Is Amazon moving into the ocean freight business?
Amazon has garnered a lot of attention recently for its moves to muscle into nearly all miles of delivery, and this development shows it’s apparently willing to log nautical miles as well.
An ocean freight forwarder organizes shipments from suppliers to far-flung receivers, which Flexport calls a $350 billion market. An entry into the ocean freight forwarding market could be significant because it could allow Chinese factories a more direct path to American consumers, Flexport CEO Ryan Petersen noted.
In fact, while Amazon could smooth logistics or make them cheaper for its Marketplace sellers, those sellers aren’t likely to take Amazon up on that. That’s because they’re unlikely to be willing to give Amazon, a rival retailer, the kind of information that an ocean freight company would be privy to, Petersen said. And it’s likely that any full-blown development of Amazon’s ocean freight forwarding capabilities is still months, if not years, away.
Still, the move could be a boon to Chinese sellers interested in reaching the American market as well as Amazon’s other markets globally, especially considering the expectation that Amazon would keep costs down.
“I don’t think people realize how threatening this is for their U.S.-based merchants, who are making money selling goods from Chinese factories,” Petersen told Retail Dive. “It makes sense for Amazon, for a company so focused on driving down costs. But considering that 40% of their business comes from their Marketplace, it would have to be a graceful transition and managed really well.”
The registration means that Amazon China can provide freight forwarding services to Chinese companies looking to move products directly into Fulfillment by Amazon warehouses, or “even cross-docking the goods for direct injection into Amazon’s courier network,” according to Petersen.
While some may think that Amazon has Alibaba in its sights with such a move, Petersen believes it may, if anything, be an answer to Wish, a mobile e-commerce platform that has built much of its fortunes so far on bringing Chinese sellers to customers in the U.S. and elsewhere.
“We think we’re going to be the second or third trillion-dollar-a-year marketplace,” Wish CEO Peter Szulczewsk. “We think Alibaba will be first and then it’s either us or potentially Amazon depending on how quickly, or if, they win in India.”
Taking on the ocean freight market “to create a streamlined, vertically-integrated system for Chinese factories to sell directly through Amazon would be a classic Bezos response to Wish’s threat,” Petersen said, predicting that “Amazon’s ocean freight offering could be a huge hit for Chinese merchants.