Pros and cons of that $10,000 Amazon delivery business offer

Dave Clark, Amazon's senior vice president of worldwide operations, speaks in front of an Amazon branded van in Seattle, Washington, U.S., June 27, 2018.

Lindsey Wasson / REUTERS

If you've always dreamed of starting your own business, Amazon (AMZN) has a deal for you. But you may want to think twice before you accept it.

In an effort to ensure the Seattle-based company can make good on its increasingly demanding product delivery schedule, Amazon is offering to help set you up in the delivery business.

With an initial investment of as little as $10,000, the company says it can get you leased vans, insurance, gas cards and training to launch your own delivery fleet. The site also promises to be your first – and, possibly, only – customer. A delivery fleet owner with 20 to 40 vans can potentially earn $300,000 a year, Amazon says.

"Individual owners can build their business knowing they will have delivery volume from Amazon, access to the company's sophisticated delivery technology, hands-on training, and discounts on a suite of assets and services, including vehicle leases and comprehensive insurance," Amazon said in a press release Thursday.

The catch? There's no guarantee that you'll make a $300,000 profit – or any profit, for that matter. In fact, you may be able to earn more on an hourly basis by simply delivering packages on your own, without investing the time and money required to start your own enterprise.

The costs of working with Amazon are so substantial that independent delivery companies are increasingly turning away Amazon's business, says Peter Schlactus, co-founder of the Association for Delivery Drivers. The reason: Amazon requires that delivery companies hire their drivers as employees, rather than work with independent contractors.

"The challenges of doing delivery work for Amazon have taken many dozens of delivery owners by surprise," Schlactus says. "My read is that Amazon is doing this to address a dwindling supply of independent delivery companies who are willing and able to work with them."

Why is Amazon's requirement that you hire, rather than contract with, drivers so onerous? Because it subjects the delivery company to a wide array of expenses, from employment taxes, workers compensation and unemployment insurance levies, as well as to substantial additional liability.

"If an independent contractor gets into an accident, they cover the damages and liability from their own insurance," says Schlactus. "If they are your employee, you are liable."

Worse, he says, if your van is emblazoned with an Amazon logo, it may put a target on your back.

"When people see a major company's logo on your van, they won't hesitate to make a claim and to make a claim more aggressively than if they think they are dealing with a small business with limited resources," he says.

Then, too, to make the kind of money Amazon is talking about requires an extraordinary amount of work. You've got to find 20 to 40 fit and responsible individuals with good driving records to operate your vans, do background checks and process employment paperwork and then manage the mind-boggling job of scheduling not only their time, but the delivery of thousands of packages per month within tight allotted time frames.

"It is a 24/7 management commitment," he says. "It would be interesting to see what your pay would work out to on an hourly basis."

That said, Schlactus says there's never been a better time to be a delivery driver or operate a delivery business. Because more sales are happening online and more companies are trying to compete on service as well as sales, delivery drivers are in high demand.

"There is a shortage of commercial drivers, which means they can command better terms and better conditions than any time in recent memory," he adds.

Solo delivery drivers can earn $30,000 to $50,000 annually with nothing more than a passenger car, he says. If you have a van, you can earn twice as much.

Notably, you can even drive for Amazon without starting a business. Amazon Flex hires independent contractors to deliver packages and pays between $18 and $25 per hour, according to job rating and review site SideHusl.com. 

As for Amazon's offer, Schlactus says: "My advice would be to approach this cautiously. Do your homework. Plug into trade associations, such as ours and the Customized Logistics and Delivery Association, and talk to people. Many current and former Amazon service providers belong and can tell you what it's like."