By Cate Hull
Amazon, the e-commerce giant, this week unveiled a trial version of its freight brokerage platform and undercut market prices by as much as a third, according to FreightWaves.
The e-commerce giant has decided to cut out the middle man and act as a broker between shippers and truckers, giving it more control over its access to trucking capacity and the price it pays. It’s competing with companies such as C.H. Robinson and Uber Freight.
Amazon relies on a network of trucking carriers to move huge volumes of products across its markets. The move should give the company greater control over its access to trucking capacity and the price it pays.
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,” according to the Wall Street Journal.
“We work with many line-haul services providers in our transportation network and have long utilized them to carry loads for Amazon,” an Amazon spokesperson said. “This service, intended to better utilize our freight network, has been around in various forms for quite some time.”
Opening 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.
Amazon is sticking to its tried-and-tested recipe for market domination: undercut competitors and rack up losses as it captures market share, then raise prices and turn a profit once it has gained traction and scale and driven rivals out of business.
With Amazon quietly developing its logistics portfolio with vans, trucks, and aircraft, it is expected that the launch of the freight brokerage platform will see Amazon change their practice and increase capacity above its immediate need.
Analyst Brian Nowak, writing in supplychaindigital.com, wrote: “We see Amazon’s One-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.”
In recent months, Amazon has been scaling back its use of third-party logistics providers as it takes greater control over how it moves shipments through its distribution networks. Amazon pulled about $600 million in business from XPO Logistics Inc. in the fourth quarter, with the company’s brokerage unit taking the biggest hit.
Amazon spent $7.32 billion on shipping world-wide in the first quarter of 2019, according to company financial reports. That was 21 percent more than the same quarter a year ago, far below the 38 percent increase between the first quarters of 2017 and 2018.
Cate Hull is the CEO of FreightExchange, a freight and logistics company based in Sydney.