Amazon’s brokerage operation goes national
Story by:at FreightWaves.com
As demand for goods from its own warehouses as well as third-party suppliers skyrocket, Amazon is expanding its brokerage division, first launched just a year ago.
The e-commerce giant is now offering brokerage services in 48 states, a spokesperson confirmed to FreightWaves. Amazon’s shipper-focused website, freight.amazon.com, now says service areas include “all U.S. states except Alaska and Hawaii.”
The service matches shippers with freight capacity. The spokesperson added that previously, access to the site was limited to only line-haul providers pre-approved to sign up for loads. The site is now open to all carriers.
FreightWaves first reported the launch of the brokerage service in April 2019. The expansion of the service now expands truckload capacity for shippers.
The initial launch of the service featured rates as much as 30% below market value, according to FreightWaves research. In a larger survey of the logistics industry, FreightWaves found that eight of 10 carriers and freight brokers think Amazon’s entry into digital freight brokerage [was] ‘negative’ for their market segments. Carriers, by a two-to-one margin, are more apt to view this development as ‘very negative’ than freight brokers. On the other hand, seven of 10 shippers think it is a ‘positive,’ though this view is tempered as only one in five that believe it is a ‘very positive’ development.
In the survey, “Amazon and the Logistics Industry,” carriers and brokers were concerned that Amazon’s size could push down freight rates, but as one respondent noted, Amazon may have to eventually pay market rates.
”As long as carriers get access to all of their freight as well, it has to be a volume play,” the respondent said. “Amazon will need to pay ‘market rates’ just like other 3PLs. At the end of the day, I believe Amazon will compress the average margin for brokers, but they will not eliminate them from the market.”
An analysis at the time of the survey found that rates available from Amazon’s online platform supported the respondent’s thesis. Shipper quotes collected for 30 lanes indicated Amazon’s quotes to shippers were within 50 basis points of DAT spot rates.
The expansion of the service comes at a time when Amazon recently halted a delivery service for non-Amazon packages and after reports emerged earlier this year that the company was dropping logistics service providers.
The delivery service, Amazon Shipper (3P), is to be suspended in June. In a research note in early April following the news, Morgan Stanley analyst Ravi Shanker reported that the move would apply to Amazon’s third-party program. It picked up non-Amazon packages at sellers’ warehouses for delivery to end customers.
“This was still a pilot/nascent service and not a full operation,” Shanker wrote. “The 3P service within Amazon was an expanded version of a limited pilot that began in the L.A. area in December 2017 and did national delivery from three major U.S. metro areas (New York, Chicago and Los Angeles as well as in London) early last year. However, it was still a limited pilot program and had not yet seen broad rollout as a full 3P service. As such, we believe the volumes of this operation are likely to be relatively limited within Amazon Logistics.”
Shanker said the thought is the suspension is COVID-19 related and likely not permanent.
“It is no secret that e-commerce volumes have surged in recent weeks post-COVID-19 restrictions and that Amazon has had to adapt its operations to cope,” Shanker wrote. “This has included hiring 100,000 workers, prioritizing essential products over others and pushing out delivery windows for Prime and Fresh customers. It is no surprise that Amazon would be directing all of its resources to managing its internal volumes no matter how small.”
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Source of original story and credits: freightwaves
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