Understanding Amazon Logistics

February 28th, 2020

Understanding Amazon Logistics 

 Everyone familiar with Amazon knows that their packages have traditionally been delivered via third-party services (like those offered by UPS and FedEx). But now the company is using its own fleet and contracted personnel to deliver in the name of faster and better shipping options.  

Introducing Amazon Logistics! Amazon Logistics leverages a more efficient and proactive way of delivering customer orders. As a seller, it’s vital that you understand the process and whether it can help reduce your shipping time. 

What Is Amazon Logistics? 

It’s basically a last-mile delivery and shipping service that gets orders to Amazon customers. While it does the same work as commercial carriers and national postal services like Royal Mail and USPS, it’s not as big as these organizations. It’s more of a technology-driven marketplace, like TaskRabbit. Amazon buys a host of delivery services to make logistics work – including bicyclists, motorcyclists and walkers in some locations.  

Amazon Logistics provides same-day and seven-day delivery options, and the capacity of its deliveries are given by drivers and companies who are under Amazon’s contract. Here’s how they function: 

• Individual drivers: These drivers sign on through the ridesharing opportunity known as Amazon Flex to deliver packages in their area. Think of it as the gig economy model of carsharing services like Uber. 

• Independent delivery companies: These companies are referred to as Amazon Delivery Services Partners (DSPs). DSPs have their own vehicles and full-time drivers for delivering orders on Amazon’s behalf every day.  

Amazon has some rules in place for third-party vendors (in terms of safety training, licensing, and vehicle size), but the providers don’t operate under Amazon’s name. They do, however, operate under Amazon’s contract to get packages from Amazon’s warehouses and deliver them to the relevant customers. Independent contractors use Amazon’s app for instructions and registration of deliveries.  

How To Become an Amazon Delivery Service Partner 

Amazon has designed the logistics program more like an opportunity to invest in a promising venture. Here’s how to become an Amazon DSP (Delivery Service Partner):  

- Invest a minimum of $10,000 

- Build a team and take responsibility for its development  

- Manage 100 personnel and 40 vans  

- Ensure that orders are delivered 7 days a week throughout the year 

Contractors, on the other hand, need to meet the following criteria: 

- Get licensed by Workers Compensation, Cargo Legal Liability, automotive and Commercial Insurance. 

- Have skilled and experienced drivers with proper policies and documented safety training.  

- Own cargo vehicles in good condition and ensure each van or truck is capable of holding 200 cu.ft. of products at a minimum. 

Amazon estimates that these businesses could earn $1 to $4.5 million annually, with profits in the range of $75k to $300k. However, DSPs aiming to make it to the top will need to be mindful of customer delivery expectations and shipping times. Currently, precise delivery times are not offered by Amazon Logistics, so all that a DSP can do right now is stick with the estimated time frames.  

Pros and Cons for Amazon Sellers 

 There are several advantages to using Amazon Logistics. For instance, your orders will be assigned the fastest delivery options, enabling you to leverage programs like Flex, Prime Air, and Lockers to provide expedited shipping. Seven-day and same-day shipping are also available in most locations. Also, when other delivery providers are slowing down due to seasonal variables, Amazon Logistics can prevent overcrowding in the warehouses and keep up with demand.  

Other benefits of Amazon Logistics include: 

• You can empower customers to follow the journey of their package with Amazon Logistics’ new map tracking feature (they can even receive image confirmation once the parcel is delivered on their front porch).  

• The synergy of internal teams and external partners will allow for international growth and new initiatives. 

• Those using Seller Fulfilled Prime or Fulfillment by Amazon (FBA) will enjoy the additional benefit of having Amazon handle product support and customer support. 

 However, there are some downsides to the program as well:  

- You don’t get the option to decide what delivery service will be getting your goods to the customers, and any negative experiences with the service will have a direct impact on your business. 

- Mishandled deliveries can also harm the feedback score of Amazon sellers. Not only does that score influences a customer’s decision to buy from a seller or their competitor, but it also impacts your chances of winning the Amazon Buy Box – a way to stand out when several merchants offer the same item.  

How to Reduce the Risks Associated with Amazon Logistics 

 Because your reputation and sales are at stake, you should adopt a proactive approach from the time you receive an order through its shipment. Here’s what you should do: 

- Implement an “automated messaging” system for requesting feedback immediately after the customer gets his or her parcel. The message should be generated as soon as an item is marked as delivered.  

- Provide customers with multiple ways to contact you. Once they’re aware that you’re present to assist them with any delivery mistakes or negative experiences, there won’t be any reflection of negligence on your part. Give them as many links as you can (e.g. feedback link, tracking link, the link to your Amazon store, etc.).  

- As the last step, you can try contacting customer service to “deprioritize” Amazon Logistics as customers’ least preferred delivery method. This may encourage customers to opt for other delivery options. Alternatively, customers can place such requests if they’re not satisfied with the service as well.  

If you use these strategies, you should be able to minimize the negative feedback score and prevent negative reviews from your customers. 

Conclusion 

As we head into the second quarter of 2020, it looks as if Amazon will only continue to create a denser shipping network. In fact, Amazon’s logistics strategy could even expand to introduce freight forwarding where they’re handling your orders from start to finish. However, it’s still recommended that you take a proactive approach while using Amazon Logistics and use the Seller Central dashboard to stay in touch with your customers. After all, a transparent approach to delivery is a key to heading off negative feedback.  

Want more information on Amazon delivery services.  Attend an Amazon seller event, like Prosper Show, to learn about the latest developments and find out which options would best serve your bottom line.