Amazon has rapidly expanded its internal shipping services as the company shifts toward one-day delivery shipping from its default two-day shipping service. The company is pledging to spend $800 million this quarter to achieve one-day delivery as the default shipping option for all prime members. But this planned growth has incited concerns from workers, contract delivery carriers, and logistics analysts over how Amazon is seeking to dominate another sector of the economy.
“Jeff Bezos wants Amazon to be the core infrastructure on which everyone depends, and then use this power to exclude competitors and privilege his own businesses,” said Matthew Stoller, a fellow at the anti-monopoly non-profit Open Markets Institute, on Amazon’s business model. “He doesn’t seek to run a business, but to govern all commerce.”
Stacy Mitchell, co-director of the non-profit advocacy group Institute for Local Self Reliance, added, “This is essentially a company that’s set out to be and own the infrastructure for 21st century commerce and the shipping is another piece of that.” She cited Amazon’s current relationships with manufacturers and retailers enable it to have leverage in compelling the same businesses to use its shipping services.
This quest for dominance furthers concerns over the economic power Amazon exerts over its workers, its competitors, and the foundations of the online retail marketplace as a whole.
Last-mile delivery
The existing shipping infrastructure owned by Amazon already includes ocean shipping licenses from China to the U.S, a recently launched shipping trucking brokerage platform, and last-mile gig delivery operations such as Amazon Flex services, Amazon Fresh, Prime Now, Shipping with Amazon, and food delivery services primarily conducted by independent contractors.
Shortly after Amazon announced plans in April 2019 to expedite shipping to customers, Amazon announced incentives of $10,000 and three months salary for current employees to quit and start up their own package delivery service in partnership with the company’s delivery service partner program.
“Amazon, by not employing the small business owners directly, has a lot of leverage over them,” said Mitchell, who noted that Amazon’s use of independent contractors is undercutting unionized, higher paid workforces at UPS and the United States Postal Service. “It’s not an independent business. You can only use those Amazon trucks to do Amazon delivery. Your only client is Amazon. It’s a way for Amazon to get this work done at an arm’s length with the contractor relationship.” (After publication Amazon asked us to clarify that they are legally an independent business.)
Many of those independent contractors who have driven for divisions of Amazon delivery services have already experienced the negative impacts of Amazon’s leverage over independent contractors completely reliant on them for business.
Several contractors around the United States are advertising jobs to deliver for Amazon that list wages lower than $15 an hour, despite Amazon setting a $15 minimum wage last year for all employees, including seasonal and workers hired through temp agencies.
A former driver for an Amazon delivery contractor in New Jersey noted many of the jobs that list hourly wages of $15 an hour or more are often much less. The driver noted the contractor paid workers a flat rate per day and regardless of the hours worked, the daily pay rate always stayed the same. Current job listings for contractors delivering Amazon products cite daily pay rates and note “your wage is up to you!”
In 2016, Vanessa Boggs started working as an Amazon Flex driver in Tampa, Florida, when the service was first introduced to the region. She explained when the flex service first started, drivers received $18 an hour plus tips. Since then, along with the reported absorption of the tips towards drivers’ base pay, Boggs felt that there were myriad reasons why the work opportunity became less advantageous.
“I loved driving when I did the two hour prime deliveries. But as they hired on more people, it became harder to get work. I had to pay to get someone to get me shifts,” Boggs said. Then the tips were taken away by Amazon, and Amazon began shifting work from delivery restaurant orders to delivery larger loads of Amazon products. She quit in early 2018, as the lack of tips, longer routes, and larger delivery loads made it untenable to continue driving. “Amazon doesn’t take care of their drivers. We didn’t care too much when the station first opened because we made our money, but then they started screwing us little by little.”
In Seattle, Washington, Philip Hasten stopped driving for Amazon a few months ago after about a year because the $18-an-hour wage wasn’t enough to offset the driving expenses of gas, and wear and tear on his vehicle. “Last time I delivered I made $9 an hour,” he said. “The wear on my car was excessive and they don’t help you do repairs.”
Amazon Air
As Amazon has continued to expand its last-mile delivery services, it’s also focusing on growing air cargo services, Amazon Air, to reduce its reliance on third-party carriers such as UPS, Fedex, and the United States Postal Service. FedEx recently declined to renew their shipping contract with Amazon. According to a Morgan Stanley report in December 2018, Amazon could save between $1 to $2 billion in 2019 as a result of handling more of its own air deliveries.
In April 2019, Amazon broke ground on the construction of a $1.5 billion air hub at Cincinnati/Northern Kentucky International Airport, expected to open in 2021. The ceremony included featuring two different types of aircraft used by Amazon, but pilots for Amazon Air, that uses planes leased and operated by Atlas Air, Southern Air, and Air Transport Services Group, argue they’re being shut out of Amazon’s growth as they work to negotiate a new union contract.
“We want to see Amazon Prime Air succeed, we just want to be a part of that success. Up to this point, we feel shut out of the entire process,” said Captain Michael Russo, a pilot at Atlas Air for 15 years. Amazon Air pilots are represented by APA Teamsters Local 1224, which has called on the contractors to negotiate a new union contract to address concerns over low pay and working conditions. “We keep trying to engage the company to negotiate a fair contract so we can recruit enough qualified pilots to continue the expansion Amazon wants, yet the negotiation process continues to be stonewalled. We don’t understand how Atlas Air can serve a really big, important customer like Amazon and not include pilots in that process.”
