Opinion: Why Amazon’s 3PL is not a threat to the average brokerage
Recently, news broke that Amazon has finally launched their 3PL services to shippers nationwide: freight.amazon.com. This has been an anticipated move for Amazon; some might even say it’s been a long time coming. The Amazon brand carries immense power in the retail and ecommerce worlds. However, will this power translate to the 3PL space? Is Amazon going to put freight brokerages nationwide out of business like they did to bookstores decades ago?
The answer is no, probably not. Here’s why:
1) Amazon is offering services for dry van full truckloads only. A typical freight brokerage will sell dry van, reefers, flatbeds, partial truckloads, and usually LTL. More developed brokerages sell all of those, plus volume LTL, reefer LTL, over-dimensional flatbeds, specialized equipment like tankers or end dumps, international, expedited, even customs brokerage, warehousing services, and more. Experienced 3PL sales reps sell more than one service to their customers. They avoid selling on price, and they strive to add value to the organizations they work with. Even Amazon will take years to build a portfolio that deep, and right now it doesn’t look like it has any desire to play with freight that is outside of specifically what they are looking for, which is dry van full truckload only.
2) Amazon is offering instant quotes for dry van truckload lanes, right on their front page. However, as is the case with most publicly available rates, they are high. Any shipper who is comparing rates will immediately see the truth in this. A large part of Amazon’s success in ecommerce has been that the average person doesn’t mind paying a couple extra dollars to get their purchases the next day, or the same day. Amazon is adding value to consumers – they don’t need to leave their couch and the price is close enough to justify it. Amazon is not adding any value like that to their brokerage services. Studies have shown that the average SMB spot-market shipper is reaching out to at least 2-3 carriers or brokers for rates. Shippers have done this for years, and most likely won’t blindly trust a quote from a website to be the lowest they can find. Additionally, Amazon is not supporting same-day shipments at this point, so shippers would still need a provider to service those. Yes, Amazon does say that the capacity is guaranteed and they won’t give freight back. It remains to be seen if that will be true if and when the market tightens back to 2017-2018 levels.
3) At the surface level, it appears that Amazon is utilizing their network history and a healthy amount of technology to provide rates to customers and cut down on manpower needed to run their brokerage. This is much in the same vein as Convoy and Uber Freight. Most carriers that work for Convoy or Uber will tell you that while the apps are nice, the rates are cheap. Carriers are not looking favorably on Amazon for that reason. Also Amazon’s rates for their current in-house transportation are regularly 10-15% under market rates, and drivers pull them when they are out of other options. Amazon offers their “reliable carrier network,” but at the end of the day, every brokerage has access to the same pool of carriers, and it will come down to the relationships built on the carrier side.
So how do we fight Amazon? As brokers, we do what we do best – build solid relationships on both the customer and carrier side, sell based on value, not price, and be a trusted and proactive source of information for our customers. I don’t think Amazon poses a threat to take our customers if we have done those three things. What do you think? Will Amazon annex the freight world into its empire?
