Amazon Launches Service to Disrupt Shipping Industry
Amazon, the largest internet retailer in the world, is launching a new delivery service for businesses called Shipping with Amazon (SWA), according to The Wall Street Journal.
The launch by the tech giant will put it in direct competition with leading shippers such as UPS and FedEx.
Following the news on February 9, 2018, UPS's stock declined about 6.5% in premarket trading and FedEx's stock fell by just over 5%.
SWA is expected to roll out in Los Angeles, California in the US soon, in collaboration with third-party sellers that sell goods via its website.
The service is expected to then spread to other cities around the US.
To succeed, Amazon plans to undercut the incumbent delivery services on price, among other strategies.
Amazon will send SWA drivers directly to retailers and warehouses to pick up parcels, cutting out other delivery services from the process.
It will then take the packages directly to consumers in the 37 US cities where it currently delivers.
The announcement follows the company’s recent forays into logistics and delivery as part of its strategy to take greater control of shipments — in order to win more flexibility and digitally monitor end-to-end shipping.
In 2015, Amazon took steps such as leasing planes for ‘Prime Air’ in the US to win more control over its shipping logistics, and buying extra trailers to beef up its shipping capacity during the holiday season.
A year later, Amazon signaled its intent to enter the shipping freight market when it gained approval from the Federal Maritime Commission in the US to act as an Ocean Transportation Intermediary.
In January 2017, Amazon revealed it had started coordinating its own shipments from Chinese merchants to its warehouses in the US.
While it does not currently own any ships, it is functioning as a freight forwarder and logistics provider, reserving space on freighters and handle trucking shipments from port to a warehouse.
Amazon has coordinated shipment of 150 containers from China since October 2017.
These actions have galvanized shipping companies like Maersk to respond.
The world’s largest carrier is angling to become supply chain partners with tech giants like Amazon and Alibaba by developing new programs that combine ports, logistics and shipping into one.
According to Bloomberg, Maersk’s future strategy of combining it’s conglomerate’s container activities, including a shipping line, a port operator and a freight-forwarding service provider has been developed to offer an attractive integrated service to Amazon — and avoid the possibility it may become a competitor in the future.
As part of this new digitization strategy, Maersk announced in January 2018 that it had formed a joint venture with IBM to develop the use of blockchain technology to manage and track cross-border trade.
In an interview with Bloomberg, Soren Skou, CEO, A.P. Moller Maersk A/S, explained: “Amazon is a threat if we don’t do a good job for them.
“If we don’t do our job well, then there’s no doubt that big, strong companies like Amazon will look into whether they can do better themselves.”