(Bloomberg) -- Three years ago, Amazon.com Inc. issued an invitation that seemed too good to pass up: Start your own company and earn as much as $300,000 a year delivering packages for the world’s largest online retailer.
The offer had strong appeal for would-be entrepreneurs. With an upfront investment of as little as $10,000, these new “delivery service partners” could have a fleet on the road in weeks. Amazon pledged to use its negotiating power to help the fledgling companies get better deals on vehicle insurance, classified ads and leases for its signature blue vans. Tens of thousands of people applied, eager to draft off of Amazon’s seemingly unstoppable growth. Today some 2,500 of these small businesses—captained by military vets, construction contractors, retired college professors—employ more than 150,000 drivers in the U.S. and around the world.
Ted Johnson was a typical recruit. He and his wife, Karen, moved from Illinois to New Hampshire, leased 80 vans and hired 160 drivers. A military veteran who served in Iraq and Afghanistan, Johnson was resourceful. He translated Amazon’s training materials into Spanish and hired non-English speakers to help address a labor shortage if Amazon was overwhelmed by demand. When his drivers had downtime, he paid them to make deliveries for a local food bank. Amazon was so impressed it sent him cameras to make a documentary about being a delivery partner.
But even as he congratulated himself on finding a second act he could call his own, Johnson, 56, was constantly torn between making money, meeting Amazon’s demands and treating his workers fairly. Ultimately, he was forced to shutter the business at a loss, the casualty of a system that Johnson said imposes unrealistic demands on the drivers who play a critical role in delivering packages to customers around the U.S.
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Johnson blames the machines and algorithms that manage the operation and ensure delivery service partners hit their marks. Video cameras, telematics devices and smartphone apps monitor drivers’ every move. Software dictates how many packages a driver should be able to deliver in a 10-hour shift, a number that keeps creeping up and can be difficult to meet. The system is designed to maximize efficiency and discourage hazardous behavior, such as texting while driving. But the algorithms often get things wrong, several delivery owners said, dinging drivers for offenses they didn’t commit. These demerits affect the report cards the delivery contractors receive each week. The lower the score, the less Amazon pays them.
Bloomberg interviewed 15 delivery partners and two lawyers representing them in disputes with Amazon. Most spoke on condition of anonymity for fear of retaliation from the company, and almost all corroborated Johnson’s account of unrealistic delivery expectations, buggy software and a dismissive attitude toward their concerns. The working conditions are so tough and unforgiving, they say, that their drivers have been known to abandon their package-laden vans on the first day of work and disappear.
“We were treated like robots,” Johnson said. “They’re so data-driven they don’t know how to treat people with dignity and respect.”
Amazon uses machines to oversee much of its global operation, including the online marketplace, fulfillment centers and its Flex network of gig delivery drivers. The company argues that automating these businesses is the only way it can manage an enterprise of such daunting scale and complexity. But if error-prone algorithms have marginal consequences for Amazon, they can be catastrophic for a small business owner who suddenly sees his or her income reduced or cut off entirely. Amazon is willing to accept a certain amount of collateral damage. After all, there are always new recruits ready to take the place of those who don’t measure up.
A few weeks ago, the Seattle-based company cut loose about 100 delivery partners, according to people familiar with the situation. Online forums where owners congregate erupted with anger and fear. Some delivery firms wondered how many infractions they were away from their own curtphone call telling them they’d been terminated. Others discussed ways of persuading Amazon to take their concerns more seriously. That seems unrealistic. In a message sent last month and reviewed by Bloomberg, an executive warned delivery contractors that, with the holiday season looming, drivers would be expected to handle more packages than ever.
In a statement, Amazon spokeswoman Alexandra Miller said: “As we grow, we don’t always get it right, and we are committed to seeking feedback to continue improving the DSP and driver experience. This year, we made more investments than ever before in new technology, process improvements and rate increases for the DSP program—and much of the changes we made were based on the feedback and input from partners. The majority of DSPs consistently out-pace our marketed profit expectations for the program, and this year we invested $700 million to support DSP rate increases, sign-on and retention bonuses and recruiting costs.” About 90% of Amazon delivery drivers complete their routes within the designated time and the average route has about 250 packages, according to Amazon.
