Cfdtrade Readers Issue Scam Alert For Amazon’s “Become Our Freight Shipper” Scheme

I must confess that I hadn’t had a chance to look at how Amazon was planning to go into the freight business in competition with Fedex and UPS.

I was stunned to see that Amazon plans to prey on people who by all accounts are less desperate than the ones who wind up being warehouse workers. As I said in a message to Huber Horan headlined, Amazon’s freight shipper deal sounds worse than Uber: “And it’s aimed at businesspeople/investors who ought to be better at investment math than drivers.”

Here are the key points, hoisted from yesterday’s Water Cooler:

Shipping: “Amazon claims it doesn’t want to take on UPS and FedEx. So why is it introducing tons of its own Amazon delivery vans?” [. “The e-commerce giant is unveiling a program meant to fuel the creation of hundreds of new package-delivery businesses that can help Amazon handle the fast growth that its U.S. retail business continues to enjoy. Amazon says the program will offer new partnering delivery companies access to discounted rates on everything from fuel to vehicle insurance to delivery vans, as well as coaching from Amazon and an app to guide delivery people on which order should be dropped off when. As part of the launch, Amazon is also introducing its own Amazon-branded delivery vans that partner companies can lease, as well as uniforms that delivery partners can outfit their drivers with. Amazon claims that new partners can start up their business for as little as $10,000 — an amount that the company will reimburse to businesses founded by U.S. military veterans.” • Oh, great. More militarization…..

Shipping: “The company estimates that an individual operating a 40-vehicle fleet could earn up to $300,000 per year under this new program. Amazon said that they hoped for hundred of new partners to sign up for the program in more than two dozen states over the next 18 months. If the program is successful, the company expects to roll it out into more states and other countries going forward” [].

Starting up for as little as $10,000? When just incorporating if you have a lawyer relative or friend who was nice enough to do it at their cost was $400 in New York State in the 1990s, and I can’t think it’s any cheaper now. Starting with the truck cost alone, this is a capital intensive business, and if you aren’t putting up equity, you are taking on leverage, even if it is prettied up by being in the form of leases.

And what about all of those lovely Amazon discounts? They aren’t going to sell you anything at cost. So they’ll get a cut on provisioning the operation.

I hope Hubert will weigh in, but it turns out some alert readers had already shellacked the idea in comments.

Carolinian
So is the Amazon van service an admission that their dopey drone delivery idea is never going to fly? Looks like they will continue to pound the square peg into the round hole the old fashioned way–with gig labor. In London there were complaints about Amazon driver exploitation.

cnchal

>. . . Amazon is also introducing its own Amazon-branded delivery vans that partner companies can lease, as well as uniforms that delivery partners can outfit their drivers with. Amazon claims that new partners can start up their business for as little as $10,000 . . .

>. . . “The company estimates that an individual operating a 40-vehicle fleet could earn up to $300,000 per year under this new program . . .

SCAM ALERT!

JCC

Actually, according to “Amazon estimates successful fleet owners with a full complement of 40 Amazon-branded delivery vehicles can earn up to $300,000 in annual profit.”

Even using Amazon’s “upbeat numbers” of 40 vehicles and $300K net, this is a $1/2M investment just to get started, not including the yearly operating costs of the vehicles (fleet maintenance including labor, garage, gas, insurance, etc), along with their estimated drivers’ wages of at least $18.00/hr would be at least another $2M to $2.5M during your first year of operations.

Picking this one apart is too easy with a simple back-of-the-napkin estimate. Just figuring out the area to operate and the supposed net profit vs. cost of living for the area where you choose to operate pretty well eliminates large chunks of the country, I think. And anything less than 25 to 30 vehicles to start would be a guaranteed money loser.

For most, cnchal is right, this has SCAM ALERT written all over it for most budding entrepreneurs, even if they could afford it.

Bottom line, who wants to invest $3M to make $300K? This is McDonalds Franchise level stuff, except with greater risk, and really only for those already in large trucking/delivery operations that know their way around these types of businesses.

Louis Fyne
–“The company estimates that an individual operating a 40-vehicle fleet could earn up to $300,000 per year under this new program.—

SEMANTICS ALERT: presumably “earned” = take in as gross revenue.

Amazon is not giving away “up to $300,000” in net profit to you or your neighbors

Then of course subtract payroll taxes, fuel, lease payments for the vans, health care costs, business registration fees, slippage as not every driver will show up for work 365 days a year, recruiting costs, unemployment insurance, etc, etc., etc.

