TLDRs
- Several Amazon delivery partners are leaving the DSP program as rising costs outpace pay increases.
- Insurance premiums and vehicle maintenance costs have surged, cutting profits for delivery operators.
- Amazon’s 20% per-package pay hike fails to offset inflation and stricter performance targets.
- DSP exits may threaten Amazon’s last-mile efficiency as it approaches USPS-level parcel volumes.
A growing number of Amazon’s U.S.-based delivery partners are exiting the company’s Delivery Service Partner (DSP) program amid soaring operational costs and shrinking margins.
Operators say the cost of insurance, vehicle upkeep, and compliance has spiked over the past year, eroding profitability even after Amazon’s recent 20% pay bump.
The DSP initiative, launched in 2018, allows small businesses to manage fleets of Amazon-branded vans to handle the e-commerce giant’s last-mile deliveries. The program ballooned to more than 4,400 firms across the U.S., handling a significant share of Amazon’s 6.3 billion packages delivered in 2024. However, many operators now say the math no longer works.
“I was making close to $200,000 a year in profits,” one Texas-based DSP owner told Bloomberg. “Now, after insurance hikes and overtime costs, that’s been slashed to around $75,000 and that’s if I drive routes myself.”
Rising Costs Outpace Amazon’s Pay Boost
In January, Amazon announced a pay increase of 20%, or about 12 cents more per package, for DSP partners. But many contractors argue that this raise barely dents the inflation-driven surge in expenses. Insurance premiums alone have jumped by as much as fivefold for some operators, with liability coverage rising between 7.5% and 20% and vehicle damage premiums increasing up to 25%.
Maintenance and towing costs have also climbed, especially for DSPs managing larger fleets or operating in regions with higher labor and regulatory expenses. Combined with stricter delivery-time metrics and performance requirements, many small business owners say they’re being squeezed from both sides.
“Amazon’s expectations keep tightening, but costs keep rising,” said another DSP owner. “It’s becoming impossible to keep a team and turn a profit.”
Last-Mile Pressure Mounts
Amazon’s delivery network has become a cornerstone of its logistics empire, accounting for roughly 25% of all U.S. parcel volume in 2024. The company is even projected to surpass the United States Postal Service (USPS) by 2028 in total deliveries.
Yet the growing churn among DSP operators signals cracks in Amazon’s last-mile model. Each exit potentially increases costs for Amazon, which may have to either raise partner pay further or absorb higher overhead to maintain delivery speed and reliability, especially during peak seasons like the holidays.
The issue is compounded by inflationary pressure and a nationwide shortage of commercial drivers, making replacements harder to find. Even a modest wave of DSP departures could disrupt Amazon’s promise of one- and two-day deliveries, the bedrock of its Prime service.
Tech and Telematics Offer a Lifeline
Experts say technology could offer a buffer against rising operational costs. Fleet insurance technology (insuTech) and safety-focused Software-as-a-Service (SaaS) solutions can help DSPs manage risk and lower premiums.
Currently, only about 30% of delivery fleets share telematics data, such as vehicle tracking and driver behavior, with insurers, even though 88% already use it internally for safety. By adopting AI-driven dashcams, predictive maintenance systems, and telematics-based insurance pools, DSPs could potentially cut crash rates by 20% and maintenance costs by up to 20%.
However, about two-thirds of operators still struggle to interpret telematics data effectively, limiting their ability to negotiate better rates or implement data-driven cost reductions.
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