By Andrey_Popov @ Shutterstock.com
Amazon is opening up its internal shipping network to third parties. That could have a major effect on the American transportation market, and on Amazon’s bottom line. Jennifer Smith reports for The Wall Street Journal:
Amazon is offering beta service for truckload shipments in Connecticut, Maryland, New Jersey, New York and Pennsylvania through its Amazon Logistics arm. It also provides instant rate quotes through an online portal, freight.amazon.com, saying users can “tap into the scale of Amazon as we extend our carrier network to give you best-in-class service at great rates.”
Shippers have been able to book loads through the website since 2018, the company said.
“We work with many line-haul service providers in our transportation network and have long utilized them to carry loads for Amazon,” an Amazon spokeswoman said. “This service, intended to better utilize our freight network, has been around in various forms for quite some time.”
Opening up the platform gives Amazon more leverage with carriers on negotiating rates, said Armstrong & Associates President Evan Armstrong. “You get synergies by allowing shippers to come on to your platform, and you increase your network scale and your purchasing power with trucking companies,” he said.
Analysts and industry experts said the move, previously reported Friday by trucking data and news provider FreightWaves, poses risks to freight brokers and truckload carriers. Share prices for most truckload and brokerage companies that serve the market declined Monday and Tuesday. Shares in C.H. Robinson Worldwide Inc., the largest freight broker in North America, have declined more than 10% in the past week.
Amazon’s published rates appeared to be 4% to 5% below those on the trucking spot market, where companies book last-minute transportation, Citi analyst Christian Wetherbee said in a Monday research note. “Marginal discounts on certain lanes is common practice,” he said, adding that at a 4% to 5% discount to spot rates “Amazon could very well be making money on this offering.”
Sanford C. Bernstein & Co. analyst David Vernon said in a research note that traditional freight companies face a bigger competitive threat, however, if Amazon acts as a “not-for-profit truck brokerage,” offering money-losing rates for capacity it buys on the spot market, rather than using the platform to sell excess capacity “it has bought to run its supply chain.”
“Past entrants to the brokerage space have used discounting to achieve market share and Amazon is likely to do the same,” Cowen Inc. analyst Jason Seidl said in a Monday research note.
Read more here.