Amazon experimenting with same-day delivery for more orders

Dive Brief:

Amazon is reaching out to contract drivers working for its “Amazon Flex” Prime Now delivery program to also deliver other Amazon orders, Reuters reports. The idea seems to be in a pilot phase in the Dallas-Fort Worth area, according to the report.
Amazon confirmed to Reuters that drivers were taking on more orders beyond the Prime Now same-day delivery service.
Amazon has been looking to find delivery systems beyond its longtime relationship with United Parcel Service, according to the Wall Street Journal, as it seeks ways to meet customer demand for speedy delivery while tackling its rising delivery costs, which rose 18% to $11.5 billion in 2015.

Dive Insight:

Retail delivery, in a phenomenon arguably ignited and stoked by Amazon, is increasingly expected to be fast and cheap.

There are a plethora of startups running in the space that have kept delivery prices sometimes amazingly low—many retailers have reasonable minimum order requirements and otherwise deliveries cost less than $10, which is less than FedEx charges for next-day delivery.

Amazon Flex drivers work much like Uber drivers, using an app to receive orders and working as contractors for an hourly rate.

A looming question in this space, though, remains whether these delivery companies are viable. Many are startups still running on the fumes of investment funding rather than on profits.

Amazon, which pays well compared to some startups in the same-day delivery space and which allows drivers to accept tips, could come up against labor rules, however, if they treat their contract drivers too much like employees and then fail to reimburse their expenses or provide legally mandated benefits or taxes. Indeed, Amazon has already found itself in court in California over those very issues.

If drivers are found to be inappropriately compensated, the costs of Amazon’s same-day delivery will shoot up, defeating the purpose of the on-demand system.

In the meantime, though, Amazon appears to be finding the most inexpensive way to get more packages to more people more quickly.