Amazon is eyeing freight forwarding business!

As the global e-commerce leader, Amazon has been expanding in size in the context of the rapid expansion of the e-commerce market in the past two years. In addition to e-commerce platforms, Amazon has also extended its tentacles to other fields. Recently, foreign media reported that Amazon is expanding its shipping business ...

Is Amazon going to take away freight forwarders’ jobs?

According to Handelsblatt, the freight forwarding industry is currently worried about Amazon becoming a competitor as Amazon is expanding its supply chain business and looking to boost its freight forwarding services.

Handelsblatt reported that Amazon Global Logistics' official website has announced its special discount policy: within 60 days of completing the onboarding process, Amazon Logistics can provide an 8% discount on ocean freight.

This preferential policy is for participants of Amazon's logistics service, that is, FBA sellers on the platform . In addition to air and standard sea freight for full and less than container loads, the group also provides sea express services. Customers can ship goods from Asia to the United States, Europe, Japan and the United Kingdom.

With global shipping prices at high levels, Amazon's introduction of such a policy will undoubtedly attract a large number of new customers and promote the development of its shipping business.

However, in the eyes of foreign industry experts, this is not surprising, and it is also in line with Amazon's development strategy. Because Amazon is a company that pays great attention to efficiency, if the company lacks control in some links, then it will try its best to make up for it. In addition, Amazon's logistics department can also increase the added value of its services by providing freight services to sellers on its platform (just like FBA). For sellers and platforms, this is a win-win situation.

But if Amazon really enters the ocean shipping market in a big way, it will be a big blow to freight and freight forwarding companies. Some industry experts believe that Amazon's actions should be kept under close watch. Freight companies that provide logistics for international consumer goods purchasing organizations are at risk of losing their business.

The main customers of these freight forwarding services and logistics companies are small and medium-sized enterprises engaged in cross-border e-commerce trade.

According to Handelsblatt, Amazon’s new ocean freight quotes are significantly lower than those of medium-sized freight forwarders, which have been able to handle most of the shipments for many small market dealers so far. Rumor has it that Amazon is offering a price of around $7,000 per FEU for the Ningbo-Rotterdam route, while the current market price is around $14,000.

According to industry experts, Amazon can offer such cheap quotes because the company does not rely on profits from the transportation business. Losses in transportation can be made up from other aspects, but this will bring huge price pressure to companies in the freight forwarding industry.

For small and medium-sized sellers on the Amazon platform, it is naturally good news if they can complete cross-border transportation at a lower price. Moreover, with Amazon taking care of cross-border logistics, there is no need to ship goods overseas in advance, and inventory can be built locally.

In recent years, Amazon has continuously expanded its logistics services and laid the foundation for global logistics services. A few years ago, Amazon also obtained the necessary non-vessel operating common carrier license in the United States. Through its freight partner program, Amazon is building a network of land transportation subcontractors.

Invest in the construction of a warehousing and logistics center and control the warehouse rent

In addition to offering discounts on ocean freight and constantly expanding its ocean freight business, Amazon is also one of the most voracious warehouse buyers on the planet. During the pandemic, the e-commerce giant, along with several private equity firms such as Blackstone, has launched a warehouse acquisition spree.

Over the past two years, Amazon's warehouse size has more than doubled, from 192 million square feet at the end of 2019 to more than 410 million square feet today, and its efficiency in processing orders has also increased exponentially.

Amazon's purchases are affecting the industrial real estate market. According to a February 10 report by Prologis, the world's largest warehouse owner , warehouse vacancy rates are essentially zero and global warehouse rents have soared to record levels. Globally, rents rose by a record 15% in 2021, while in places such as the United States and Canada, rents rose by an average of nearly 18%.

Amazon hasn’t directly raised rents, but it has been contributing to rising rents. It has pushed retail toward e-commerce, two-day shipping and free returns, all of which require large warehouses. In addition, in order to control its own supply chain, Amazon spends billions of dollars each year to buy real estate as soon as it becomes available.

With supply chains disrupted, it costs companies more to ship goods around the world, which in turn means prices for everything from used cars to Valentine's Day roses are likely to rise. One surefire way to bring those prices down is to build more warehouses. Companies are racing to buy up old shopping malls, storefronts and horse trails and convert them into warehouses.

Amazon spends billions to control its supply chain

Amazon was once content to lease warehouses it owned, a business that allowed it to quickly expand the reach of its logistics network and test fulfillment centers in new markets. But as the pandemic shook the global supply chain system, Amazon began to control its logistics operations.

Amazon has spent more than $100 billion on property and equipment since the beginning of 2020, including eight of the 10 largest warehouse orders under construction in the U.S. Despite all the new construction, Amazon remains a stable tenant for warehouse owners like Amber, which helps ensure efficient utilization of leased warehouse units.

Despite Amazon's rapid warehouse expansion, its chief financial officer Brian Olsavsky said the company is not yet able to build new distribution centers fast enough to meet the growing demand for e-commerce.

Amazon's frantic expansion of its supply chain has sparked speculation that it will soon launch a courier business to compete with UPS, FedEx and DHL. If this speculation is true, Amazon is likely to buy more warehouses around the world to meet its logistics, package sorting, delivery and return needs.

Amazon has done its best in logistics layout, advancing in multiple aspects such as sea, land and air transportation in order to provide customers with the best logistics services. Logistics is also one of the most profitable links in the current cross-border e-commerce field. It is a wise move for Amazon to spend a huge amount of money to accelerate its layout in the logistics field.

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