Not all delivery firm owners are dissatisfied. Franco Ramos, introduced to Bloomberg by Amazon, started a delivery business three years ago in Denver, following a career in management consulting. Ramos, 48, said the surveillance system isn’t perfect but that the mistakes are negligible. Profits, he said, have exceeded Amazon's projections of as much as $300,000 a year.
“This has been life-changing and I’ve made a shit-ton of money,” said Ramos, who employs about 60 drivers and plans to hire an additional 30 for the holidays. “This is not a difficult business. You don’t even need a sales team. There are just packages, and you deliver them.”
Amazon unveiled the delivery partner program in 2018 to help reduce its reliance on United Parcel Service Inc. and the U.S. Postal Service. Since then, the operation has helped the company weather the pandemic and more than double revenue to a projected $476 billion this year. Maintaining a healthy system of independent delivery contractors will be critical to helping Amazon manage costs and fulfill its commitment to speedy delivery. The program was loosely modeled on FedEx Corp.’s network of independent contractors. Like FedEx, Amazon doesn’t directly employ the drivers but takes a more hands-on approach, closely monitoring their performance and reserving the right to have them fired when it deems necessary.
Devices installed in vans and apps on the drivers’ phones monitor their delivery performance and driving habits. The data, which the delivery firms are contractually obligated to share with Amazon, is converted into weekly report cards that measure things like on-road safety, delivery completion rate and customer experience. The score determines what Amazon pays the delivery firm per package, typically ranging from 10 cents to 25 cents. While the company pays an average of $425 per route per day to cover things like driver’s wages, payroll taxes, van leases, insurance and fuel, it’s the per package rate that often determines whether or not owners like Ted Johnson make money.
Amazon engineers have put heavy emphasis on “safety and compliance,” which is the first section on the weekly report card. Devices monitor speed, seat belt use, whether drivers have their eyes on the road, if they roll through stop signs and so forth. The problem, the delivery firms say, is that the software often detects unsafe driving when in fact the driver has done nothing wrong. False “distracted driving” alerts are a common occurrence and can be triggered by something as benign as a driver’s phone shaking when the van travels over rough terrain. Some smartphones are more likely to trigger alerts than others, and the delivery firms try to buy ones with the least sensitive sensors.
Amazon has been installing video cameras in delivery vans. They capture even more data and provide a video record of the driver in the cab and what’s happening on the road. Here, too, the algorithms sometimes misinterpret the data. “The camera will say someone was distracted, meaning they were on their phone, but we’ll go back to the video and they just sneezed,” one delivery partner said. “Or the camera says a driver ran a stop sign, but the video shows they made a right turn before they got to the stop sign.” In response to complaints about buggy cameras, Amazon in August introduced a feature letting delivery partners flag demerits that they think are mistakes. The company said it now reviews all of these and fixes scorecards when errors are confirmed.
These false positives add up and can seriously affect the weekly score card. Just a few mistakes, delivery partners say, can cost them $7,000 or more a week and mean the difference between turning a profit or losing money.
In a sense, Amazon has created a monitoring and rating system with mutually exclusive goals: delivering as many packages per hour as possible while doing so without causing accidents or breaking the law. The delivery contractors say the system’s architects have unreasonable expectations of how many packages a driver can deliver during a shift and fail to take into account how much real-world conditions vary from place to place. It takes much longer to deliver packages in a rural setting with gravel roads and long driveways during a snowstorm than it does in a manicured suburb on a flawless summer day.
Johnson said Amazon expected his drivers to deliver more than 30 packages an hour. His best drivers, whom he described as “industrial athletes,” could deliver about 25 packages an hour because terrain and weather slowed them down. When a driver couldn't finish in 10 hours, Johnson had to pick his poison. He could pay overtime that Amazon wouldn’t reimburse to complete the route or he could return undelivered packages to the station, which hurt his score and reduced how much Amazon would pay him.
