Eye on Retail: Amazon invests in drivers

Amazon is making a big investment in the contract drivers that are part of its Delivery Service Partners (DSP) program.

Launched in 2018, the program provides support to Amazon employees who leave their jobs to build their own contract delivery businesses. Following a $450 million investment in DSP pay and benefits in September 2022, Amazon has now pledged $840 million in incremental investment over time in expanded pay, educational opportunities and family support.

Rate increases
Amazon is investing over $440 million in rate increases during the next year to help the program provide higher wages and benefits to drivers. While individual wages and benefits will vary by DSP and geography, Amazon anticipates that delivery associates in the U.S. will earn $20.50 per hour on average or more, in addition to health care and other benefits DSPs may offer.

Education
Amazon is expanding its Next Mile education program, provided by enterprise education platform InStride and inspired by the e-tailer’s Career Choice program, which offers eligible DSP employees access to over 2,000 academic programs and up to $5,250 in tuition coverage per year.

In addition to the in-network coursework that DSP employees have free access to, they can now be reimbursed for coursework completed at any accredited institution outside the network. The program will also be available in Canada in 2024.

Family support
A new childcare-support service from Upwards will offer DSP employees a 24/7 concierge service to assist in finding childcare and emergency childcare. Through the service, DSP employees can work with a care manager to find a caregiver, post a care opportunity (e.g. babysitting job), or search for and contact a caregiver directly.

“Our focus has always been to help these small business owners build successful companies and great teams, and we’re excited to see the impact that these investments will have in furthering that goal,” Beryl Tormay, VP, last mile delivery and technology at Amazon, said in a corporate blog post.

DSP drivers strike in June
Amazon is investing in these incentives and benefits in the aftermath of the first-ever strike by drivers at a DSP partner. Held in June 2023 by 84 unionized employees of Amazon delivery service partner Battle-Tested Strategies (BTS), the strikers claimed Amazon engages in unfair labor practices and needs to bargain with the Teamsters Union to address what they characterize as low pay and dangerous working conditions.

An Amazon spokesperson said that strikers were misrepresenting the situation and that the company had already notified BTS its contract would be ended before the strike began.

Amazon reduces delivery costs
Amazon has been making efforts to reduce last-mile delivery costs, which can account for half of total shipping costs. Presumably the company expects to create net savings by encouraging more participation in its third-party contract driver program.

In addition, the recently launched Amazon Hub Delivery program partners with small businesses to deliver Amazon packages in their local neighborhoods, expanding its capacity to make fast local deliveries without adding any infrastructure or employees.

And in May 2023, the e-tailer began providing a financial incentive for some Prime shoppers to forgo delivery of their orders. Media reports indicated Amazon has been emailing an “unknown number” of Prime members with an offer of $10 to pick up Prime shipping orders worth $25 or more at established pickup locations, such as Kohl’s or Amazon Fresh stores.

Since February 2023, the e-tailer has been charging Prime members varying service fees on Amazon Fresh delivery orders that are under $150.

During the past five years, 3,500 Amazon employees have started their own delivery businesses via the DSP program. According to Amazon, they have created 279,000 driving jobs, generated $45 billion in revenue, and are now delivering over 20 million packages every day across 19 countries.