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Over 100 Amazon delivery companies are banding together to form a new kind of challenger to UPS and FedEx

A Canoo electric delivery can with Front Door Collective branding drives on a bridge.
The Frontdoor Collective is a new national delivery player launched by more than 100 Amazon delivery companies. Front Door Collective

  • A new national last-mile delivery company has entered the market: the Frontdoor Collective.
  • It's a coalition of more than 100 small delivery companies, most of which deliver for Amazon.
  • Each Frontdoor Collective franchisee will have the opportunity to obtain equity in the company.
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The giants of the delivery world have a new challenger to contend with, and it's like nothing they've seen before. 

It's not a gig-economy startup or a massive foreign corporation coming to America. It's the Frontdoor Collective, a coalition of more than 100 small businesses, the vast majority of them delivering packages for Amazon. Some say they are frustrated by deteriorating returns and limited growth potential, and they have banded together to form their own last-mile delivery company.

The collective, which emerged from stealth Thursday, has been onboarding small delivery companies via a franchise model, with the promise of unlocking new sources of revenue by contracting directly with retailers other than Amazon. Its four cofounders all deliver for Amazon, and two company leaders are former Amazon executives who are now intent on giving small delivery businesses equity and a say in the way the new company runs. 

The group hopes to compete with UPS and FedEx and says it has the capacity to deliver 1 million packages a day virtually anywhere in the US, with same-day and next-day service — vital skills as Amazon forces the broader logistics industry to ramp up delivery speed. Cofounder and CEO Dan Bourgault, who also runs a company contracted to deliver Amazon packages, said he expected to expand capacity significantly before the peak shipping season starts in November.

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The scale of the Frontdoor Collective's operation to start is enough to serve the needs of large retailers, according to Nate Skiver, the founder of LPF Spend Management and a former logistics manager at Gap.

"One million packages per day — that's pretty substantial," he said, adding that FedEx and UPS each deliver roughly 20 million packages a day.

Most of the companies that have joined the collective employ up to 120 drivers running between 20 and 60 routes a day for Amazon, as well as other logistics companies like FedEx, LaserShip, Ontrac, and XPO Logistics. Joining the group lets hundreds of small entrepreneurs keep their autonomy and gain the negotiating power of a national logistics player, the CEO said.

Bourgault said interest in the collective was voracious. 

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"Our ability to add partners, and to allow those partners to expand, will only be limited by the volume that we can generate," he told Insider. Recruiting is led by Chief Development Officer (and Amazon DSP) Kelly Pickering. 

The Frontdoor Collective won't be competing directly with Amazon and an Amazon spokesperson told Insider "DSPs are free to deliver for other companies." The Collective will be vying for the rest of the packages in the e-commerce ecosystem, making it an immediate competitor for the fast-delivery space dominated by gig economy players like Shipt, DoorDash, Uber, and Instacart.  

But as speed becomes more important to retailers, the collective's national footprint could become a serious concern for UPS and FedEx. Skiver said it could take only a year or two for these types of local last-mile delivery outfits to directly compete with the package giants.

Tiny cogs in a big machine 

Bourgault left a job at Instacart in 2018, started a small delivery company called Frontdoor Partners, and joined Amazon's Delivery Service Partner program.

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Amazon started the program five years ago as a way to reduce its reliance on carriers like UPS and FedEx. It offers entrepreneurs $10,000 grants to start their own small delivery companies, leases them Amazon vans, and then hires them to move its packages on the last leg of their journey. Amazon currently has 2,500 DSPs around the world who employ more than 150,000 drivers, according to a spokesperson. 

Amazon says its partners can make up to $300,000 in annual revenue, but the real size of the opportunity for partners is hotly debated within the DSP community. Some say there's a ceiling on how big they can grow and that returns have been dwindling for the last two years, especially during the pandemic e-commerce boom (which has significantly boosted Amazon's profits). 

In the last-mile-delivery business, more routes bring more revenue, and logistics companies like Amazon can limit couriers' growth by capping the number of routes or trucks they operate. It's often a risk-control measure so they don't depend too heavily on any one operation. But it can frustrate entrepreneurs attempting to grow their business from 10 vans to 50.  

"You're just a really tiny, small cog in a really giant logistics platform," Bourgault said. "The lack of leverage, the lack of voice, the lack of control you may have over pricing, over assets, becomes really hard." 

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Amazon declined to comment on how caps on the number of routes DSPs can handle has changed over time. A company spokesperson said: "The vast majority of Delivery Service Partners we've surveyed are within or above the projected profitability ranges for this program. As with any business, demand varies year by year and by season and we work closely with DSPs to manage this variability and strive to ensure the rates we pay DSPs are adequate to support them in operating successfully and profitably."

The collective is hoping to give small delivery companies growth opportunities where demand is the only restriction. 

"If you find somebody who's really good at last mile — they know how to hire the right drivers, they know how to deliver at a 99% success rate — the one thing you want to do is allow them to continue to expand themselves in their expertise," Bourgault said.

Building a new machine 

While Bourgault was learning the ropes with Amazon, Penelope Register-Shaw was packing up her desk. As a director within Amazon Logistics, she was instrumental in building the foundations of the DSP program that she hoped would support delivery entrepreneurs. By the time she left in 2018, she said she could see the DSP program was headed in a direction that could limit their potential. When she met Bourgault while working for Walmart and heard his vision for the Frontdoor Collective, she saw a second chance.

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"Where he hooked me was, 'expandable, not expendable,'" Register-Shaw told Insider. She signed on as its chief strategy officer

The collective will operate on a franchise model, charging a one-time flat fee to join and allowing each partner company to maintain its autonomy and existing contracts. Most, Bourgault said, have no intention of flushing their contracts with big logistics players. 

The central organization will provide the standards (including 99% on-time delivery), uniforms and branded van leases, the sales muscle, and the technology to enable smooth operations, led by Chief Technology Officer (and Amazon DSP) Riccardo Drago. The collective also has a deal with the electric-van startup Canoo to purchase 10,000 vans by 2024, with the rollout starting in the second half of 2023.

Dozens of retailers that need pickups at their stores or warehouses for consumer deliveries have shown early interest, Bourgault said. The execution and management of those deliveries is up to each partner, which can grow as large as it likes. 

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A market crying out for alternatives

Just as delivery companies want a better deal, retailers need better options, too. 

The East Coast regional package carrier LaserShip said it had sold out its peak-season capacity by July and could not take any new customers until next year. Last month, UPS CEO Carol Tomé said that this peak season, demand for delivery would exceed supply by 5 million parcels a day.

"Retailers of all sizes are having challenges with service, consistency, escalating rates, relying upon FedEx and UPS still for a large portion of their volume to be delivered," Skiver said. "And at this time of the year, heading to the fourth quarter, before too long, those options are dwindling very quickly."

The Frontdoor Collective could help meet that demand in a way that values the expertise of small delivery companies. 

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"All of the major players are at capacity," Frontdoor Collective cofounder and Chief Operating Officer C.J. Horist said. "They're tapping out, raising their prices, indicating to the market that there's a need for another player." 

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