Amazon’s Next delivery man is YOU

Jun 17, 2015

In its ceaseless quest to speed delivery, Amazon.com Inc.wants to turn the U.S. into a nation of couriers.

The Seattle retailer is developing a mobile application that would, in some cases, pay ordinary people, rather than carriers such as United Parcel Service Inc.,to drop off packages en route to other destinations, according to people familiar with the matter.

As envisioned, Amazon would enlist brick-and-mortar retailers in urban areas to store the packages, likely renting space from them or paying a per-package fee, the people said. Amazon’s timing for the service, known internally as “On My Way,” couldn’t be learned, and it is possible the company won’t move ahead, the people said.

An Amazon spokeswoman declined to comment.

The service could give Amazon more control over the shopping experience and help contain shipping costs that grew 31% last year, faster than revenue. It also might give the retailer negotiating leverage with the largest carriers.

But the concept faces many hurdles, from how Amazon will vet deliverers to whether physical retailers will cooperate with a key rival. Major shippers are efficient; it costs UPS an average of about $8 to deliver a package in the U.S.

Amazon ships an average 3.5 million packages a day, according to SJ Consulting Group, so it would need a lot of couriers to make a meaningful impact. Nor is it clear who would be responsible if packages are damaged or go missing.

“There is a certain logic to the idea, but it seems there’s a lot that could wrong,” said Marc Wulfraat, president of Montreal-based logistics consulting firm MWPVL International Inc., which closely tracks Amazon. “What’s to stop these people from simply taking the packages for themselves instead of leaving it on someone’s porch?”

If Amazon carries through with the plan, it would join several others working on so-called crowdsourced delivery using contract laborers, including Deliv Inc., Uber Technologies Inc. and Instacart Inc. Google Inc.and eBay Inc.are also testing same-day delivery efforts using contracted workers, to varying success. Amazon rival Wal-Mart Stores Inc.in 2013 briefly considered a crowdsourced delivery program that would turn customers in its stores into package carriers.

So far, though, no one has been able to seriously challenge the parcel-delivery giants or regional carriers that carry out the final, costly leg of a package’s journey.

Amazon itself has tried a dizzying array of delivery options. In several U.S. cities, it employs bike messengers for its Prime Now one-hour delivery and has contracted with delivery firms for its same-day Fresh grocery service. It is building its own network to take on UPS and has enlisted the Postal Service for Sunday delivery and early-morning grocery drop-offs. And it is developing aerial drones for parcel delivery.

Last year, Amazon briefly tested delivering packages in San Francisco via yellow cabs and Uber vehicles, paying about $5 per parcel. It was a limited experiment to gauge the feasibility and cost of such deliveries and wasn’t expanded, people familiar with the matter said.

“On My Way” emerged as Amazon considered an on-demand taxi service called Rides, which would be similar to Uber or Lyft Inc., according to people familiar with the matter. Amazon has since put the Rides project on hold, the people said.

Crowdsourced delivery could offer Amazon an escape valve for the shipping woes it suffered around the 2013 holiday season, when it had to compensate customers after some packages failed to arrive by Christmas. Last year, Amazon’s shipping costs jumped by $2.07 billion to $8.7 billion, or 9.8% of sales, compared with 8.9% the year prior.

One big challenge will be reaching deals with retailers for storage space, though the e-commerce giant could look to UPS as an example. The carrier has a service in New York and Chicago using dry cleaners, convenience stores and other small retailers as pickup points so that customers don’t have to be home to sign for them. UPS pays the retailers a per-package fee for the service.

As well, Amazon has a network of lockers installed in 7-Eleven stores, parking garages and other locations where customers can pick up packages or make returns. Amazon rents the space in the store, and retailers benefit through increased foot traffic.

The fee structure for “On My Way” was recently still being worked out, including whether Amazon would pay with cash or credits to be used on its website, the people said.

Source: The Wall Street Journal