Amazon Delivery Firms Are Bailing Amid Rising Costs, Meager Profit

Core Insights - The Amazon Delivery Service Partner program, launched in 2018, initially attracted entrepreneurs with promises of high profits but is now facing significant challenges due to rising operational costs and tightening performance metrics [4][5][12]. Financial Performance - Jake Clay, an Amazon delivery partner, invested $75,000 and earned over $200,000 in his first year, but rising costs led him to quit the business after experiencing a fivefold increase in insurance rates to nearly $500,000 [1][2]. - Amazon claims that about 80% of delivery contractors generate annual profits of at least $100,000, with average profits increasing each year [21]. Rising Costs - Delivery partners are struggling with increased costs for insurance and vehicle maintenance, with some reporting repair bills as high as $20,000 per vehicle due to stricter inspection processes [13][14][17]. - One contractor noted that his annual profit dropped from $400,000 to $150,000 due to skyrocketing insurance premiums after a serious accident involving a driver [18]. Program Adjustments - Amazon recently announced a 20% increase in payment per package delivered, acknowledging inflationary pressures, but many delivery partners view this as insufficient and too late [6][5]. - The company has also implemented a "Road to Ownership" program to encourage drivers to start their own delivery businesses, which some existing partners see as a threat to their operations [8][10]. Contractor Sentiment - Many delivery partners express dissatisfaction with the program, with some quitting due to declining profits and others contemplating leaving [5][10]. - A minority of delivery partners report satisfaction with the program and growing income, indicating a divide in experiences among contractors [10][21]. Business Viability - Contractors face challenges in exiting the program, as they have no hard assets to sell and are bound by contracts that give Amazon veto power over potential buyers [25]. - Some delivery partners are diversifying their business interests to mitigate risks associated with the delivery service, such as starting franchises in other industries [22].