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Amazon "On My Way" - disruptor or disaster?

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Amazon "On My Way" - disruptor or disaster?

Ian Kerr

Amazon is reportedly developing a mobile app that would pay members of the public to deliver goods.  Could this be the delivery world’s “Airbnb”?  Or is it just a publicity stunt?

Let’s take the proposal seriously. Post and parcel delivery companies have built up systems and expertise of decades – even centuries! What practical hurdles are there for a “sharing economy” service such as Amazon’s “On My Way”?

At the warehouse

Picture a typical delivery centre in the morning. Parcels being sorted, delivery drivers scanning parcels, parcels being loaded into vans, vans entering and leaving the yards.

Imagine the utter chaos as semi-professional drivers attempt to park, negotiate loading bays, pick up the right parcel, scan faulty barcodes with smartphones, and so on.

How will access to delivery docks be controlled? Will authorised drivers have ID? Will authentication by smartphone be sufficient?

Or will “On My Way” drivers only collect from retailers and never go near an Amazon distribution centre?

Even so, if multiple drivers have to collect from a retailer at the same time it would be like a queue of taxis at an airport during peak hour.

Insurance

A long-held concern of the insurance sector is that some commercial courier delivery contractors take private vehicle insurance rather than commercial vehicle insurance.

Private vehicle insurance costs much less than commercial vehicle insurance. When (because it’s not a matter of “if”) an “On My Way” driver has a serious accident while delivering a parcel, what will happen from an insurance perspective?

Failed first-time delivery

No matter what sophisticated systems are put in place, there will be a small percentage of failed deliveries. Inexperienced drivers might go to the wrong address. Drivers might get stuck in traffic. Then there’s the classic case of the customer being at home but not hearing the doorbell because they’re in the shower.

So what happens when the delivery fails? Where will the delivery be taken?  How will the driver be paid?

What happens if the driver stores the package at home overnight?

Fraud and theft

Will prospective “On My Way” delivery drivers be subject to any security screening?

What happens in the case of disputed deliveries, where the customer claims not to have received the delivery while the driver is adamant that the package was delivered?

How many times will an “On My Way” driver be able to pilfer a parcel before Amazon cottons on?

These are serious security issues that Amazon will need to overcome in order to ensure the trustworthiness of its delivery network. Customers will abandon Amazon if its delivery network becomes unreliable or untrustworthy.

Contractor status

Uber has recently faced a challenge to the status of its drivers.  This is nothing new – FedEx forked out $228m to settle a long-running independent contractor status case.

On what little information is available, it seems unlikely “On My Way” drivers would be classified as employees.

Tax

Some tax authorities are struggling for consistency when it comes to services in the “sharing economy” such as Airbnb and Uber. 

This year the Australian Tax Office announced that Uber drivers must register for GST (the Goods and Services Tax – a consumption tax like a VAT), while Airbnb hosts do not need to register for GST.

Under ATO rules, Airbnb hosts must declare income from renting properties, but the earnings will be classified as residential rents, which are exempt from GST.

In the US city of Philadelphia, Airbnb rentals are now subject to an 8.5% hotel tax.

How will tax authorities deal with independent drivers working for Amazon?

Customer acceptance

Will customers be prepared to accept delivery by their neighbours?  The answer is “probably yes”, going by the success of Royal Mail’s “Delivery to Neighbour” scheme.

If customers are prepared to trust their neighbours to receive parcels on their behalf, they will be prepared to accept delivery from their neighbour.

Conclusion

A service like “On My Way” will be a delivery option for Amazon customers. Customers will continue to make delivery choices based on cost, speed, trust and convenience.

There are many practical matters for Amazon to take into consideration before rolling out a “sharing economy” delivery service. These considerations aren’t insurmountable, but they need to be addressed well in advance of the service being launched.

Customers may accept the concept of delivery by a driver who isn’t in uniform and isn’t in a van with corporate livery, especially if it saves them money. However, customers invest a degree of trust in the fact that the delivery driver is in uniform, is wearing ID, and is driving a van with corporate livery.

Success will in part hinge upon the number of people who sign up to be drivers, and how often they make their services available.

Parcel delivery companies can’t be complacent in the face of competition. Small, nimble competitors are out there now, chasing a slice of the delivery market.