Amazon Could Upend The US Trucking Industry By Undercutting Prices By A Third

According to FreightWaves, market prices are being undercut by as much as a third by the trial version of the online freight-brokerage platform that is being developed by Amazon. This new etch development by the largest e-retailing company of the world is set to rival companies such as C.H. Robinson and Uber Freight.

“Tap into the scale of Amazon as we extend our carrier network to give you best-in-class service at great rates,” the Amazon website says.

“Amazon Freight is a free, marginless brokerage,” FreightWaves said.

According to FreightWaves, another industry is also poised to be disrupted because of the plans of Amazon to shorten its two-day shipping for Prime members to one-day shipping which will set the retailers scampering to follow similar measures.

FreightWaves further said that market prices were set to get undercut by between 26 per cent and 33 per cent because of the trial version of the online freight-brokerage platform being developed by the e-commerce giant.

In the United States, a very large cross country network of trucking carriers is used by Amazon to transport very large volumes of products throughout the country. The company last week beat analysts’ expectations for its first quarter financial performance. According to an Amazon spokeswoman quoted in the media, the new technology being developed by it is “intended to better utilize our freight network,” and has been present “in various forms for some time”.

According to the company website, in New York, New Jersey, Pennsylvania, Connecticut, and Maryland, access to 53-foot full truckload dry van freight is being offered by the “beta service” by Amazon. According to Amazon website talking about the new service, it urges its customers to “tap into the scale of Amazon as we extend our carrier network to give you best-in-class service at great rates”

Describing the new service offer by Amazon to be a “free, margin-less brokerage”, FreightWaves informed that Amazon would be charging about $709 to moving goods from Albany, New York, to Washington, DC which is just over 33 lower to to DAT’s broker-to-carrier spot rate which is about $1,066.

“The analysis suggesting dramatic undercutting of pricing is false,” Amazon said but refused to elaborate further.

It tried and tested business strategy of market domination would potentially be used by Amazon – which in this case is the strategy to offer discounted rates while absorbing the losses in its efforts to increase its market share. And according to the strategy, after acquiring a sizable portion of the market, Amazon raises increases prices and makes profits after it becomes a dominant force in the market and by scale while also driving out rivals out of business on price competition.

While new entrants in the freight business such as Uber Freight that managed to raise $125 million in revenue in the fourth quarter of 2018, are competitors for the new tech based service by Amazon, it would also offer tough competition to est6abolsuihed and long time brokers such as C.H. Robinson.

(Adapted from BusinessInsider.com)



Categories: Creativity, Economy & Finance, Strategy, Sustainability, Uncategorized

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