Amazon shook the electronics distribution industry when it entered the b2b components space. Now Amazon’s move into the ocean-shipping business has logistics companies rattled.
The ocean freight business has been in turmoil since late last year when South Korea’s Hanjin Shipping Co., which accounted for about 3 percent of shipping containers globally, filed for bankruptcy. Dr. Zvi Schreiber, CEO and founder of Freightos, a digital marketplace for freight forwarders, said logistics companies have been eyeing Amazon suspiciously for years.
“Yesterday, their fears were confirmed,” Schreiber said in a statement, “with the revelation that Amazon has been quietly arranging China-to-U.S. ocean shipments. Amazon’s deep pockets – the company spends an estimated $12 billion per year on shipping – means the trillion-dollar freight industry is now coming up against the very same disruptors that changed the name of the game for retailers, manufacturers and computer storage.”
According to a Freightos industry survey, top forwarders average 2 to 4 days to provide freight pricing, exposing them to competition from more automated, online services. The options are pretty clear: adapt or control-alt-delete.
Schreiber, who manufactured electronics components in China, found it difficult to get shipping quotes in a timely manner. Few freight forwarding companies have adopted digital platforms for conducting business. Freightos provides such a platform to link customers with freight services providers.
Amazon appears to be skirting the third-party freight business. The Seattle-based e-commerce giant has started handling the shipment of goods from Chinese retailers that sell on its platform to its vast U.S. warehouses. Previously it left this to global freight-transportation companies.
Since October, Amazon has helped to ship some 150 containers of goods from China to the U.S., according to The Wall Street Journal, which cites shipping documents collected at ports of entry.
Shipping – like electronics--is a trillion-dollar industry, according to MIT Technology Review. While Amazon doesn't actually own any ships itself, it has started reserving space on ocean vessels and acting as a global freight operator and logistics organizer. Other freight operators include FedEx and UPS, which are widely used by electronics distributors.
Amazon’s entry into the b2b space made electronic components more widely available outside the typical supplier-direct and authorized-distribution channels. The move challenges distributors on several fronts. Amazon has become a price leader in the retail business: the electronics supply chain has been battling eroding component prices and shrinking profit margins for decades. It has also been battling the introduction of counterfeit electronics components through largely-online channels.
Although the electronics supply chain has not yet seen a significant impact from Amazon, industry proponents caution against sourcing from any reseller that cannot guarantee parts come directly from a supplier. Amazon lists numerous vendors on its site but does not distinguish authorized and nonauthorized sellers.
Logistics companies seem to be sharing distributors' pain. Earlier this year, Alibaba and the Maersk shipping line announced an alliance.
“Global logistics is taking center stage like we’ve never seen before,” Schreiber said in a statement. “This gritty industry has taken the background role in the past but now has the potential to affect the way every product is sourced, bought and delivered. Building on a massive 80 percent e-commerce market share in China, Alibaba’s new partnership with Maersk - which controls 25 percent of all container ships globally - means Chinese manufacturers and retailers have a direct line to U.S. buyers, avoiding middleman markups."
Maersk is testing the waters of digital sales with one of the world’s largest e-commerce companies while threatening forwarder business, Schreiber added. "But for Alibaba, this is a direct challenge to global retailers like Amazon. Beyond drones and futuristic supermarkets, Amazon opted to get licensed as a forwarder (NVOCC). Alibaba one-upped them by going directly to the world’s largest ocean liner. Point, Alibaba.”