Can Amazon really disrupt the logistics sector too?
They’ve expanded from a small online book store into the biggest internet retailer, and now Amazon are at it again with an entirely new venture. Their new plan involves implementing an Uber-like app that connects trucks and shippers. Uber itself has been moving into the shipping business for some time, after acquiring innovative trucking startup Otto in 2015. Although Uber is focused on creating a fleet of autonomous trucks, Amazon’s interest in the area could lead to a showdown between the two companies. On top of trucking, there are plans on both sides to expand delivery services for air and sea. While logistics is an obvious choice for transportation heavyweight Uber, Amazon’s step into shipping also makes sense. What’s interesting is that it follows the opening of a prototype store with no checkouts, which looks to be the beginning of a B2B strategy that targets other retailers. Now, they’re also moving in on shipping firms. Are Amazon gearing up for logistical takeover?
Amazon’s endless expansion
Developing a system to rival Uber seems to be part of Amazon’s goal. Through the app, Amazon will bring all out-bound operations under their control by integrating pricing, driving directions and truck stops – without having to pay commission to third-party companies. Amazon is gradually accumulating a small fleet of trucks, complete with branding. When you consider that 70% of all global freight is transported via trucks, it makes perfect sense. The app is due to be released this summer, and comes as part of a recent push to handle their own shipping. A sceptic might question the point of trying to fix something which clearly isn’t broken. . . so what is the point?
Firstly, by implementing their own delivery systems, Amazon will be able to offer cheaper and perhaps even free shipping for customers, which will push sales. However, it may only be Amazon Prime subscribers that receive free shipping for their purchases on the site. This will encourage more people to become Amazon Prime members, therefore increasing Amazon’s already impressive reach and revenues. By taking deliveries into their own hands, the company will save a reported $1.1 billion per year. So, the retail giant is continuing to offer a better B2C service, whilst at the same time challenging other businesses in the logistics sector and building a B2B network. They’re not the only ones, though. Amazon has some powerful competition in the form of UPS, FedEx and of course Uber. Last year, UPS purchased the logistics network platform Coyote Logistics, and there are various startups stepping out into the industry including Trucker Path. The thing is, Amazon dominates e-retail by such a majority that losing Amazon’s business alone could be a major hit.
How will Amazon’s relentless expansion disrupt logistics?
Amazon’s new app is an unmistakable move against Uber’s expansion into the sector, however it’s also a real challenge to other companies like UPS and FedEx. The growth of big data has equipped tech-savvy businesses with the tools to transform physical distribution. Uber, for instance, uses the spare capacity of their cars and unrivalled knowledge of mapping to move parcels. This, and other innovative approaches to getting Item X from A to B, is changing logistics. The sector has always been massively reliant on data, but not the colossal datasets of mass digitalisation. Now, it’s the companies with the best software and data analysis that will emerge as major players. As much as Amazon and Uber are encroaching on established delivery services, they are also opening up a business opportunity for trucking companies, and not to mention other forms of transportation too. Uber bought Otto for a tidy $680 million, and now the startup has access to Uber’s extensive resources. In short, big data companies like Amazon are negatively disrupting established shipping firms, but are bringing positive changes for their customers and for innovative transportation companies looking for partnerships.
Over the years, Amazon has built up a successful B2C service, which is demonstrated by the fact that they are responsible for half of all online purchases. Now they have created a strong relationship with consumers, they can place more attention on negotiations with other businesses. Hot on the heels (or wheels) of Uber, their expansion into logistics is part of an ambitious B2B strategy. At the same time as cutting costs and improving customer satisfaction, Amazon are squaring up to the big names in shipping with their very own delivery fleets. At the moment, this encompasses a small number of trucks but will undoubtedly include other types of transportation in future. Add the recent success of drone deliveries into the mix, and that’s a real problem for competitors. Ultimately, Amazon and Uber represent the disruption of physical distribution by big data models. Both are, after all, data companies – but the question is, who has the most – and the best – data?
Can Amazon really compete with major logistics companies? How will Uber (and others) react to this challenge? Share your thoughts and opinions.