Amazon is known for its outside-the-box thinking and creative ways to tackle tough logistical issues. Sometimes those fly and sometimes they die, but innovation is a steady thread. There are also questionable ethics involved in some of its scaling efforts, but that political beehive is a different article.
Focusing on the strategic dynamics, Amazon’s latest move is to tap small businesses as last-mile delivery resources. The idea is that local salons and coffee shops can make some extra scratch by delivering packages for Amazon… assuming they have idle time and resources to do so.
According to some investigative reporting from Axios, Amazon estimates 20-50 packages per week per SMB. It’s initially targeting smaller U.S. cities including Columbia, Missouri; Eau Claire, Wisconsin; Fayetteville, Arkansas; and Findlay, Ohio. It’s also eying the Big Apple as a population-dense test bed.
Strategically for Amazon this makes a lot of sense. For SMBs, it’s a bit more nuanced and situationally dependent. As with all-things SMB there’s no one answer or common behavioral pattern. The sector’s fragmented orientation is what makes it so challenging to serve, and to predict consistent outcomes.
HR and PR
Starting with the strategic drivers for Amazon, this helps with some of its last-mile challenges. It’s also a logistical experiment that’s on-brand for a company that likes to test things at scale. In that way, it’s in a similar bucket as past last-mile moves, such as establishing storage lockers with retail partners.
But the bigger driver is that Amazon views this as a more cost-efficient way to deliver packages through individuals that are familiar with the territory. By cost-efficient, we mean that SMBs likely won’t require the rates demanded by shipping pros, though that might mean amateur results (more on that in a bit).
Similarly, this reads as a clear move for Amazon to sidestep the issues and politically-fueled drama that it faces over collective bargaining on several fronts (again, a different article). It’s unclear how SMB delivery partners will be legally classified, but they’re unlikely to unionize and demand full-time status.
There also may be PR motives at play. Amazon has gotten decades of flack due to the negative impact that its operational scale and aggressive price competition have on local businesses. The company may see SMB delivery – and the SMB supplemental income that goes with it – as a way to shift that narrative.
Sleeping with the Enemy
That brings us to the SMB dynamics. For years, Amazon has been the SMB antichrist. It may be hard for SMBs to stomach the idea of sleeping with the enemy, and doing so for marginal revenue. The terms are unclear (Axios says it’s a “small fee”) but Amazon is known for squeezing margins into oblivion.
Furthermore, there’s the issue of bandwidth. SMBs are generally cash and resource constrained. So the idea of tapping idle human power may seem like a no-brainer on paper, but it could fall flat in practice. Beyond overall availability is the concept of unpredictable availability… which translates to unreliability.
There’s also the issue of space. For the same reason that SMBs are resource and cash-flow constrained, they’re also often space-constrained. For example, restaurants utilize every last square inch for yield optimization. Though they have shipping and receiving, it’s a matter of space for package storage.
Adding up all the variables, we’re mostly skeptical that this will fly. Even if Amazon can sidestep the SMB challenges noted above, it comes down to unit economics. As Tony Kornheiser says, “the answer to all your questions is money.” It’s doubtful Amazon will offer enough to make this worthwhile for SMBs.
