Amazon Enter the Freight Forwarding Business
Amazon have now entered the freight forwarding business via their Beijing subsidiary Joyo Courier Service Co. According to the Wall Street Journal:
“The registration, which was filed in November, would potentially allow Amazon to begin helping to arrange cargo shipments into or out of the U.S. immediately, said Peter King, director of the Federal Maritime Commission’s bureau of enforcement.”
Amazon’s Latest Logistics Plays
This comes at the tail end of a number of other plays Amazon have been making recently. Their purchase of thousands of branded semi truck trailers in December 2015 is purportedly to help shuttle inventory between their facilities.
Amazon is also seeking to lease 20 Boeing 767 aircraft for its own air delivery service operation as a means of avoiding delays caused by third-party parcel carriers.
In France they have just closed a deal to purchase the remaining 75% of Colis Prive an independent independent parcel carrier. Amazon are already the French postal services largest customer shipping approximately 50 million packages a year. This move is obviously to reduce their dependence on the Postal Service.
In addition Amazon have been given an option to acquire 4.2% of Yodel a large parcel carrier in the UK.
So Why This Big Flurry of Activity From Amazon?
There are three main reasons:
The first is cost. $3.2 billion, or 11.7% of revenue in the third quarter, represent their total shipping costs. That’s roughly 1.5% higher than the same quarter last year.
The second is control. Amazon are growing much faster than FedEx or UPS can keep up. Both carriers have become bottlenecks for Amazon’s deliveries.
But the most interesting reason is the big profit opportunity it represents. According to the Seattle Times
Robert W. Baird & Co. analyst Colin Sebastian believes Amazon may be developing a delivery service that meets more than its own shipping needs. He expects Amazon to ultimately offer any excess cargo capacity it has to other companies looking to transport goods.
“They have the opportunity to disrupt this market and generate a lot of revenue,” Sebastian said.
“That’s because the global fulfillment market, which includes shipping and warehousing goods, represents a $400 billion to $450 billion business,” Sebastian said.
Adapt and Succeed – Or Go Work For Amazon
Amazon has the resource to become a dominant global logistics player. Their market cap is $250 billion, $20 billion more than Walmart, and only just under $38 billion less than General Electric. They have the technology and they have the motivation.
It’s going to be interesting to see how our current logistics industry can adapt and succeed in the face of the disruption Amazon will wreak upon it.