I hope most people aren’t gullible enough to take Amazon’s PR at 100% hunky-dory face value.

Amazon wants to shift as many costs as it can to subcontractors.

Alex morfesis
Bezos wall Street math thrown at main Street precariatz…you could end up with as much as 20 buxxx per day profit by running a 40 unit slave fleet…that is up to…

up to 20 hole buxx per vehicle per day…

less than one dollar per hour…

up to…for each iron horse slave vessel

As long as you are willing to let us offbook the expenses onto your personal fico score…

Gigistan…

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44 comments

  1. sd

    The language used is very similar to multi level marketing. I was actually wondering if there’s a similar bonus structure for encouraging drivers to become ‘entrepreneurs’ each layer getting a piece of the one below.

    Reply
  2. The Rev Kev

    The least that Amazon could do is to offer to throw in a set of free steak knives! They have arrived in Australia and I am seeing their ads on TV all the time. Based on what I have read here though, I absolutely refuse to have anything to do with them based on their mistreatment of their people. How can they treat their fellow Americans like they were nothing more than crap? I don’t get it.
    Looking at the big picture, I am going to say that their future plans is all about logistics. What I mean is that they want to be responsible for all deliveries in countries like the US and I mean all deliveries – packages, goods, furniture, you name it. And they will be there taking a cut from every delivery and this warped, screwed-up version of a McDonald’s franchise is just their next step.

    Reply
  3. skippy

    “new partners” is on par with smart and innovative marketing PR. Which basically means more screwies for the screwers…..

    Reply
  4. Samuel Conner

    Could this be a ploy to pressure UPS and USPS to lower the “last mile” portion of their delivery fees?

    Reply
    1. Yves Smith Post author

      Oh, duh, that should have occurred to me!

      Amazon is big enough that it could get 10 straws and fully fund them (THAT is what the $10K BS is about!) and have secret or explicit loss protection for them just to pressure the shippers. Then get PR and sell the BS that there are tons more in the pipeline.

      Reply
      1. Louis Fyne

        – Then get PR and sell the BS that there are tons more in the pipeline.-

        Which hopefully industry folks know is a big bluff. see my comment in the holding pen.

        Amazon *already* has a program similar to the FedEx “green logo” — a network of “white van’ last mile subcontractors. And its Amazon Flex—an Uber-like services for individuals who want to deliver packages.

        Anecdotally driver turnover is very, very high. (see low pay versus working conditions)

        The only noticeable new feature of this program is that the vans will be painted in an Amazon livery instead of having a generic white van livery.

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      2. JCC

        This is the only way I am able to see that any of this makes any kind of sense.

        And if it works, God Forbid, we all know who will bear the cost reductions, the working class of the big delivery companies, UPS, FedEx, USPS, et. al.

        The only (good?) long term outcome of all this Amazon crapification is that ultimately they will drive themselves out of business due to lack of customers with money.

        Reply
  5. NY Geezer

    The richest man in the world and his world’s richest corporation have devised a corrupt scheme to avoid hiring its own drivers to deliver its packages because they just do not want to fairly compensate UPS, the US Post office and those who drive for them.

    In this laissez faire capitalists’ play book one can never stop victimizing other people and other companies. All its competitors must be crushed and it is entitled to have people work for it for nothing as they did on pre-civil war plantations.

    Reply
    1. Jean

      Sounds like the FedEx Ground drivers–green letters in the “Ex”, (orange letters are actual employees), who have to buy their own trucks, their own insurance, their own uniforms and sometimes their own routes and drive as fast as possible to make their money in piecework.

      A breast cancer victim had to pay for people to take over her route and eventually lost her life savings when the truck was repossessed.

      At least she didn’t lose the FedEx shirt off her back that she had paid for.

      As to starving the Amazon beast, you can go one better. When ordering multiple items, have each one shipped individually, thus costing Amazon per package and keeping their employees working.

      Reply
    1. Yves Smith Post author

      The only shopping I have done there this year is to use up a gift card someone sent me for Christmas…and only just now.

      My mother consumes books the way other people consume potato chips….and I’ve done SO much better by her since I started buying from Powells. They have terrific recommendations by real people. I took a chance based on staff recommendations in buying books out of her genre (mysteries) that I though she’d like, and she was very keen about them. Plus the mysteries I picked based on their reviews went over well too. Powells isn’t as cheap but net net they are a bargain given the much higher satisfaction rate.

