Exclusive: Amazon expanding deliveries by its 'on-demand' drivers

Wed Feb 17, 2016 7:36pm EST
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By Mari Saito

SAN FRANCISCO (Reuters) - Amazon.com Inc (AMZN.O: Quote) is quietly inviting drivers for its new "on-demand" delivery service to handle its standard packages, as the online retailer known for low prices and razor-thin profit margins looks to speed up delivery times and tamp down its growing multi-billion dollar logistics bill.

The move, which has not been announced publicly, is the latest sign that the world's biggest e-commerce company wants to control more of its own deliveries. Media reports have said the company plans to lease its own fleet of jets, and CEO Jeff Bezos eventually wants to use drones to get packages to customers.

Amazon outlined details of its latest plan over the last few weeks in an email to contract drivers who deliver parcels for Amazon Flex, a program launched last year to handle speedy deliveries of common household goods to customers using Prime Now, a mobile app that comes with Amazon's popular $99-a-year Prime membership. They are not Amazon employees.

If the gambit works, industry analysts said it could help Amazon contain its shipping costs, which grew more than 18 percent to $11.5 billion last year.

It might also create a logistics network to compete with United Parcel Service Inc (UPS.N: Quote), FedEx Corp (FDX.N: Quote) and the patchwork of local carriers which currently deliver Amazon packages.

An Amazon spokeswoman confirmed on Wednesday that Flex drivers in Texas are already delivering Amazon.com packages and not just Prime Now orders. The Seattle-based company did not go into details of its plans, but said it will "explore new ways to provide customers with faster service and delivery partners with more opportunities."

In a recent earnings call, an Amazon executive said the company was not trying to replace partner carriers but rather find ways to handle more of its own deliveries at peak times.

Amazon Flex works like on-demand ride-hailing service Uber. Drivers use the app to sign up for shifts to pick up packages at small warehouses near metropolitan areas - as opposed to Amazon's massive fulfillment centers - and deliver them to customers' doors. The program is now available in 14 cities including Seattle, Las Vegas, Phoenix, and Dallas.   Continued...

Amazon boxes are seen stacked for delivery in the Manhattan borough of New York City, January 29, 2016. REUTERS/Mike Segar