Amazon the freight forwarder gains ground in China
- Amazon, which in October registered as a freight forwarder, has officially expanded into the maritime freight booking business as of January, The Wall Street Journal reported Wednesday.
- The Journal reports the online retailer is also listing rates for services typically handled by third-party logistics providers, such as sorting, labeling and trucking shipments. The listings are handled by Amazon's Chinese subsidiary: Beijing Century Joyo Courier Service.
- The move marks a further expansion by Amazon to control more pieces of the supply chain puzzle, Tech Crunch. However, the company has no plans to own or operate vessels. Rather, it will book ocean freight slots for its Chinese customers..
An e-commerce company increases its service offering to help Chinese customers book ocean freight slots, for a premium. Sound familiar? Alibaba, Amazon's main rival, recently partnered with Maersk Line to provide precisely the same service for its customers.
But why are the two e-commerce companies entering the freight forwarding business?
For one, to think of Amazon or Alibaba as merely e-commerce companies at this point would be to ignore their massive investments in logistics and fulfillment. Amazon, for example, has made its dreams of becoming a full-fledged logistics provider and compete with FedEx and UPS explicit. The company owns its own warehouses, air cargo fleet, delivery trucks and even drones. While it still relies heavily on other logistics providers, the company's intentions are clear.
And while Alibaba claims it does not seek vertical integration like Amazon, it too has now entered the freight forwarding business. The reason, it appears, is that both companies have concluded the highly fragmented and relationship-based third-party logistics market is ripe for disruption. The barriers to entry for this space are low — capital assets, strong buyer relations and, in the case of freight forwarding, regulatory and logistical know-how are the main skills required to start off. Meanwhile, the massive market for e-commerce has buoyed the providers' assets to ease the market entry.
The main question that arises both from Amazon and Alibaba's entry into the space is whether the freight forwarder should be concerned about a new class of competitor.
Those worried claim the freight forwarder must begin to adapt to online booking tactics and rely less on relationships, in order to tap into the growing small business client Amazon and Alibaba are taking ownership of. In addition, as the industry consolidates it may become increasingly difficult for smaller forwarders to secure good deals for their clients.
However, others argue the high fragmentation of the freight forwarding and logistics, alongside the business boom that has come from the rise of e-commerce will ensure the pie remains large enough for the e-commerce companies as well as the traditional business sector.
- The Wall Street Journal Amazon Expands Into Ocean Freight
- Supply Chain Dive Logistics versus e-tailers: Can e-commerce compete as fulfillment providers?
- Supply Chain Dive Alibaba customers can now reserve slots on Maersk
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