Amazon recently signed a chartering agreement of 20 aircrafts with a leasing company, ATSG. This decision is a strategic move to control their outbound logistics network in the USA. Amazon Fullfilment Services will therefore become a competitor of Fedex and UPS although Jeff Bezos’ company actually ships close to 20% of its outbound US volumes with these 2 companies.
Last but not least, this agreement shall allow Amazon to acquire 19.9% of ATSG’shares within the next 5 years if they decide to further expand control of the outbound distribution to Amazon’ customers. Such a strategic move may challenge Amazon current relationship with Fedex and UPS who could also benefit this year of an expected 10% increase of Amazon’ outbound delivery volumes in the USA.
Fedex and UPS vs Amazon on the US airfreight and logistics market : threat or opportunity ?
Another Amazon decision was disclosed in January 2016 : as reported in the Financial Times, « Amazon lands China ocean shipping licence ». It was registered with the US Federal Maritime Commission (FMC) in November 2015 and it allows Amazon to buy space from vessel owners directly to control capacity and ship their own goods – and even to sell it to third-parties if it wishes to do so.
Another possible threat for seafreight forwarders and international logistics providers ? According to several analysts, Amazon overseas volumes account for only 10% of Wal*Mart annual volumes but its growth sounds promissing on a shipping market depressed by a slower global economy growth, vessel overcapacity and low freight rates. Threat ? Or an opportunity for ocean carriers to sign strategic service contracts with the fast-growing Seattle-based company ?
"Amazon’ last mile delivery – low - cost strategy is clearly a threat for logistics service providers who seek to deliver profitable services to the retail sector while committing to high-level quality standards."
I recently attended in London to a Round Table discussion organised by UKWA and sponsored by Zetes. « Senior representatives from across the logistics industry gathered to consider and discuss challenges and likely future trends around visibility, tracking and traceability, and the impact of changing technology on their businesses » (see more http://www.ukwa.org.uk/market-intelligence/blog/2016/03/best-ever-house-lords-event-ukwa/).
As we were here to discuss tracking and traceability, business trends due to changing technology, most of the participants pointed out Amazon’increasing willingness to control their end-to-end supply chain and the related influence Jeff Bezos’ company has already on the logistics market putting additional pressure on logistics providers serving the retail sector. Interesting to note how Amazon was in almost all conversations!
Amazon, which loses around 1b$ per quarter on shipping costs, is strategically trying to cut costs and control capacity, even warehousing space (already close to 15% of the market in the UK). Amazon’ last mile delivery – low – cost strategy is clearly a threat for logistics service providers who seek to deliver profitable services to the retail sector while committing to high-level quality standards.
Amazon’strategy is fully supported by state-of-the art technology. Digital supply chain is becoming a strong market trend.
Competition is always a good incentive to innovation and transformation : do you think logistics service providers will be able to turn this Amazon threat into an opportunity ?
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