Amazon’s New Delivery Model Has Implications for Fleet

It was during the holiday season of 2013, when thousands of Americans missed that special gift under the Christmas tree because Amazon.com could not deliver the orders in time. The backup was blamed on overwhelming volume at Amazon’s shippers, UPS and FedEx, but the customer service damage was done.

After the apologies, discounts and refunds, Amazon decided to take control of its deliveries. The company began expanding its warehouse footprint by opening more than 50 new, smaller fulfillment centers around the country. And deliveries in many cities are now being handled by independent contractors.

They’re called Amazon Delivery Service Providers (DSPs), and their vehicle needs present new opportunities for fleet providers.

In a span of two months, Karl Kirker, fleet manager at Mossy Nissan in El Cajon, Calif., sold more than 100 Nissan NV and NV200 vans to three new Amazon contractors. The dealership has delivered vans to Las Vegas, Phoenix, San Francisco, Seattle and Chicago.

Nissan Commercial Fleet formalized a purchase program for Amazon DSPs, providing discounts under its Franchisee Program. (A survey of four other independent fleet providers revealed they were not selling to Amazon DSPs, nor were they aware of Amazon’s new system.)

Kirker says most Amazon DSPs already run courier services, with various size fleets — from a handful of vehicles to hundreds — but not at this level. They’re doubling and tripling their staffs overnight, and their delivery schedules are widening to nearly a 24-hour window, seven days a week. “It’s exponential,” he says. “It’s got to be nerve-wracking, but everyone is trying to make it work.”

(Ironically, mirroring Amazon’s Christmas delivery problems, Kirker says other Nissan dealerships promised delivery of vans to these Amazon contractors by a certain date, but they couldn’t deliver. Kirker says he was simply more realistic on a delivery date, and thus was never late.)

Kirker says his Amazon DSP customers buy the basic van with no upfit, save a partition in some cases. The purchase split is 60% NV 1500 and 40% NV200.

This world seems to be in flux right now as Amazon’s new delivery model sorts itself out. “One customer ordered 427 vans, and two weeks later said some things are changing, let’s cancel the order,” Kirker says, though talks are ongoing.

This new, outsourced delivery model would seem to be poised to grow. For one, the online ordering and doorstep delivery model is increasingly exponentially, from grocery delivery services to “same hour” services such as Amazon Prime Now.

Google Express hires drivers as independent contractors, but it has come under fire in a lawsuit regarding misclassification of independent contractor status. Using a licensed courier service in the Amazon DSP model would seem to avoid this.

And then there’s an even newer, peer-to-peer delivery model, which relies on individual users to transport goods on their personal errand routes. (Let’s not go there yet, and have to ponder the legal ramifications of an accident in a personal vehicle while delivering a package.)

Nonetheless, let’s be on the lookout for a growing group of entrepreneurs who will need vehicles and the resources on how to manage them.

Originally posted on Business Fleet