In recent weeks, speculation has mounted that Amazon.com Inc. plans to launch a global shipping and logistics operation that will compete with United Parcel Service Inc. and Federal Express Corp.
Asked about reports that the company was leasing planes and had registered an ocean freight booking business, Chief Financial Officer Brian Olsavsky downplayed Amazon’s ambitions last month in an earnings call. He said the company was simply looking to supplement its delivery partners — not replace them — during peak periods like the Christmas shopping season
Amazon documents reviewed by Bloomberg News reveal a far bolder plan.
A 2013 report to Amazon’s senior management team proposed an aggressive global expansion of the company’s Fulfillment By Amazon service, which provides storage, packing and shipping for independent merchants selling products on the company’s website. The report envisioned a global delivery network that controls the flow of goods from factories in China and India to customer doorsteps in Atlanta, New York and London. The project, called Dragon Boat, is proceeding, according to a person familiar with the initiative, who asked not to be identified because the information isn’t public.
According to Bloomberg it is also about the growing cross-border e-commerce market, expected to grow to a $1 trillion industry. (Nothing new to Early Moves readers.) Amazon and Alibaba are going to directly compete over this. Bloomberg:
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.
We talked recently about Amazon’s logistics endeavours:
Owning its own delivery network is the logical next step for an online retailer the size and ambition of Amazon. There is a lot of potential on the marketplace side as well. Which begs the question how fast and how far Amazon will build its network out and in the process open it up to marketplace sellers and maybe even other online retailers outside its marketplace.
More and more, Amazon’s future looks like the company becoming a (giant) infrastructure provider1 to online retail rather than ‘just’ being a mere online retailer. That is a very big pie.
More on the topic: