https://www.vice.com/en/article/wxdbnw/i-had-nothing-to-my-name- amazon-delivery-companies-are-being-crushed-by-debt

‘I Had Nothing to My Name’: Amazon Delivery Companies Are Being
Crushed by Debt

On the Clock is Motherboard's reporting on the organized labor
movement, gig work, automation, and the future of work.

One afternoon last July, Jim, an Amazon delivery contractor in Boston
who operated a fleet of 30 Amazon vans, received a call out of the
blue from Amazon’s corporate offices in Seattle. The caller, who
identified themselves as a representative from the Amazon Network
Health group, informed Jim that Amazon was terminating his contract to
deliver packages, in effect closing his business.

“There were no rumors, no business coach saying, ‘Hey you need to plan
for this.’ Nothing,” Jim, who asked to remain anonymous because he
wants to stay in the delivery business and fears retaliation from
future clients, told Motherboard. “This would be like someone walking
into your business and shutting it down and saying we don’t care, you
can sue us. I am a pimple on the butt of an elephant when it comes to
Amazon.”

Sixteen months earlier, in March 2020, Jim had packed up his life in
the Midwest, said goodbye to his wife, four kids, and dog, and headed
east with his two oldest sons to open a last-mile delivery company in
an Amazon delivery station in downtown Boston. (Typically, a handful
of contractors operate their businesses out of Amazon’s last-mile
delivery stations, the company’s smallest style of warehouse.)
Amazon’s Delivery Service Partner program advertises on its website
that its partners can expect to make up to $300,000 in annual profit
with as little as $10,000 start-up investment. Jim came to the program
with an MBA and nearly 20 years of experience working in the Midwest
for the package delivery company Airborne Express, later acquired by
DHL.

“My sons and I went to follow the American Dream to be a small
business,” he said of his decision to start an Amazon delivery
company. “I took a leap with Amazon,” he said, noting how he’d
educated himself about the program by visiting his local delivery
station, and going to trainings and ride-alongs at an Amazon
warehouse.

Getting his bearings on running a parcel delivery service in a new
city during the height of the pandemic came with logistical
challenges. Jim launched his business as Boston descended into a
COVID-19 lockdown, and demand for Amazon deliveries skyrocketed.
Adding to the complications, Amazon required all packages in the city
of Boston to be hand=delivered to the customer, staffed mailroom, or receptionist, or else the driver would receive an infraction.
“Basically we were risking our own lives to deliver Amazon packages.
In most places, you are able to go to a front door, take a photo, mark
it delivered, and leave. In the city of Boston, if a driver did not
give it to a person, he was written up. It took a lot of extra time to
contact the customer, wait, and redeliver. We delivered 3 million
packages that year.” Amazon delivery companies can lose money from
both undelivered packages and packages not delivered to a person. “We
were damned if we delivered, damned if we didn’t,” he said. Still, Jim
passed his yearly audit with flying colors, according to documentation
reviewed by Motherboard.

Sixteen months later, after Jim received the call giving him two
weeks' notice for him to wind down operations, he notified his staff,
mostly drivers who earn close to Boston’s minimum wage, that he had to
let them go. “I went one day and said, ‘We’re done.’ These guys are
still contacting me about their W2s and telling me they’re still
trying to find work. They had families, they trusted me. How can you
treat people that way?”

Jim sent me a payroll spreadsheet listing all 86 of his employees that
became unemployed when Amazon shut down the business. "They and their
families suffered and continue to suffer,” he said.

Do you have a tip to share with us about Amazon’s delivery service
partner program? Please get in touch with the reporter Lauren Kaori
Gurley via email lauren.gurley@vice.com or securely on Signal 201-897-
2109.

Jim is now facing bankruptcy, a destroyed credit score because he
can’t make payments, and losing his house. Motherboard spoke to three
other Amazon delivery-service partner owners in California, Georgia,
and Oregon who said that Amazon’s delivery service partner program had
depleted their life savings during the pandemic, and thrown them into
tens, or in some cases, hundreds of thousands of dollars worth of
debt. All of the delivery-service partner owners asked to remain
anonymous because they feared speaking publicly about the significant
unpaid debts that they've accumulated. Others wanted to stay in the
delivery business and thought telling their story would make it
difficult to find new clients. Two owners quit the program because
they had amassed so many expenses that it was no longer profitable to
continue.

During the time that the owners Motherboard spoke to were cut or
struggled to stay afloat, Amazon profited massively. Amazon’s profits
hit an all-time record in 2020, and soared 220 percent in the first
quarter of 2021.

Meanwhile, screenshots obtained by Motherboard of messages from delivery-service partner owners on Ignite, Amazon’s delivery service
partner app, reveal widespread anger and despair over the mounting
cost of van repairs during the past year, for example. Amazon
advertises the delivery service partner program as an opportunity for
those without significant capital to invest to run their own business,
yet once launched, business owners become wholly beholden to Amazon
and in a precarious financial position. Amazon is currently facing a
$15 million lawsuit from two of its former Portland delivery partners
that shuttered last year because they “were losing money and employees
trying to satisfy Amazon and their constant changes.” The lawsuit
alleged that Amazon "controlled nearly every aspect" of two Portland
delivery companies' businesses.

Amazon did not respond to two requests for comment for this article
and a series of questions about how it decides to terminate the
contracts of its delivery service partner owners.

When I spoke to Jim on the phone in February, he tallied his debts. He
owes $350 a month for a two-year lease on a parking spot and $1,800 a
month for the apartment in Boston. He owes $3,200 a month for a five-
year lease for the parking lot for his Amazon delivery vans and $1,200
a month for the office space where he ran his company. He signed and
extended these leases because he had passed all of his annual Amazon
audits. He had even received a trophy and note from Amazon
congratulating his team for delivering 3 million packages that year.
(Amazon conducts annual comprehensive audits, or reviews, of its
delivery companies—everything from payroll to insurance claims to van inspections to drug testing, in addition to periodic audits that can
occur anytime about any aspect of its delivery-service partners’
business without warning.)

But Jim’s biggest expenses are for workers’ compensation claims,
leases on his vans, and van damages. He owes $23,996 for workers comp
claims, according to a letter from his insurance provider. He has yet
to receive an assessment for damages on his fleet of delivery vans,
often the largest expense for Amazon delivery-service partner owners.

“It was horrible, absolutely devastating,” Jim said about Amazon’s
termination of his contract, noting that Amazon did not tell him why
it ended his contract. (Motherboard obtained the separation agreement
that Amazon gave Jim, which promises $10,000 if delivery service
partners agree to all of its terms including an NDA.) “They didn’t
explain anything. They just strong-armed me. I’m humiliated and
embarrassed. We were working seven days a week. We never took any
salary or pay. We left it in the business.”

The stress of working with and losing his contract with Amazon, he
says, has likely taken a toll on his health. In November, he was
diagnosed with a heart condition. “I didn’t have one before I moved to
Boston. But now I have it and have to take medication,” he said.
“Could you imagine how depressing it is to get fired when you think
you’re doing great and making big plans and there’s no recourse you
can take?”

“Everyone in my station had issues making any money. ‘We’re bleeding’
is the common term that was used. It means we’re dying. We’re not
making money. We’re in the red,” one delivery service partner owner in
Atlanta, a 62-year-old African American veteran, who opened her
business in October 2020 and exited the program last August, told
Motherboard.

All four owners told stories about Amazon’s unilateral ability to
control nearly every aspect of their businesses, from Amazon’s audits
to payroll to the weightings on the scorecards that determined their profitability to their route assignments to companies that do
inspections and assess damages on their vans. They all also said that
Amazon’s ability to change the rules on a whim, and place the vast
majority of the liability for their operations on the delivery service partners, made it impossible to survive or make money as a business.

In 2018, Amazon debuted its Delivery Service Partner program,
advertising the program as an opportunity for “aspiring entrepreneurs”
to build small businesses using Amazon’s technology, processes, and
decades of experience in logistics. The program offers special
incentives for veterans, Black, Latinx, and Native American owners.
The tagline is “Own Your Success.” In addition to annual profit of
$75,000 to $300,000, the brochure for the program says that
“successful” delivery companies can expect $1 million to $4.5 million
a year in revenue.

At the same time, this program has allowed Amazon to reduce its
reliance on UPS and the U.S. Postal Service, and speed up delivery
times for Prime customers by running operations around the clock. Its
reliance on small, tightly controlled contractors has allowed Amazon
to increase the speed at which customers receive their orders but
without taking on the enormous liabilities of parcel delivery, which
include accidents, injuries, van damage, and upkeep. Instead those
liabilities are placed on small business owners, who are responsible
for their drivers and the maintenance of their fleet of delivery vans.

In April 2020, Randy, a former delivery service partner from Boise,
Idaho, sold his house and relocated his wife and two daughters to
Portland, Oregon, to start Red Horse Logistics, a delivery company out
of an Amazon warehouse in the foothills outside downtown Portland.
Randy had had a positive experience working in an Amazon delivery
station as a shift assistant and was impressed by the company. He
would have preferred to stay in Idaho, though, where he’d spent his
whole life, but Amazon said he could wait six to 12 years for a spot
in Idaho, whereas Portland had an available opportunity.

A few months after he moved to Portland, Amazon asked Randy to move
his business to another Amazon delivery station 13 miles away on the
Willamette River. “They said, ‘If you transfer, you can make more
money. You’ll have a bigger team, more vans, more money,'"' he said.
So he moved, but Amazon continued to make changes that he felt he had
no control over that hurt his performance.

“Starting one day, all your routes could be in a different town. When
I started, all my routes were in the suburbs; then one day, they’re
like, ‘All your routes are in a very busy part of northern Portland.
You have to adapt. There’s nothing you can do.” Another time, Randy
was audited by Amazon for his drug-testing process. (Amazon requires
all delivery service partners to periodically drug test their drivers
and send in the results to Amazon). Randy had used the same drug test
provider recommended by other delivery service partners in his
building, but one day, Amazon sent him a breach of contract letter
threatening to end his contract because his drug tests did not show
individual negative results, only positive ones. “They said this
policy has changed. As of now, you’re in breach of contract. And I
said ‘How was I supposed to know if you didn’t notify me,?’ and there
was no explanation of how you could avoid this in the future,” he
said. “The problem is this program is considered a partnership, not a dictatorship.”

Randy’s delivery service company didn’t always have the best
performance metrics of his station, but when it came time for his
annual audit, his Amazon business coach—all delivery service partners
have access to a coach from Amazon who provides advice on how operate
and scale up a delivery business—told him “there’s no way you’re not
getting your contract renewal.” A performance summary for the first
three quarters of 2021 said that his average “Team Tier” was
“fantastic.” Amazon periodically rates its delivery companies on a
scale from “poor” to “fantastic plus.”

But in February 2021, Randy got an email from a senior regional
manager asking for a 15-minute phone call.

“A woman named Stacy said, ‘Hey you have 30 days to shut down
operations and you can’t tell your drivers for two weeks.’ They said
they’d pay me $10,000 to sign an NDA.” The call only lasted five
minutes, and Randy said he was offered no explanation for why Amazon
was shutting down his business. Motherboard obtained a copy of the NDA
titled “separation agreement” that includes a “transition plan” with a
full script for how business owners should break the news to drivers.
Amazon’s script begins: “Thank you everyone for meeting today. The
purpose of this meeting is that I wanted to announce to you today that
the business relationship between the Company and Amazon will end on
[Amazon's determined date.] I know this news may be upsetting to you,
but my goal today is to be available to answer any questions.” The
agreement goes on to say that Amazon has the “sole discretion to
determine the content of the communications that the delivery company
has with workers about the termination.”

After the call, Randy was immediately cut off from Amazon's Ignite
platform, an app which allows delivery service partners to communicate
and raise questions, even though he still had 30 days left at Amazon.
He refused to sign the NDA, and soon told his more than 50 employees
that they would all lose their jobs and contacted a bankruptcy
attorney.

