Amazon launched a new Uber-like freight-brokerage online platform on a trial version. The platform will enable the ecommerce giant to eliminate the broker and center man between the shippers and the truckers.
The new online platform matches shippers with truck drives. Amazon does not provide any vehicles of its own in the platform. Instead, the company is brokering shippers' access to its trucking partners. In the process, Amazon can now better manage its network of carriers and speed up the cargo matching process. Freightwaves estimates that this new platform undercuts the market prices by 26% to 33%. Such price reduction is likely to disrupt the shipping industry causing major ripple among the players.
Growth of Amazon Freight Infrastructure
For years, Amazon has been moving its huge volumes of products across the country using a countrywide network of carriers. The use of this service has been to better utilize the US freight network, and Amazon has relied on the various forms of the service for a while. Over the years, the company has grown its infrastructure and can broker the movement of goods in the network without having to take a huge investment. With the new tracking platform, Amazon is now offering freight beta service of 53-foot truck in some states. The states include Connecticut, Pennsylvania, Maryland, New Jersey, and New York. As the company seeks to extend its career network, it now urges customers to make use of the service and benefit from the great rates. While this may be beneficial to customers, shipping companies in the industry may be facing stiff competition from the company's move.
Source: Business Insider
Amazon Offering Cheaper Freight Charges
The freight charges for the new trucking platform is about $709 for transportation of services to Washington, DC from Albany, New York. The customer enjoys a discount of about 33% compared to DAT's broker-to-carrier spot rate of $1,066. Although Amazon refutes claims that the new platform will result in dramatic undercutting of pricing, Freightwaves have described the platform as a brokerage without a margin. Apart from the cheaper prices, the new trucking system provides shippers with instant quotes to ship their packages between warehouses.
The success of the new trucking platform can lead to market domination by the company. By undercutting competitors, Amazon can reduce its losses and capture more market share. Then it can raise its prices once the platform has gained traction and pushed rivals out of business. The major competitors of the new service include Uber Freight and C.H. Robinson. By providing competitive prices in this market, Amazon is more likely to gain traction and secure its share of the market.
Implications of the New Trucking Platform on the Shipping Industry
Although the new service may not be as attractive as the company's Prime Video original series and the Alexa smart speaker, it will enable Amazon to take control over its supply chain and have a greater competitive edge over its rivals. Currently, only a few carriers have been approved to use the service based on Amazon's own criteria for participation. However, more carriers are likely to join the network expanding the market share of Amazon in the shipping industry. The impact is likely to compound on the shipping industry at large resulting in lower shipping costs. With the likelihood of USPS and UPS lowering their shipping rates to counter the turbulence in the market, you may need a tool to help calculate your shipping costs. The USPS shipping calculator and the UPS shipping calculator offer by InstantShip will ease the process for you, ensuring you are only incurring minimum expenses possible.