Shippers and couriers are informed. Amazon has started his digital goods Brokerage platform on Freight.Amazon.com.
The apocalyptic prediction was made by Morgan Stanley analyst, Brian Nowak, after reading the comment of a customer who responded to Amazon’s announcement in which he revealed the launch of the free shipping service to Prime members. With this service, Amazon increases consumer expectations and costs to compete in e-commerce. In the long term, this will become the Trojan Horse that will grow its next business … “a third-party logistics network“, according to Nowak.
Amazon moves an enormous quantity of goods through its distribution and sorting centers and has a vast network of direct carriers. For many observers, it was only a matter of time before Amazon exploited its network and linked both sides of its logistics business.
A former Amazon executive explained the disintermediation strategy of the e-commerce giant. “The advantages deriving from disintermediation and the monetization of these capacities are secondary to the immediate need for self-preservation, but serve to satisfy the need of Amazon’s ability to support itself”, wrote the Amazon veteran. “This innovation and growth then manifests itself as constantly evolving towards the ability to sell everything. This is the real Amazon flywheel: disintermediate to survive, monetize to finance innovation, innovate to grow, disintermediate to survive …”. Disintermediation means “reducing the use of intermediaries between producers and consumers“!
Amazon’s entry into the freight transport industry is the “unrelated to survive” phase. Today it offers transport services in the states of Connecticut, Maryland, New Jersey, New York and Pennsylvania, and has already listed lower market prices, from 26 to 33%.
Amazon with this same strategy has wiped out the book industry. In 2011, Borders Books was out of business and today Barnes & Noble is hanging by a thread. Then Amazon hit the entire retail industry. Just in the last year, Sears, David’s Bridal, Mattress Firm, Brookstone, Rockport, Nine West, Claire’s and Bon Ton have closed due to bankruptcy.
Amazon needs to raise its revenue again, which went up by +30% a year, three years ago, to less than +15% planned for this year and cannot allow the limited capacity of trucking industry to limit the its growth and therefore chose to enter the sector to increase this capacity. From a quick review of the current Amazon Freight offer, it is clear that Amazon does not want to make large gross margins, but has instead massively lowered market prices.
Amazon is already active with Asian shipping to North America and has entered the top ten of international freight forwarders. He has already transferred much of his freight through third-party carriers, and has been able to become a broker for other companies that need to move goods. Amazon offers its brokerage service without markup, reducing margins for its competitors and could easily grow this brokerage business with a $ 10 billion transaction a year, selling capacity at cost.
The trucking industry calls this “Georgia Overdrive” ploy. We can’t say how much Amazon wants to grow its merchandise trade, but at some point it will increase prices by monetizing the brokerage service to finance other innovations.