Since receiving that phone call, Randy has depleted his life’s savings
of $80,000 paying out his drivers’ vacation time and other expenses.
His conservative estimate is that he still owes $90,000 for van
damages, workers’ compensation, health insurance for his employees,
and rent on an office in nearby Vancouver, Washington. A recent
invoice from Element, Amazon’s fleet management company, shows he owes
$34,120 for van damages. “Before this, I had $80,000 in my personal
account. I now have zero after all the bills I’ve paid. My business
account is completely drained. We had to sell personal cars, downrate everything to make it back here [to Idaho].” The fallout of losing his
company and employees brought on “a pretty dark six months of anger
and depression,” he said.

A former Amazon delivery service partner's account statement for
Amazon van leases from Element Fleet Corporation, Amazon's fleet
management provider, from 2021.

“Getting this contract ripped out completely bankrupted me,” he said.
“I had nothing to my name after I moved back. If I have to file for
bankruptcy, they can come after my credit, my vehicles. I couldn’t get
a loan on a car or buy a house.”

Amazon pays its delivery companies roughly 10 cents per package
delivered, roughly $150 per day per route, and covers the cost of gas
with additional bonuses of roughly 15 cents per package for achieving
the highest performance metrics. (These numbers vary regionally across
the United States based on the cost of doing business.) Amazon does
not reimburse delivery service partners for expenses such as insurance
claims, overtime pay, tows and repairs, leases on vans, van damages,
workers’ compensation claims, office space, parking, parking and
traffic tickets, labor costs for recruiters and dispatchers. Van
damages are among the steepest of these costs, and often exceed
$100,000 a year, delivery service company owners said.

Screenshots obtained by Motherboard from Ignite, Amazon’s internal
community platform for delivery service partner owners, suggests that
Amazon’s small business owners around the country are experiencing
widespread financial distress due to the cost of repairs for van
damages that Amazon offloads onto them.

“I spent $33,000 on damages on 20 vans before…but Element is ‘HELPING’
me out by giving me 90 days to pay the bill, starting July 20. But hey
‘that’s the cost of doing business’!” a delivery service partner wrote
on June 22.

“Please fix this ASAP. This process ruined a family relationship. Post
peak 2019 we had to give back 24 Vans on short notice. My younger
brother got them fixed and the cost exceeded $125k….Fast forward to
Monday and I get a bill from Element. $30k for damages on 14
vans…..I’ve championed this program to many people. I’ve pitched it to
former Pro Athletes. Have been a personal sounding board for others.
In theory this program is awesome. Theory is not reality. And we need
some major changes to the Fleet process,” wrote another delivery
company owner.

“I turned in a total of 47 Vans but I’ve only received an invoice for
38 of them averaging $7,000 per van. I’m estimating a total of
$336,000 after the Amazon discount,” another owner wrote on June 22.

According to a confidential 25-page guide obtained by Motherboard that
defines “wear and tear” on Amazon vans, Amazon charges delivery
service partner owners for “excess damages,” but not normal wear and
tear on vehicles. ‘The definitions change based on the location and
visibility of the damage. We do this to ensure a high brand image and
not repair damage that isn’t visible or doesn’t impact safety,” the
guide says.

Three delivery service partner owners told Motherboard that despite
this guide’s existence, Amazon frequently charges its delivery service
partners for damages, such as replacing car doors or ripped seats,
that occur because of heavy, repeated use of the van.

For some Amazon delivery companies, the burden of these expenses means
that they’re operating at a loss. And in cases, where Amazon does want
to renew contracts, some business owners voluntarily exit the program
rather than take on more debt.

Such was the case with Angela, a 62-year-old Amazon delivery company
owner in Atlanta and a vet who served in the army for 24 years as a logistician—experience she thought would come in handy in last-mile
delivery. She launched her Amazon delivery station in October 2020,
but could not scale up to enough routes to make her business
profitable. As is typical, Amazon started her out with five routes,
then increased to 10 or 15 routes per day, but despite promising over
20 routes, she never was offered that many. (Amazon’s website says in
fine print that turning a profit of $70,000 to $300,000 a year is
based on the assumption that delivery companies run 20 to 40 routes a
day.) “My average was 10 to 12 routes a day,” she said. “But there’s
no way you can be profitable running less than 20 routes. Even with 20
you can’t be profitable. Imagine running with half of that.”