      Reply
      1. dug fur

        For readers who don’t know it, Powell’s is a union shop: ILWU #5 (though management and corporate are excluded, warehouse and floor are included)

        Reply
      2. berit

        Thank you for info on Powell’s. I’ve been buying from The Book Depository in UK, never ordering anything from Amazon. Then I learnt (a bit late) that Amazon bought the much beloved Book Depository. Which means I’ve been buying from Amazon. Powell’s looks good. Thanks!

        Reply
        1. carolyn_f

          Agree, The Book Depository was great until taken over by Amazon – I was a big fan.

          If you’re in the UK try Waterstones; they’re the only national independent bookstore chain left. If you’re lucky enough to have a Waterstones store nearby you can ‘click and collect’; they offer home delivery; they also deliver internationally at what look like reasonable rates.

          Reply
    2. jrs

      No, I don’t think it actually works that way. At best you starve the retail end of the beast. That is not where Amazon actually makes most of it’s money though. It’s Amazon Web Services.

      Reply
        1. Angie Neer

          Believe me, you are using AWS even if you don’t realize it. They sell infrastructure services to just about everybody.

          Reply
        1. Arizona Slim

          Me again. I didn’t mean to double-post. Could the NC double-post terminator please blast the first post out of the sky?

          And here’s bit of info for those who are looking for alternatives to the Big Evil River:

          Reply
          1. Oregoncharles

            The system seems to just double post every once in a while, I think at random. I’ve accidentally tried to double post, (eg, by double clicking), and it always catches the error, so I don’t know how that happens, but I suspect it’s just a glitch. I notice that Lambert no longer tells people not to do it.

            Reply
      1. gearandgrit

        Which is surprisingly hard to do. It’s nearly impossible to find a user friendly web hosting company that isn’t just reselling AWS. You have to be pretty savvy to avoid them.

        Reply
        1. Dirk77

          Google, Microsoft and other big players all have cloud services. If you use Kubernetes or similar to avoid lock-in, jumping from one to another is not difficult.

          Reply
        2. Mark Alexander

          I chose Linode as the host for our little town’s library software (Koha). It’s been great: low price, nice management tools, reliable, full root access for our Debian instance, etc. I looked at AWS briefly and found it wasn’t competitive in any meaningful way; I am not sure why it’s so popular.

          Reply
    3. Dirk77

      If the rich have no empathy for anyone outside their class, I suggest it is a contiuum. Because watching the professional class customers hand over their Amazon Prime cards to the meagerly paid cashiers (most new immigrants apparently) at Whole Foods to get an extra discount says something about them.

      Reply
    4. DHG

      I told em to take a hike in late 2016, took some doing to get it canceled with multi emails from them saying are you sure, etc etc.. My last return to them was laced with expletives and threats to hire a lawyer to sue if it wasn’t immediately canceled. It was done within 15 minutes of my sending that email. I will never do business with them again.

      Reply
    5. ChrisPacific

      I use it for stuff that I can’t find locally, which is still more than I would like. I used to order direct from retailers (at least those that would ship internationally) but a lot of them have been killed off by poor business performance and/or PE now.

      Historically their UI, delivery performance and customer service were always excellent, although it’s fallen off a bit in recent years. If there was only an equivalent out there with comparable range and level of service that treated their employees properly, I’d be very happy to order from them even if prices were significantly higher.

      Reply
  6. Louis Fyne

    this could be it’s own half-post….

    My cousin is an Amazon Flex driver right now—-Amazon’s Uber-esque independent contractor last mile delivery arm. School teacher otherwise.

    Rate is $18/hr gross revenue from Amazon. that’s all, no option for health insurance, no workers comp. Point of reference average USPS carrier compensation (not including benefits) is $24 per Bureau of Labor Stats.

    You drive to a warehouse in an industrial park. Queue up. Get a route randomly (to stay compliant with independent contractor regs) and your smartphone acts as a GPS – barcode – mail tracking device.

    Off you go for 3 to 4 hours.

    Anecdotally the turnover among warehouse staff is high. Seems the same with drivers.

    Back of the envelope-wise Amazon Flex seems like a really good bargain for Amazon. The only thing preventing its scalability is probably driver turnover.

    pic of the scene for imagination purposes:

    Reply
  7. Louis Fyne

    this could be it’s own half-post….

    My cousin is an Amazon Flex driver right now—-Amazon’s Uber-esque independent contractor last mile delivery arm. School teacher otherwise.