Atlas Air pilot of nearly 20 years, Captain Bob Kirchner, cited that the contractor is expected to increase the number of aircraft for Amazon Air from 24 to 44 planes over the next year.
“Our competitors, who pay 60 percent or more, who have better working conditions and retirement plans, are taking away many of the experienced pilots at Atlas and its creating real stresses in the business,” Kirchner said. “Because the airline is not growing and people are leaving, we feel these are unachievable numbers right now. Unless they come in and fix it, we feel that Amazon is putting so much pressure on contractors, driving the cost down and putting financial pressure on them its becoming a safety problem.”
An Amazon spokesperson told me in an email, “We are disappointed with the current state of relations between Atlas and their pilot union. Neither side seems willing to work towards a reasonable compromise. This is contrary to the interests of Atlas, the pilots, and the customers they both serve.”
The pilots launched a website, PilotsDeserveBetter.org and have held several protests near the Amazon hub construction site to push their contract carriers to improve working conditions to meet Amazon Air’s expansion.
Ocean and trucking freight services
Amazon first acquired a license from the Federal Maritime Commission to transport goods from China to the United States in 2016, and have since taken steps towards controlling their whole supply chain.
From Amazon’s purchasing power to its widespread network of distribution centers, Amazon has significant advantages over competitors as it seeks to grow its shipping and logistics network.
Steve Ferreira, the CEO of Ocean Audit, recently noticed Amazon frontloaded its shipments from China to avoid paying tariffs raised by President Trump last month.
“Amazon tactically ordered 4 to 5 times it’s normal order pattern of the items it sells on Amazon.com, and imported them ahead of the Trump tariffs so that it can avoid having to pay the extra China tariff/duties that most customers, that don’t have the buying power or distribution space,” said Ferreira in an email. He noted Amazon now has the option to either pass the savings onto customers or sell those products at higher profits.
Rather than owning ships themselves, Amazon has contracts with steamship lines to transfer goods and sells freight space to their customers, similar to their air cargo services and the trucking freight brokerage platform they launched earlier this year. XPO Logistics, one of the largest logistics companies in the United States, estimated a revenue loss of $600 million in the coming year as Amazon is insourcing the majority of its business with the company.
“Their goal is to create the ‘world’s most customer-centric company’—what better way to do this than to control their supply chain,” Cathy Roberson, founder of Atlanta based Logistics Trends & Insights, told me in an email. “I believe they will always have a need for their logistics partners and will not drop them entirely. However, because of the volumes, Amazon likely commands big discounts on shipping costs. How many of their logistics partners will be willing to do this is hard to say.”
How shipping expansion will impact Whole Foods and Amazon warehouses
Other sectors in Amazon’s business have felt the squeeze to increase the company’s market share. At Whole Foods, which Amazon acquired in 2017, changes to expedite shipping services are kept under tight wraps by management, though workers have reported store space has increasingly become focused on Amazon Prime business.
An anonymous Whole Foods worker in the Pacific Northwest who has worked for the company for several years explained the grocery store chain has shifted into a retail outpost for Amazon to push online sales and prime memberships. They provided a photo of a new Amazon kiosk, which are being constructed at several stores around their region. Amazon declined to provide further information on Amazon’s plan to expand prime services at Whole Foods.
A spokesperson for Amazon told me in an email, “We’ve been able to expand the Prime 1 day offering because we’ve built our network over 20 years powered by incredible employees and state-of-the-art technology like Amazon Robotics to supercharge fast delivery, increase efficiency, lower prices and improve workplaces around the world.”
At Amazon fulfillment centers, where workers over the past few years have reported widespread abuses and robotic, inhumane working conditions, it remains unclear how faster and insourced shipping services will impact warehouse workers, but labor unions and workers have criticized Amazon for working to expedite shipping without addressing working conditions.
“As soon as we clock in, we’re pushing our bodies and minds to the limit on these machines, feeling like robots a lot of the time getting the stuff out,” said William Stolz, a picker who gathers products for orders at an Amazon fulfillment center in Minneapolis, Minnesota who has worked there for about two years. “Amazon’s working conditions have to change if they’re going to actually start treating us like human beings with dignity. A lot of the jobs they have are still temporary. We want Amazon to provide safe and reliable jobs. Right now it’s not the case.”
Updated 06/21/2019 5:50pm: An Amazon spokesperson sent the following statement regarding the impact of one-day shipping on associates in Whole Foods and Amazon warehouses: “Increasing delivery speeds for customers did not change any individual performance expectations for associates in our Fulfillment and Delivery operations.” On working conditions, an Amazon spokesperson sent the following statement: “We don’t recognize these allegations as an accurate portrayal of working in our buildings. Amazon is proud to have created thousands of roles – these are good jobs with highly competitive pay and full benefits. One of the reasons we’ve been able to attract so many people to join us is that our number one priority is to ensure a positive and safe working environment. We encourage anyone to come see for themselves what it’s like to work at an Amazon fulfillment center by taking a tour.”
Corrections: Amazon has not eliminated the use of third parties in their shipping supply chain as previously stated, but have taken steps to further control it. After the publication of this article, Amazon stated that they do not “lease” space on ships but that they “have contracts” with freight services.
Michael Sainato is a journalist based in Gainesville, Florida. Follow him on Twitter @MSainat1.