This is equal to Apple planning iTunes for the record industry many years ago. If executed right, it will mark the end of Fed Ex’s and UPS’s dominance over shipping. It might take time to scale to the size required by Amazon. But if there’s one thing Bezos has demonstrated over the years, it is a patience to develop ideas and nurture them to become gigantic businesses.
The ambitious strategy promises to turn FedEx and UPS into Amazon rivals, but also will pit the Seattle giant against Chinese counterpart Alibaba Group Holding Ltd. Both companies are vying for dominance of the rapidly growing cross-border e-commerce market, which by 2020 is expected to swell into a $1 trillion industry serving 900 million shoppers, according to a June report from Accenture and AliResearch, Alibaba’s research arm.
Amazon’s plan would culminate with the launch of a new venture called “Global Supply Chain by Amazon,” as soon as this year, the documents said. The new business will locate Amazon at the center of a logistics industry that involves not just shippers like FedEx and UPS but also legions of middlemen who handle cargo and paperwork associated with transnational trade. Amazon wants to bypass these brokers, amassing inventory from thousands of merchants around the world and then buying space on trucks, planes and ships at reduced rates. Merchants will be able to book cargo space online or via mobile devices, creating what Amazon described as a “one click-ship for seamless international trade and shipping.”
‘Ease and Transparency’
“Sellers will no longer book with DHL, UPS or Fedex but will book directly with Amazon,” the 2013 report said. “The ease and transparency of this disintermediation will be revolutionary and sellers will flock to FBA given the competitive pricing.”
Amazon will partner with third-party carriers to build the global enterprise and then gradually squeeze them out once the business reaches sufficient volume and Amazon learns enough to run it on its own, the documents said.
If the logistics business takes hold, financial services could follow, with Amazon giving loans to merchants, processing international payments and consulting its network of sellers on customs and tax matters.
The strategy echoes the company’s move into cloud services, which it developed internally and gradually expanded into a commercial enterprise that’s now Amazon’s fastest-growing and most profitable division. Amazon never made big proclamations about its cloud operations in the early days and instead marketed directly to software developers. Companies like Hewlett Packard, Dell and Microsoft largely ignored the threat and are now playing catch-up.
“This is classic Amazon fashion,” said Colin Sebastian, an analyst at Robert W. Baird & Co., who says a global logistics operation could become a $400 billion business for Amazon. “They take baby steps along a long path, which allows some companies that could be disrupted to remain in a sense of denial. Amazon rarely takes one big step forward that shocks the market.”
This is incredibly bearish, long term, for FDX, UPS.
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