Is Amazon’s Delivery ‘Purge’ A Boon To Last-Mile Rivals?

When the axe falls from Amazon, the ripple effects are significant, especially for smaller logistics firms. Several companies have enjoyed the fruits of partnering with the eCommerce giant, to be sure, but the partnerships — at least, some of them — are proving short-lived.

That’s the partial takeaway, as Amazon has cut ties with UPS and FedEx. At a high level view, that means smaller logistics and last-mile freight firms have rushed in to fill the void.

Yet, live by the eCommerce, die by the eCommerce giant. Part of the reason has to do with safety, according to recent announcements by Amazon.

Smaller Firms Feel The Brunt

As reported last week, Bear Down Logistics is no longer working with Amazon, with the firm cutting hundreds of jobs in the wake of that severance, and effectively ceasing operations across five states. The net impact of Amazon’s decision translates to Bear Down Logistics’ facilities shutting down in Ohio, Virginia and Illinois in April — with 280 positions lost. There are another 120 workers slated to be let go in Michigan.

“We have a responsibility to our customers and the communities where we operate to ensure these partners meet our high standards for things like safety and working conditions,” said an Amazon spokeswoman, according to Bloomberg last week. “Occasionally we need to end a relationship with a partner, and when this happens, we are committed to helping the impacted employees find opportunities with other delivery service partners, or to learn more about the thousands of available roles at Amazon delivery stations and fulfillment centers.”

These last two points hint at the ways that logistics and last-mile journeys might be changed — significantly, and perhaps permanently. Consider the fact that Amazon started its program in 2018 to work with smaller firms to get packages where they needed to go. That rush underpinned the livelihood of 75,000 drivers, as estimated by Transport Topics.

To get a sense of where the job cuts are, well, cutting, Transport Topics reported last week that the job cuts have thrown at least 1,300 drivers out of work. In other (anecdotal) announcements, RCX Logistics said it is letting go of 600 employees after losing its Amazon contract.

At this point, 1,300 drivers from an installed base of 75,000 does not leave this courier base hollowed out. Yet, it does speak to the meaningful shift, which leads one to wonder if those same drivers, or other logistics professionals, might shift to delivery focused competitors.

Amazon tends to look for little impact through the industry. As reported by Freight Waves, a spokeswoman said that — for example, in the case of California-based Transportation Brokerage Specialists’ layoff of 900 drivers and employees — “we are planning for there to be zero or very little net job loss in these communities because nearly all impacted employees of these companies will have an opportunity to move into other delivery driver roles with Amazon partners.”

Yet, in a competitive market, pay may matter. The Seattle Times reported that a Bear Down Logistics driver in Michigan makes $15 an hour, while UPS pays about $20 an hour in the same region for the same work.

The opportunity may indeed be there for attrition from the logistics network being refashioned to, well, other logistics networks. In one example, last week, Banana Republic began offering on-demand delivery through Postmates, extending its buy online pickup in-store (BOPIS) efforts, as detailed by Glossy. Postmates said its overall Delivery-as-a-Service has leapt by more than 300 percent year over year across retailers. Uber Freight, too, has logged steady gains, up 75 percent year over year as measured in the latest quarter.

The possible shifts — where the smaller firms are, in effect, absorbed by Amazon at various delivery and fulfillment centers, or even by Amazon partners or competitors — come as overall hiring within the logistics sector has seen momentum.

In the most recent data, the U.S. Bureau of Labor Statistics said that January saw the 11th straight month of gains within consumer and messenger jobs, with the latest month showing 14,300 new jobs added. Warehouse and storage jobs also grew in January by 5,700 positions, and trucking jobs were up 3,200 positions.

The last mile … perhaps a seller’s market for now?