Amazon Edging Ever Closer to the Shipping Indusrty
December 20, 2016 Leave a comment
This article is reprinted from “Business Insider”, which points out that Amazon has its own considerable demand for freight services, and is closing the gaps in its logistics supply chain. Now that Amazon has moved into the trucking industry. Trucking is a highly fragmented and deeply conservative industry, just like shipping. Once Amazon has understood and “conquered” trucking, it will be a relatively small step to apply these techniques to the shipping industry.
Amazon is secretly building an ‘Uber for trucking’ app, setting its sights on a massive $800 billion market
Author = Eugene Kim, “Business Insider”, Dec. 15, 2016, 7:50 PM
Amazon is building an app that matches truck drivers with shippers, a new service that would deepen its presence in the $800 billion trucking industry, a person with direct knowledge of the matter told Business Insider.
The app, scheduled to launch next summer, is designed to make it easier for truck drivers to find shippers that need goods moved, much in the way Uber connects drivers with riders. It would also eliminate the need for a third-party broker, which typically charges a commission of about 15% for doing the middleman work.
The app will offer real-time pricing and driving directions, as well as personalized features such as truck-stop recommendations and a suggested “tour” of loads to pick up and drop off. It could also have tracking and payment options to speed up the entire shipping process.
This is the latest in Amazon’s rumored plan to become a full-scale logistics company that controls the entire delivery cycle. Over the past year, Amazon has purchased thousands of trailer trucks and dozens of cargo planes while launching new “last mile” services like Amazon Flex that take packages straight to the end customer.
But the broader goal is to improve the “middle mile” logistics space, which is largely controlled by third-party brokers that charge a hefty fee for handling the paperwork and phone calls to arrange deliveries between shipping docks or warehouses. It would make shipping more efficient and cheaper not just for its customers but also for Amazon, which has been dealing with rising shipping costs lately.
The new service would put Amazon squarely in competition with numerous startups in this space, such as Convoy and Trucker Path, while putting a direct hit on incumbent players, including the publicly listed ones like C.H. Robinson and J.B. Hunt. Amazon is a customer of C.H. Robinson, while CEO Jeff Bezos is an investor in Convoy.
Amazon declined to comment.
‘Exciting and confidential’ initiative
The team for this project is scattered around Seattle, Minneapolis, and Amazon’s offices in India. The Minneapolis office in particular, is expected to have more than 100 engineers by next year working mostly on this project, according to Business Insider’s source.
In fact, one of the job postings for the Minneapolis office says Amazon is looking for a principal product manager to work on “an exciting and confidential initiative in middle-mile transportation organization.”
Another job posting for a software-development engineer in Minneapolis says Amazon’s Transportation Technology division is building software that optimizes the “time and cost of getting the packages delivered.”
It’s unclear why Minneapolis has become such an important part of this project. But the city is close to the headquarters for C.H. Robinson, Target, and Best Buy, possibly making it easy to hire people away from those companies.
RBC Capital Markets predicts Amazon’s package volume will surpass FedEx in three years and UPS in seven years.
$800 billion industry
The opportunity is huge for Amazon. Roughly 84% of all freight spending is on trucking, and the market is estimated to be worth $800 billion, according to the trucking startup Convoy.
Trucker Path, another startup in this space, says truck driving is the most common job in 29 US states, but it’s a market that’s been slow to adopt new technologies, as most of the trucking companies are small businesses and 90% of them own fewer than six trucks.
But unlike its competitors, Amazon has an advantage in not having to worry about demand from the shipper’s side. To make an “Uber for trucking” marketplace work, you need demand from both sides of the equation – shippers and drivers. But Amazon already has a giant shipping network and a rapidly growing package volume, so theoretically it shouldn’t be hard to find a load match for the drivers on its platform.
There are some regulatory problems that need to be addressed. For example, drivers are not allowed to press more than one button when making a call while driving. There are also strict limits on how long drivers can go without a break. Amazon may be considering adding Alexa’s voice controls and new auto-logging features to get around these issues.
Trucking has certainly been one of the hottest spaces in tech over the past few years, with big startups like Uber joining the race. Amazon is the new 800-pound gorilla that everyone will have to be aware of.
C.H Robinson’s stock went down roughly 2.5% after Business Insider reported Amazon’s plans:
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.