Amazon Boosts Its Logistical Strength With Freight Service

Amazon is delivering another potential blow to other companies that do logistics. The eCommerce operator has launched its digital freight brokerage platform, freight.amazon.com, where it invites other firms to “tap into the scale of Amazon we extend our carrier network to give best-in-class service at great rates.”

The move comes as observers continue to talk about whether Amazon will mount direct challenges to the main players in delivery, UPS and FedEx, firms that now function more as Amazon allies than foes.

The Amazon logistics service offer, via it website, offers “great rates instantly” on “hauling 53-foot dry van full truckload freight.” The service, now in beta, is available in Connecticut, Maryland, New Jersey and New York.

Nightmare Situation

According to at least one report, this one from FreightWaves, the service launch represents “freight brokers’ and carriers worst nightmare come true.” That’s because Amazon, in its latest bid for more logistical strength, is reportedly “undercutting market prices from 26 to 33 percent” with its new freight endeavor, according to that publication.

“Amazon already moves an enormous amount of freight through its distribution and sortation centers and has an extensive network of trucking carriers,” the report said. “For many industry observers, it was only a matter of time before Amazon leveraged the implicit network effect — the total number of shippers and carriers who do business with Amazon — and connected both sides of its business.”

The launch of this Amazon freight effort comes just days after news emerged that the eCommerce operator would make one-day shipping standard for all Amazon Prime members. Amazon said it was going to spend $800 million in Q2 of 2019 to beef up its infrastructure and warehouses to make the change happen. Amazon is estimated to reach more than half of all U.S. households and has upwards of 100 million paying Prime members. With the announcement as well as its widespread reach, Amazon could potentially shift customer expectations to receive ordered items in the faster timeframe.

Trojan Horse

In the wake of that Prime announcement, a note from Morgan Stanley linked the one-day shipping offer to more logistical moves by Amazon including freight. “We see AMZN’s 1-day Prime shipping raising consumer expectations and increasing the cost to compete in e-commerce. Over the long term, we also see this as a Trojan horse for Amazon to grow its next disruptive business … a third party logistics network,” the note read.

Indeed, earlier in April, Amazon’s shipping and logistics service reportedly became operational, at least in part. The service had been noted last year as a way for the eCommerce giant to compete with logistics companies like FedEx and UPS, with an eye toward moving tangible goods from sellers to Amazon-owned fulfillment centers. The service, said reports back then, would feature shipping prices cheaper than those seen with traditional logistics providers.

Reports now say Amazon Shipping is in fact a seller-to-customer service, moving beyond the fulfillment center. In terms of mechanics, invited sellers can print labels from Amazon. The eCommerce firm will pick up packages from sellers’ warehouses each weekday, but deliveries to customers will span the entire seven-day week.

Ground shipments will arrive at their destinations within five calendar days, and as is germane to Prime, Amazon Shipping will fulfill those shipments to customers who live within a two-day shipping radius (via ground shipping) from seller warehouses. The shipping service is operational for sellers that have warehouses in the greater Los Angeles, New York/New Jersey and Chicago areas.

More Amazon Moves

That’s not all the big, relatively recent moves for Amazon when it comes to logistics, fulfillment and delivery.

Last year, the eCommerce operator ordered 20,000 Mercedes Benz vans to expand its delivery fleet. The vans will also be used for small businesses to carry an excess supply of packages (at least one company in New Orleans is looking for drivers to deliver packages for Amazon in shifts meant to last 10 hours). Judging by the orders for the vans, the company expects 500 or more delivery companies to join its program.

Not only that, but Amazon’s acquisition of Whole Foods and the resulting grocery deliveries have boosted growth in Prime memberships and Prime Now deliveries, the eCommerce giant also said — factors that also serve to increase Amazon’s delivery proposition and strength. The number of consumers who signed up for Prime in 2018 exceeds the number of members who signed up in previous years, the company added. Prime has more than 100 million members, though Amazon did not reveal how many deliveries were made via the Prime program.

Amazon is driving toward even more dominance for logistics, and it seems the eCommerce operator is pressing down the gas with freight.