Amazon Launches Branded Delivery Service Aimed at Small Businesses

Photo Credit: Ted S. Warren/AP/REX/Shutterstock
June 28, 2018
9mo ago

By Justin Chermol

Amazon took another jab at FedEx and UPS Thursday, soliciting the help of entrepreneurs to help build out its own "last mile" delivery service.

Under its new Delivery Service Partners initiative, the company will offer incentives to small businesses to form their own delivery companies, deploying up to 40 Prime-branded vans and employing up to 100 drivers.

This is not the first delivery program unleashed by Amazon. The company, which spent $21.7 billion on shipping last year, has also rolled out “Flex” and “Shipped With Amazon.” But the "last mile" issue is a tricky one for online retailers. Getting products from warehouse to warehouse and to customers' general metro areas is much less complicated and expensive than moving them door to door. Experts say solving this issue will be key for the industry.

"Amazon needs to figure out a solution to this problem, because it would like to be totally self-reliant and not deal with third parties," said John Divine, Senior Investing Reporter at U.S. News & World Report. "It will require some risk-takers on the parts of the entrepreneurs."

As for Amazon's latest effort, the company says those that are accepted into the Delivery Service Partners program could potentially start a business with less than a $10,000 investment. The entrepreneurs will have to recruit and hire drivers. But Amazon will provide uniforms and offer plans to cover, at least partly, things like insurance and fuel costs.

But that wasn't the only news out of Amazon on Thursday -- the company also announced it was acquiring online pharmacy company PillPack. That sent shares of Walgreens and CVS plunging.

Shares of Walgreens and CVS dropped Thursday morning after Amazon said it's buying online pharmacy start-up PillPack in a deal reportedly worth a little less than $1 billion.

The move was the latest indication of the e-commerce giant's intent to get into the prescription drug business. Boston-based PillPack organizes delivery of medications for patients, dividing doses by when they should be taken and automatically refilling and renewing orders.

"Part of the execution that PillPack is supposed to be bringing here is dealing with insurance and copays and refills," said John Divine, Senior Investing Reporter at U.S. News & World Report. "A lot of consumers do want those to be streamlined."

"Maybe millennials especially are used to the stay-at-home economy and having everything come to them. With the prospect of overnight delivery here, that's where the game-changing aspect of this is."

Amazon's ambitions in the healthcare space have been no secret. The company received wholesale pharmacy licenses in 12 states last year, and in January it announced a joint venture with JPMorgan and Berkshire Hathaway to provide health insurance and other services to employees. The threesome last week named well-known surgeon and writer Atul Gawande to lead that project as CEO.

"If there's one thing that Amazon CEO Jeff Bezos is known for, it's long-term execution," Devine said. "I don't think that other peers in this industry need to worry today, but I think that longer term, over the next three to five years, they need to watch out."

The PillPack acquisition was also a win for Amazon over rival Walmart. CNBC reported in April that the big box retailer had been looking to buy the company for about $1 billion. Amazon didn't officially disclose the terms of its deal.

But that wasn't the only news out of Amazon on Thursday -- the company also announced a new plan to tackle issue of "last mile" delivery. That sent shares of FedEx and UPS plunging.

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