50% of the total shipping cost per package.

Cutting costs is huge right now for Amazon CEO Andy Jassy. The company has already laid off 27,000 workers dating back to last November, and its online store revenue growth came in flat year-over-year in the company’s recent first quarter. To cut expenses while also minimizing delays, Amazon is throwing a few middlemen back into the mix.

This week, the e-commerce titan started recruiting thousands of small businesses such as bodegas, cafes, clothing stores, and flower shops in 23 states to help with deliveries in, roughly, the final three miles. Operating under the Amazon Hub Delivery program, each business would deliver roughly 30 packages a day and receive about $2.50 per parcel, Axios reported, while Amazon likely breathes down their necks to deliver even more:

  • The move could be a boon for small businesses that survived the pandemic but now face historic levels of inflation, higher interest rates, and a worker shortage. According to the US Chamber of Commerce, in Q1 of this year, only 49% of independent store owners said their access to capital or loans was good; six years ago, that number was nearly 70%.
  • Amazon wants 2,500 small businesses in the program by the end of the year, and in a statement to Axios, executive Beryl Tomay said the program will “create opportunities for delivery partners interested in growing a business … and supplementing their income.”

The Packages Never Stop: While Amazon pretty much wrote the book on same-day delivery, that often comes at a cost. In 2018, Amazon launched its Delivery Service Partner network, which basically operates like a franchise similar to opening up a local Taco Bell. But the workload and expectations can be frustrating for managers — and exhausting on workers. Drivers have reported delivering nearly 200 packages per day with barely any time for bathroom breaks and an in-truck camera watching them the whole time. If a driver wasn’t living up to Amazon’s standards, corporate could fire them, leaving DSP managers down an employee and susceptible to a fine from Seattle for not having enough drivers.

The system reached a breaking point in the summer of 2021 when two companies in Portland, Oregon — Triton and Last Mile — shut down in protest, demanding Amazon to agree to conditions they hoped would improve revenue and driver safety. Amazon declined, and w Triton and Last Mile’s workforces shriveled.