Amazon makes official entrance into truckload brokerage market

Lately, it seems odd when there is not any news coming about logistics inroads being made by global e-commerce bellwether Amazon. If it is not announcing a pending rollout of one-day free shipping for Amazon Prime members, then it is its entrance into the highly competitive truckload brokerage market, which came to light this week, according to various reports.

While Amazon did not have much to say publicly about its entrance into truckload brokerage, its website provides information about what it is and what it will be doing.

Entitled Full Truckload Service, the site says “Tap into the scale of Amazon as we extend our carrier network to give you best-in-class service at great rates.” And it adds that this offering is in Beta mode and now available in Connecticut, Maryland, New Jersey, New York, and Pennsylvania, hauling 53-foot dry van truckload freight.

So, now that Amazon has formally made its entrance into the truckload brokerage market, that leads to the question: what happens now and what does that mean for the major players in the truckload brokerage space, too?

Cowen analyst Jason Seidl wrote in a research note that past entrants to the brokerage space have used discounting to achieve market share, with Amazon viewed as likely to do the same, citing reports that indicated Amazon’s Full Truckload Service will offer discounts in the range of 30%-35%, akin to what Uber Freight did when it first entered the market.

“It is interesting that Amazon used predominately Northeastern states for their beta test as it is normally an unbalanced market (head haul in nature),” wrote Seidl. “However, the Northeast is highly correlated to the typical Amazon short haul type business.

Will Amazon’s next truckload move be to buy power assets? Seidl observed that is not likely in the short term, while noting that it could boost its trailer fleet, which would, in turn, open up ore potential owner-operators to move freight for Amazon.

As for the impact on established brokers, Seidl said that Amazon’s entrance could be viewed as a potential long-term negative for major players, including C.H. Robinson, Echo Global Logistics, J.B. Hunt, and XPO, among others with both assets and a brokerage presence. But what could work in these players’ favor, he noted, is that “not all customers will be looking to turn over their confidential supply chain data to Amazon, particularly larger players in the retail and consumer products businesses.”

With steep discounts being reported, Morgan Stanley analyst Ravi Shanker said that implies Amazon is making an operating loss on the transactions, which he wrote is consistent with what other new entrants to the space have done to try and scale up/gain share in the initial years.

“We note that it is still unclear as to whether AMZN is using third-party carriers (carriers that do not have any other transactional relationship with AMZN) or if they are only continuing to leverage their dedicated fleet for backhaul routes, like they have been doing so far,” commented Shanker.

An industry stakeholder told LM that development was a long time coming but took a bit of a different approach, in terms of what it means from a market competition perspective.

“If Amazon is making this move to better serve customers, it makes total sense,” he said. “And if that is the primary reason they are doing it, then it is probably a great idea. It is unclear if it is looking to go beyond what they are trying to do for Amazon customers at this point. The closer you get to the asset access to capacity, the more flexibility you have to deliver something faster to your customer. It makes total sense that Amazon would want to do that, and if it is 100% geared towards Amazon to handle customer orders, they may not be a lot of disruption for other brokers.”

What happens next with respect to Amazon’s Full Truckload Service remains to be seen at this point, but it is clear this move, as is the case with all of its logistics-related moves to be honest, has the industry’s attention and curiosity as well. With a healthy economy and capacity not as tight to come by as it was in 2018, there are opportunities a plenty for Amazon as a truckload brokerage and its many competitors, too.