Amazon’s engineering culture has hardwired executives to trust the software more than human beings, and when delivery firms try to dispute the algorithms’ errors, they say, the company takes note but typically declines to adjust their performance score. Johnson said he paid a lawyer to write letters to dispute the machine-generated grades, but said Amazon seldom over-rode an error and he gave up challenging false negatives. Another delivery partner said he has disputed false alerts about drivers not wearing a seat belt and showed Amazon video to prove the point but failed to persuade the company to correct his score card.
One delivery partner said a driver was bitten by a dog while making a delivery in a rural area with no cell reception. The driver sped to the hospital to have a deep puncture wound treated. The algorithm dinged the driver for speeding but Amazon declined to overturn the demerit, the delivery partner said. “They’ve made it increasingly difficult to dispute the computer-generated driver scorecard,” he said. “They know they can punish us with buggy software, and there’s nothing we can do.”
Leah Ranalli, 38, started her delivery business in Tucson, Arizona, three years ago and was invited by Amazon to speak for this story. Ranalli said she loves the freedom associated with being her own boss and said the money is far better than what she made running dialysis centers. She employs 90 drivers and has more than 40 vans.
Ranalli does have one gripe, saying that Amazon fails to differentiate between what a young athletic driver can do and what an older driver with bad knees can reasonably accomplish. And she echoed other delivery firms’ contention that the company fails to make allowances for rural areas with extreme weather.
One of her drivers is in his 20s, plays competitive soccer and runs from his van to doorsteps through much of his route. He wants to finish early so he can go home, she said, but then the algorithms see that and try to squeeze more packages on the next run.
“What Amazon needs to do is stop looking at everything from such a high level and have regional teams that understand regional concerns,” Ranalli said. “People in the ivory tower in Seattle don’t understand what drivers in the mud are experiencing or what the hiring market is like in Chicago. Unless they do that, there will be unrest.”
Amazon’s senior executives, including consumer and logistics chief Dave Clark, have been aware of such concerns since the program began, according to a person familiar with the matter. Rather than solve the issues, the person said, they kept pushing drivers to work harder and improve their metrics. Executives mostly had experience refining Amazon’s warehouses where weather, traffic jams and locked gates aren’t an issue, said the person, who requested anonymity to discuss an internal matter.
“The data would come in and say something had been planned for a 10-hour route and it took the driver 14 hours to complete,” this person said. “There were a few people on the team who were willing to dive in and try to figure out why. Was it weather, or a poor route, or a parade? No matter how much scrutiny you gave it and how many details you pointed out, the feeling at the top was ‘they’re just lazy, they’re not working hard enough.’”
Miller, the company spokesperson, disputed this characterization, saying: “Our leaders are proud of this program and regularly seek feedback from DSPs and drivers to measure to improve their experience. Anyone who says otherwise is speaking out of self-interest to discredit the program. The biggest challenge in developing a driver network is building great teams who understand their communities, and we think local small business owners do that best—they tap into their community to hire and develop great drivers, while the Delivery Service Partner program supports them with logistics experience, technology and services that help their business thrive.”
Tensions between Amazon and the delivery contractors began escalating earlier this year when they discovered that they could be terminated with no explanation. Many who saw their agreements extended for an additional year were angered that Amazon reduced their overall number of routes while adding new delivery partners with whom they’d be competing. They suspect Amazon would prefer to spread the work around to a greater number of smaller businesses so it can control and replace them more easily.
Johnson got a call from Amazon in February and was expecting congratulations for delivering so many packages during the holiday shopping season. Instead, he was told his contract wasn’t being renewed and that Amazon was under no obligation to tell him why. Johnson was gutted. Then he learned that a business that cost as little $10,000 to launch would cost a lot more to shut down. Johnson said he lost about $100,000 to pay for various costs, including covering damage to the leased vans because he said the algorithms underestimated the beating the vehicles would take—a common complaint among delivery firms.
