How Are Amazon DSPs Paid?
Buyers often ask how an Amazon DSP receives compensation. Like FedEx Ground, DSPs receive a weekly settlement statement paying them the revenue they earned the week prior.
There are multiple components to the payment contract from Amazon, impacting a DSP’s weekly revenue stream.
How Amazon DSPs Receive Compensation
Within the Amazon space, the following factors determine compensation:
A Monthly Base Rate
DSPs receive a monthly base rate. This is essentially the baseline pay of their contract. Also, this is referred to as their van reimbursement, which is how DSPs offset the vehicles' costs.
Amazon DSPs do not usually own their trucks. Typically, DSPs operate a long-term lease through a third-party provider facilitated through Amazon. As they operate these third-party vehicle leases through companies such as Element Leasing, the contract reimburses you for the service charge covering the costs of the van leases. This means you do not have to worry about purchasing vehicles.
This portion of the Amazon contract can potentially leave a margin for additional costs covering minor vehicle repairs. However, DSPs are responsible for covering the costs of tires, brake replacements, etc.
An Hourly Base Rate
Think of the hourly base rate as compensation to offset the costs of running a route. The hourly base rate is calculated on:
A set amount per hour
The number of hours worked
Each route that dispatches that day
Let’s say you make $25 per hour, per route, and do a 10-hour workday. That would total $250 for one route. If you operate multiple routes, you will multiply that rate based on the number of routes you dispatch. If you run 10 routes, that would be $2,500 of revenue.
Employee Onboarding
Amazon DSPs also receive payment for onboarding employees at a flat rate. This is for employees going through training, offsetting the training costs required as you bring in new drivers.
Fantastic and Fantastic Plus
Fantastic and Fantastic Plus is a performance ranking system within the Amazon network where DSPs receive an evaluation for service, safety, client experience, and other metrics. Your ranking will be included in your contract.
How you perform to the critical metrics on the Amazon DSP scorecard impacts your compensation. DSPs ranking in Fantastic or Fantastic Plus will see an additional cents per package upgrade to their total compensation plan.
For Fantastic, it’s 7 cents per package, and 15 cents for Fantastic Plus. With Fantastic, DSPs will see an additional $8,000 a week in compensation, and those ranking Fantastic Plus will receive $15,000 or more. This is paid out weekly based on the volume of packages.
Note: During certain times of the year, such as peak season and Prime Day, Amazon will wave the scorecard. However, as a DSP, you have to submit for the waiver through Amazon.
It’s important to remember that Amazon’s compensation rates will vary based on:
Delivery areas
Different parts of the country
Requirements based on the delivery area
Expecting one common compensation is not realistic in this space based on the various territories throughout the country. Also, this compensation model can change. As Amazon evolves its network, so too could it evolve its compensation structures and rates.
Other Investment Information for Amazon DSPs
If you are interested in becoming an Amazon DSP, there are a few unique requirements that Amazon Logistics expects you to fulfill.
Local Ownership
When Amazon is evaluating candidates for ownership of a delivery territory, they typically prefer local owners.
In the FedEx Ground space, it’s fairly common for business owners to live in other locations or states from where their business is located. For Amazon DSPs, this is not the case. If you live in a different city or state from the location you are applying for, it is unlikely that Amazon will approve you to be a DSP.
Hands-On Owners
One of the primary reasons Amazon requires owners to be local to the distribution centers is that owners are expected to be physically present and actively work in the business every day.
This is very different from FedEx Ground’s policies. In the FedEx Ground network, remote ownership is very common. Contractors are not required to be physically present in the building as long as the business is operating well and the owner is aware of any issues.
Keep this in mind if you are looking to apply for an Amazon territory and ensure you can meet the in-person requirements.
Single Entity Owners
Due to the hands-on, physically present requirements we previously discussed, Amazon typically only allows DSPs to own a single entity at a time. Potential DSPs that already own FedEx Ground routes or other businesses may not be approved by Amazon because DSPs are expected to give their full attention to the business.
You Must Apply and Interview
Similar to the FedEx Ground network, every new potential DSP must submit an application and interview with Amazon in order to be approved to take over the business. This is true whether you are purchasing from an existing DSP or if you are applying through Amazon Logistics for an awarded territory.
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