Is Amazon Undercutting the Entire Trucking Industry?
Amazon Vs the Trucking Industry
Free two-day shipping was just turned into free one-day shipping. It seems almost too good to be true, but it is what Amazon Prime is offering its members.
While they were unveiling their new speedy shipping, Amazon discreetly unveiled their freight brokerage platform. You can see the new service at freight.amazon.com. They advertise that you can “[t]ap into the scale of Amazon as we extend our carrier network to give you the best-in-class service at great rates.”
What Does the New Amazon Platform Mean for Trucking?
First of all, what is their new freight brokerage platform, anyway?
This is Amazon expanding even further than it already has. Obviously, they have a large shipping brokerage ability. Now, they are looking to sell that to companies with their new online freight platform. Amazon is offering access to its vast network of trucks, without a markup in price. The mammoth company is not making any money from the deal now but later down the line, they’ll be able to mark up their own goods. Why? They’ll be cheaper from their monopoly on trucks.
So, how do other freight brokers and carriers feel about this new Amazon Freight? Not very happy. Their prices could be undercut by this new service by as much as 26 to 33 percent.
Amazon, however, feels great about it. They’re essentially turning a large portion of their own cost into revenue for themselves.
According to Freightwaves, people should have expected this move. “Amazon already moves an enormous amount of freight through its distribution and sortation centers and has an extensive network of trucking carriers,” said John Paul Hampstead of FreightWaves. “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.”
Amazon moves much of its products through third parties as it is. Other companies that need to move freight through their brokerage platform are able to do so more cheaply than they were before. That means that other trucking companies are going to be forced to lower their prices in order to keep up.
The Market’s Future
Time will tell if they are indeed able to keep up. Target and Walmart, for instance, are going to have to figure out a way to stay competitive while not having nearly the same foothold in the trucking industry that Amazon has been able to gain.
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