Dive Brief:
- Amazon plans to hire thousands of its own seasonal drivers to help deliver parcels this peak season, a spokesperson for the company confirmed to Supply Chain Dive.
- Amazon will provide vans to the drivers and pay them in the range of $15 to $19 per hour, depending on the market, Reuters reported. Drivers would work four 10-hour shifts each week.
- The news of driver hiring follows Amazon's announcement to allow free shipping for all customers, not just Prime members, during the holiday season, with no minimum purchase requirement.
Dive Insight:
The last mile is always a competitive space, but it may be even more so at this time of year, as consumers get in the holiday spirit and fill their online carts with orders.
Amazon's move to manage its own drivers, along with expanding free shipping, shows its desire to remain competitive with other retailers.
Target launched free two-day shipping for customers at the beginning of the month through Dec. 22, with no minimum purchase requirement. Walmart rolled out a similar program for orders over $35 and for many items sold by third-party sellers.
Free shipping, while appealing to customers, will be costly to Amazon, creating a need for the e-commerce giant to control its last-mile delivery costs.
By hiring its own fleet of drivers, Amazon will decrease its reliance on companies such as UPS, FedEx and USPS to transport parcels to consumers.
With logistics providers proposing rate increases and additional surcharges, bringing last-mile services in house could result in significant cost savings for Amazon. Proposed hikes to postal rates, which if approved would take effect in late January 2019, could cost Amazon as much as $1 billion.
Amazon's hiring initiative also seeks to add capacity to a tight market during increasingly busy holiday seasons. "Seasonal employees have long been utilized to supplement capacity during peak shopping periods," an Amazon spokesperson said. UPS and FedEx are also hiring thousands of seasonal employees to handle rising demand.
Expansion of its own fleet and less reliance on third parties for delivery services, however, is not unique to the holiday season for Amazon. In June, the company started seeking small businesses and entrepreneurs to deliver packages, even welcoming applications from candidates with "little to no logistics experience." Months later, the company order 20,000 branded vans for the program.
