In the last two years, Amazon has set its sights on expanding and controlling the shipment of their deliveries to consumers. If you are a trucking or intermodal shipper, now is the time to take a closer look at the history of Amazon’s prior expansions, and prepare for the day that Amazon steps into your market and challenges you directly.
Do you have the pricing and analytical capabilities to challenge the $500B behemoth?
If history is any indication, you’ve got about 5 years to prepare before the onslaught arrives.
Why 5 years? Let’s look at how and why Amazon built out Amazon Web Services (AWS), and how they created a cloud service that dominates the industry.
In 2003, Amazon put together a vision for their computing infrastructure that would standardize the tools they would use to deliver across their enterprise. Even at this early stage, they already had the foresight to realize they could sell this service to other companies. Fast forward to 2006, AWS was officially released as a way for companies to use Amazon’s infrastructure for cheap computing power and storage. Offering both long-term and spot market rates, Amazon’s scale drastically undercut the price of traditional hosting providers. Not only that, Amazon’s continuous improvements built an ecosystem that put them years ahead of other cloud providers.
By 2012, AWS surpassed $1B in revenue. In 6 short years, Amazon had effectively built an advantage in revenue and technology that Google, Microsoft, IBM, and every other hosting company are still struggling to close.
Now, let’s apply that same timeline to the transportation and shipping industry. Amazon has clearly identified an opportunity with the existing shipping and transportation network. Over the last few years, they’ve started putting the pieces into place that will allow them to control their own infrastructure. In 2016, they announced an investment in air freight. 2017 has seen a major move into package freight.
Is there any doubt that once the infrastructure is in place, they’ll start selling their excess capacity to other companies? Does the transportation industry have the same types of long-term and spot market pricing opportunities?
Right now, Amazon is in the same place for shipping that they were with AWS in 2005 or 2006. If we apply a similar timeline, it means that in the next 5 years, they’ll have the infrastructure in place to be a dominator in the industry.
If you are a transportation company, ask yourself:
- Do you have the automation in place to get the data you need in close to real time?
- Do you have the predictive analytics to address dynamic capacity and demand?
- Do you have the pricing capabilities to know when to drive margin and when to compete on price?
Now is the time to prepare for the battle, or risk being overrun by the retail e-commerce giant.
If you’re ready to step up to the challenge, we’ll talk in depth about what you’ll need in the coming entries.