Dive Brief:
- S&P Global Ratings issued a report and press release Thursday, arguing Amazon's reported new shipping service, Shipping with Amazon (SWA), will not provide direct competition to 3PLs such as FedEx and UPS, because Amazon currently lacks the logistics infrastructure to truly compete.
- Rather, the report claims SWA will help Amazon mitigate its own "huge" shipping costs, which S&P totaled around $21.7 billion in 2017 alone.
- Amazon could threaten landed 3PLs if SWA "undermines market pricing" or "materially changes the bargaining position of Amazon relative to the established package carriers," according to the press release emailed to Supply Chain Dive.
Dive Insight:
While Amazon could bring huge changes to the logistics industry if SWA takes off, it's still unclear just how intense the increased competition will be.
S&P thinks it's too soon to be worried; SWA would be Amazon's first serious experiment in the logistics industry, and right now Amazon simply doesn't have the infrastructure, relationships and experience to compete on the level of FedEx and UPS. But Amazon will build that over time, and since we still don't have a lot of details on SWA, it's really hard to predict with certainty what the 3PL market will look like with Amazon finally in the ring.
Firstly, as S&P notes, SWA will help Amazon mitigate its own shipping costs and possibly even make shipping faster and cheaper for its customers and third-party sellers. That's huge in itself, and could prophesy a loss of business for the 3PLs Amazon uses, which include both FedEx and UPS.
Whether or not Amazon will then begin to take customers away from FedEx and UPS is still too opaque to foresee. What the new shipping service will do is force retailers to fully digitize, according to Jon Marti, CEO of cloud-based solutions provider Point Inside, which specializes in helping retailers enhance their omnichannel offerings.
"I think SWA is going to put more pressure on retailers to ship direct," Marti told Supply Chain Dive. "It's going to be more pressure to make sure your omnichannel offerings are running really efficiently. Retailers don’t like the word 'digital' because it’s a vacuum in which you throw a lot of money and lose money. They haven’t quite figured out how to run a digital business. Hopefully in 2018 we’ll see a little more learning and profitability."
