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Amazon Looks To Solve Its Last-Mile Problem By Creating Entrepreneurial Delivery Services

In what could evolve into a challenge to the likes of UPS and FedEx, Amazon is wading deeper into last-mile delivery by rolling out Delivery Service Partners.

The program, unveiled by the retailer on Wednesday, will support entrepreneurs in running local delivery networks of up to 40 vans to carry Amazon packages.


Although the delivery workers won't be Amazon employees, they will have access to Amazon-branded vehicles, uniforms and other items. Moreover, the barriers to entry won't be particularly high: anyone dreaming of setting up such a service might be able to for as little as $10K.

The program could be the answer to Amazon's last-mile problem as customers order ever-more stuff from the e-commerce giant with expectations of shorter delivery times. Namely, this could help Amazon quickly get packages from its various package-sorting centers to people’s doorsteps, the New York Times reports.

The last-mile conundrum is now a major force that is reshaping industrial real estate. The desire to get packages to people faster has even revived the development and redevelopment of close-in urban industrial properties in recent years.

"Consumers increasingly expect rapid delivery of online orders ... These factors contribute to retailers and manufacturers choosing to place their e-fulfillment operations in urban locations, in turn reducing truck trips," Prologis said in a statement when it broke ground on an urban Seattle distribution facility that will be completed in September.

Each Amazon Delivery Service Partners' van will start its day at one of 75 Amazon stations in the U.S. where parcels ordered from are picked up. Algorithms will determine which packages are sent to these delivery stations, and which are sent via other delivery services, such as FedEx or UPS or the post office, CNBC reports.

Could a new fleet of delivery vans challenge existing delivery services, which currently make a mint through their association with Amazon? Possibly, though Amazon Senior Vice President of Worldwide Operations Dave Clark told the NYT that Amazon would continue to use all of its existing delivery partners.

A retailer getting into delivery isn't entirely a novel idea. Late last year, Target Corp. acquired same-day delivery service platform Shipt in a $550M cash deal. Alabama-based Shipt keeps in close contact with customers during the delivery process so they know when packages have been picked up, are out of stock or are en route to their home.

Industrial property owners and retailers are also hard at work trying to automate many of the tasks done by warehouse workers, the better to cut costs and speed up delivery.