Two delivery partners in Portland, Oregon, hit their breaking point in June and stopped making deliveries. Their attorney, Tom Rask, has since heard from several other firms and is helping them consider legal options. Amazon requires delivery contractors to agree to resolve all disputes through binding arbitration, a secretive process that precludes class-action lawsuits in public courts. Amazon offers delivery partners $10,000 to go away quietly as part of a separation agreement, one of which was reviewed by Bloomberg. Other delivery partners were able to negotiate bigger settlements of about $100,000, according to people familiar with the matter.
The pushback in Portland emboldened other delivery partners and fueled complaints in online discussion groups, including a platform shared with Amazon. Driver burnout and retention were of particular concern, with one delivery partner saying he typically lost 75% of his drivers within months of hiring them. The delivery firms suggested raising wages for their drivers, who make about $18 an hour on average—considerably less than their counterparts at UPS and USPS. Amazon urged them to stop screening applicants for marijuana and make that explicit in job advertisements—a suggestion that didn’t fly with some firms afraid of potential legal exposure in the event of an accident.
In August, Parisa Sadrzadeh, Amazon’s delivery service director, tried to quell the unrest with a 2,200-word message to delivery partners. The 10-year Amazon veteran, who began her career working on Kindle tablets before moving to logistics, highlighted $96 million Amazon dedicated to improving compensation, $12 million on marketing and recruitment and the creation of a team to assist with hiring. In the same missive, however, Sadrzadeh warned that vans would be packed with even more packages and that the delivery jobs would become even more physically demanding since drivers would spend more time walking up driveways and less time driving around.
“We’ve seen a growing number of posts around concerns over driver workload, questioning the data we use to determine what ‘good’ looks like, and asking to see more change,” she wrote. “I have multiple facets of my team whose only jobs are to gather and analyze insights from drivers and DSPs across the network, and we look at this data consistently and frequently.”
Counseling patience, she warned that “unconstructive negativity and complaints add noise to the platform and detract from the experience of the partners who want to learn, connect and ensure their voices and experiences are heard.” She shared some encouraging metrics, including that Amazon increased driver wages and that attrition had dropped in the previous six months.
Many delivery partners didn’t buy it. Days later, about 100 convened in Las Vegas. They were there for a meet-and-greet session organized by Amazon that had been canceled thanks to a spike in Covid-19 cases and figured they might as well show up anyway to discuss their souring relations with the company. Driver turnover was top of mind and, once again, the algorithms came in for criticism—sending drivers down dirt roads in downpours, for instance, where they would become mired in the mud and incur costly towing bills. On top of the relentless pressure from the machines, their employees were earning fast-food industry wages.
It was during the Vegas summit that the delivery contractors learned Amazon had terminated about 100 of their counterparts. Panic ensued. Some suggested forming an association so they could negotiate with Amazon on issues like compensation and metrics with one voice. Others afraid Amazon was recruiting new contractors to compete with them, discussed ways of selling their businesses and getting out. In late September, drivers working for a contractor in Long Island whose contract wasn’t renewed blocked an Amazon delivery station with their vans, took their keys and walked off, making it impossible for other drivers to pick up their packages.
One proprietor from a southern state who was terminated said he lost about $80,000. He said his drivers were frequently penalized for spinning their tires trying to negotiate a steep grade or get a van through mud, which the sensors flagged as abrupt acceleration. “It was not a pleasant experience,” he said. “It was constant mayhem, and when you try to address anything with Amazon, they just hold over your head that they can replace you in a heartbeat.”
Johnson, for his part, now works as a substitute teacher. He doesn’t miss the long days, revolving door of drivers or battles trying to overturn machine-generated scores. “I’d pick being in the shit in Afghanistan or Iraq any day over this because of the way they treat us,” he said. “They say work hard and make history, but Amazon is a culture of fear and anxiety.”
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