Angela shut down her business in October 2021 because she saw herself
falling deeper and deeper into debt. According to an invoice, she
currently owes $64,465 for damages on 20 Ford Transit vans.

A former Amazon delivery service partner owner's invoice for van
damages from an Amazon fleet management provider from February 2022.

When asked whether she could pay off these debts, Angela said, “Hell
no, I won’t be okay. I don’t have $64,000. I have been totally in a
state of depression from the time I left there. I’m the kind of person
who always has an excellent credit rating, pays every bill. I’m in
counseling for anxiety and depression. I’ve gone through divorce, been
a single parent, a vet, and never had to file bankruptcy. Now to think
I might have to do that weighs on me very heavily.”

Sam, a former Amazon delivery service partner with decades of
experience working at Silicon Valley tech companies, shuttered their
business in September based out of an Amazon delivery station in San
Francisco. They told Motherboard that their business was profitable
when they started in 2019, but as Amazon’s system for scoring delivery
service partners got more and more complex and their routes longer and
higher volume, making California’s law requiring businesses pay
workers overtime after eight hours of work kick in, they no longer had
a cashline to cover all of their costs. During the pandemic and
wildfire season, routes would take drivers more than 10 hours. Routes
that started later in the day, due to a change in scheduling known as “megacycle” meant drivers were on the road after dark and getting into
more accidents. It also meant hiring more dispatchers. “We had to get
tow trucks that cost $400 to $600, there goes all day's profit,” they
said.

In the end, Sam says they quit because “it wasn’t sustainable or worth
the amount of risk. One bad accident or a few major accidents could
wipe you out for an entire year. As an hourly employee, when the
routes got huge, you needed to be a robot. That’s not fair or fun.
Same for the owner, you didn’t have room to decide. You couldn’t
afford to keep people safe if there were fires or have a say in the
matter. It’s not worth working that many hours to take that much risk
to make hardly anything.”

Sam said that although they exited the program to avoid mounting
expenses, they’re still in hundreds of thousands of dollars of debt
for workers compensation insurance, van damages, and forfeiting $1,000
deposits on 27 vans. They worry that they’ll lose their house if they
have to file for bankruptcy when the leasing company and insurance
come for their claims.

“The sad thing is we were one of the top performing delivery service
partners in the station,” they said. “It’s not like we had bad
drivers, we had really good scorecards. We hit our metrics. We just
couldn’t afford to be out there for 10 hours. That comes straight out
of your pocket. I’m pretty devastated after having worked so hard and
scaled so quickly.”

Randy and Jim both suspect they had their contracts cut because Amazon
had opened too many delivery service partners in their delivery
stations and wanted to scale back and lacked the incentive to keep
contractors in business.

“I think what Amazon did is they went under contract with too many
DSPs, and they had to shut down my delivery station,” said Randy.
“Suddenly they were like ‘oh my gosh, we need to cut people’ and my
contract date was coming up. And they were like ok let’s trim the fat.
What more of a slap in the face when you do everything they ask you
to, and then they say goodbye.”

“I was ‘fantastic plus’ [Amazon’s highest rating.] I was robbing the
bank but they opened too many DSPs in my station,” said Jim. “The
public views Amazon as a tech genius but they’re so centralized that
they don’t understand that kind of problem. Amazon could care less
about me as a family run business and that won’t stop until customers
stop buying or they get sued.” Amazon gives its delivery service
partners a weekly scorecard that ranks delivery companies on dozens of
safety and performance metrics and determines whether they receive
bonuses that are key to being profitable. Jim provided Motherboard
with a scorecard from 2021 where his team had received a “fantastic
plus” rating.

“I hope that it gets out to enough people that they don’t end up in
the same position as us,” said Randy, the Amazon delivery company
owner in Portland. “The reality is it’s not about money. It’s exposing
corrupt corporate America picking on little guys kind-of-deal that was
pretty eye opening for me. From the second you launch and sign a
contract, you get in line and follow orders. If you don’t, you’re
gone. Everything is a threat.”

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