    Rate is $18/hr gross revenue from Amazon. that’s all, no option for health insurance, no workers comp. Point of reference average USPS carrier compensation (not including benefits) is $24 per Bureau of Labor Stats.

    You drive to a warehouse in an industrial park. Queue up. Get a route randomly (to stay compliant with independent contractor regs) and your smartphone acts as a GPS – barcode – mail tracking device.

    Off you go for 3 to 4 hours.

    Anecdotally the turnover among warehouse staff is high. Seems the same with drivers.

    Back of the envelope-wise Amazon Flex seems like a really good bargain for Amazon. The only thing preventing its scalability is probably driver turnover.

    Budding entrepeneur beware.

    pic of the scene for imagination purposes:

    Reply
        1. flora

          Yep. Reframing contingent work* as heroic Galt-ian “entrepreneurship” is preposterous, but that’s how these mega corps pitch it.

          Reply
      1. John Wright

        Apparently the Amazon Flex drivers are paid only for successful deliveries.

        Last October we had a number of wildfires rip through Northern California, burning down many houses.

        A package was ordered from Amazon to be shipped to a burned down house address, with the assumption it could be intercepted when it was returned to the “before the last mile” shipper (UPS,FEDEX,USPS).

        Amazon reported the package as delivered..

        It was found sitting on the curb of the burned down house with an insurance company sign resting on top to protect it from the elements.

        It couldn’t be left at the neighbors as those houses were also gone.

        The delivery driver knew they were at the correct location, the mere fact there were no people or houses around did not matter.

        Mark it “delivered”.

        Reply
        1. Anon

          Yes, successful delivery seems to be of Supreme concern. Just yesterday I received a frantic email from an Ebay purveyor about the Amazon shipping driver unable to get a signature. I emailed back, no worry, the package was received at my PO Box (as intended).

          Reply
  8. Blue Meme

    The elephant in the room: Amazon is asking people to invest in a business that by definition has only one customer. That customer will have absolute pricing power. Indeed, that customer can stop doing business at any time with any “entrepreneur” who angers Amazon by, say, unionizing drivers or criticizing Amazon’s model.

    Reply
    1. some lurker

      monopsony, a word that needs to be used more often…people like to argue the AMZN is not a monopoly but just as Walmart pioneered, it doesn’t have to be. Controlling supply gives you a lot of control over price (diapers.com, anyone?) and price is how you get buyers.

      Reply
      1. Jeremy Grimm

        Amazon controls access to a large share of the online market, much as Walmart controls access to a large share of the retail market for many goods. As large corporations they both have monopsony power for hiring labor, and as a large employer they have power to squeeze locals for tax advantages for their facilities. Both Amazon and Walmart are built in-part on innovations in logics. Both squeeze the vendors who access the market through their gates pressing down vendor margins and raising fees vendors must pay. Walmart gives large vendors like Proctor and Gamble some power to control what products show up on what shelves at what eye-level further controlling any attempts by smaller vendors to sell competing products.

        Reply
  9. Lord Koos

    Yves, I would quibble with the assertion that hiring veterans is “militarization” in some way.

    However, Amazon giving people the idea that they are patriotically handing vets a break is nothing more than cheap, empty public relations.

    Reply
  10. JCC

    Imagine getting into the clutches of a Bezos Franchise if you were new to the business while considering your immediate, highly skilled, behemoth competitors, UPS, FedEx, the U.S. Postal Service, DHL, ParcelForce, let alone many other smaller operations.

    Most franchises are risky and costly enough, and failed franchisees are a dime-a-dozen (unfortunately I know this from experience and extensive too little, too late, post-franchisee research).

    I took one look at this, and combined with Louis Fyne’s post,

    Amazon is not giving away “up to $300,000” in net profit to you or your neighbors

    I know that even if a net profit of $300,000.00 were possible with 40 leased delivery vans (which I don’t believe), if I had access to $3M or more to invest, the last thing I would want to do with it is purchase a highly competitive, front-to-back, risk-filled job. I personally think that even those already in the transportation/delivery business would probably consider this “opportunity” and Bezos to be ridiculous, if not borderline insane.

    + The obvious and intentional marketing to, and scamming of, U.S. military veterans is reprehensible.

    Reply
  11. John

    Another billion-for-Bezos scheme in the beginning, so that later he can ‘save’ the USPS (because he’s such a nice guy) having used the American workforce in conjunction with U.S. legislators’ goal to break its back.

    Reply

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