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Is Amazon (AMZN) Venturing into the Trucking Business?
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If rumors are to be believed Amazon.com Inc. (AMZN - Free Report) is likely to bring about a significant change in the logistics industry as the e-commerce giant is secretly working on an Uber like app to pair truck drivers with shippers, as reported by Business Insider. Citing a person with direct knowledge of the matter, the financial news agency revealed that the company may launch this "Uber for trucking" app in the summer of 2017.
Giving some insights about the app, Business Insider in its report said “The app will offer real-time pricing and driving directions, as well as personalized features, such as truck stop recommendations and a suggested "tour" of loads to pick up and drop off. It could also have tracking and payment options in order to speed up the entire shipping process.”
Citing an anonymous source, Business Insider revealed that the teams on this project are working at offices across Seattle, Minneapolis and India.
Why is Amazon Pushing into the Trucking Business?
We believe that the company has learned its lessons from the retail debacle of Christmas 2013 when the “Big Two” delivery services companies – United Parcel Service (UPS - Free Report) and FedEx (FDX - Free Report) – failed to deliver goods as promised due to bad weather conditions and lack of logistical planning.
Amazon tried its best to pacify customers by refunding the shipping costs and giving out $20 gift certificates as compensation.
We believe that Amazon is trying to avoid any such mishaps in the future and therefore attempting to bring deliveries within its own control.
Since its bad experience in 2013, the online retail giant has undertaken several initiatives to enhance the fulfillment infrastructure and lessen its dependence on the Big Two delivery service providers.
Amazon has utilized the distribution centers situated across the country to bring packages closer to customers for the final-mile delivery. At the same time, it has been experimenting with drone deliveries.
Furthermore, the company has bought thousands of trailer trucks over the past year and has introduced its own air cargo operations by purchasing over a dozen cargo planes. It should be noted that, this year, Amazon has already signed deals with The Boeing Company (BA - Free Report) and Atlas Air for leasing 20 cargo planes from each of the aircraft manufacturers.
Also, in Mar 2016, Amazon’s China arm registered itself as an ocean freight forwarder to operate in the United States. The registration allows Amazon to organize shipment of goods from a supplier or factory in one region, in this case China, to a company or customer in another, such as the U.S. The license will make it easier for customers to move goods into Amazon’s logistics network.
The license does not permit Amazon to purchase and own ships, though it can now offer international shipping through subcontracts. This strategic move has enabled Amazon to enter the ocean freight market, which is worth $350 billion.
Also, it gives the online retailer more control over shipping products from Chinese factories to U.S. shoppers. As the merchants will have to mention the exact value of all the cargo shipped, Amazon will be aware about pricing, allowing it to lower the costs for customers.
Amazon’s foray into the trucking business will enable it to have full control over the entire supply chain. Apart from this, by tapping into the $800 billion trucking industry, Amazon will be able to broaden its reach as a logistic company.
Our Take
Timeliness has become one of the most important factors in the e-commerce space. As competition intensifies, Amazon needs to keep pace with others in the space, if not stay ahead of them. Creating a logistics service could help it to dramatically cut costs.
Shares of Amazon have been steadily treading higher on a year-to-date basis. The stock generated a return of 12.6% compared with the Zacks Electronic Commerce industry’s gain of 9.2%.
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Is Amazon (AMZN) Venturing into the Trucking Business?
If rumors are to be believed Amazon.com Inc. (AMZN - Free Report) is likely to bring about a significant change in the logistics industry as the e-commerce giant is secretly working on an Uber like app to pair truck drivers with shippers, as reported by Business Insider. Citing a person with direct knowledge of the matter, the financial news agency revealed that the company may launch this "Uber for trucking" app in the summer of 2017.
Giving some insights about the app, Business Insider in its report said “The app will offer real-time pricing and driving directions, as well as personalized features, such as truck stop recommendations and a suggested "tour" of loads to pick up and drop off. It could also have tracking and payment options in order to speed up the entire shipping process.”
Citing an anonymous source, Business Insider revealed that the teams on this project are working at offices across Seattle, Minneapolis and India.
Why is Amazon Pushing into the Trucking Business?
We believe that the company has learned its lessons from the retail debacle of Christmas 2013 when the “Big Two” delivery services companies – United Parcel Service (UPS - Free Report) and FedEx (FDX - Free Report) – failed to deliver goods as promised due to bad weather conditions and lack of logistical planning.
Amazon tried its best to pacify customers by refunding the shipping costs and giving out $20 gift certificates as compensation.
We believe that Amazon is trying to avoid any such mishaps in the future and therefore attempting to bring deliveries within its own control.
Since its bad experience in 2013, the online retail giant has undertaken several initiatives to enhance the fulfillment infrastructure and lessen its dependence on the Big Two delivery service providers.
Amazon has utilized the distribution centers situated across the country to bring packages closer to customers for the final-mile delivery. At the same time, it has been experimenting with drone deliveries.
Furthermore, the company has bought thousands of trailer trucks over the past year and has introduced its own air cargo operations by purchasing over a dozen cargo planes. It should be noted that, this year, Amazon has already signed deals with The Boeing Company (BA - Free Report) and Atlas Air for leasing 20 cargo planes from each of the aircraft manufacturers.
Also, in Mar 2016, Amazon’s China arm registered itself as an ocean freight forwarder to operate in the United States. The registration allows Amazon to organize shipment of goods from a supplier or factory in one region, in this case China, to a company or customer in another, such as the U.S. The license will make it easier for customers to move goods into Amazon’s logistics network.
The license does not permit Amazon to purchase and own ships, though it can now offer international shipping through subcontracts. This strategic move has enabled Amazon to enter the ocean freight market, which is worth $350 billion.
Also, it gives the online retailer more control over shipping products from Chinese factories to U.S. shoppers. As the merchants will have to mention the exact value of all the cargo shipped, Amazon will be aware about pricing, allowing it to lower the costs for customers.
Amazon’s foray into the trucking business will enable it to have full control over the entire supply chain. Apart from this, by tapping into the $800 billion trucking industry, Amazon will be able to broaden its reach as a logistic company.
Our Take
Timeliness has become one of the most important factors in the e-commerce space. As competition intensifies, Amazon needs to keep pace with others in the space, if not stay ahead of them. Creating a logistics service could help it to dramatically cut costs.
Shares of Amazon have been steadily treading higher on a year-to-date basis. The stock generated a return of 12.6% compared with the Zacks Electronic Commerce industry’s gain of 9.2%.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>