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Amazon offers employees incentives to quit … and start delivery businesses

Boxes move along a conveyor belt at an Amazon fulfillment center.

More than half the products sold on Amazon come from smaller companies. Justin Sullivan/Getty Images

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In its ongoing effort to build a more robust package delivery network, Amazon said Monday it will offer incentives to current employees to quit their jobs and start their own delivery businesses. The company is offering $10,000 in startup costs, plus three months’ salary.

Big appetite for shipping

As Amazon grows, it is delivering a lot more packages, and has pledged to get them to Prime customers faster. The company needs to reduce dependence on outside shippers like FedEx and UPS.

“Basically what they are trying to do is disintermediate UPS for that final mile delivery,” said Bill Pearce, assistant dean at UC Berkeley’s Haas School of Business, “by establishing their own third-party logistics network that’s, frankly, beholden to Amazon.”

Some key advantages

About a year ago, Amazon started letting would-be entrepreneurs apply to launch independent Amazon delivery businesses. Now, it is extending the program to employees to grow its delivery network even more.

“Keep in mind, this person doesn’t show up at your cafeteria. This person doesn’t submit health care claims. This person doesn’t ever file a suit for wrongful termination,” said Scott Galloway, marketing professor at NYU.

Starting a delivery business isn’t easy

When Amazon launched its new delivery network about a year ago, it said startup costs for things like lawyers, accountants, and supplies would start at about $10,000. Dave Mawhinney, associate professor at Carnegie Mellon’s Tepper School of Business, said running a new logistics business, though, isn’t just about money, and won’t be easy.

“Information systems take many, many, many years to build up over time,” he said. “Even Uber, in its early days, had scores and scores of programmers developing these systems that they would iterate on and improve upon.”

Amazon declined to say how many employees it expects to make the transition from employee to delivery business owner.

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