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The great capacity gamble: Amazon or Walmart?

As Walmart denies reports it is pressuring carriers to stop hauling for Amazon, fleets nonetheless may have to choose

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The Walmart/Amazon retail battle is waging on, and based on recent reports, the battle may have moved from the online retail space into the driver’s seat. Multiple reports have indicated that Walmart has threatened to withhold business from any trucking company that continues to haul goods for Amazon.

Walmart has denied making any such threats, but the mere suggestion of it raises questions that carrier executives need to address.

“On the one hand, we find this report somewhat hard to believe because it is unlikely that a shipper, even of [Walmart’s] size, would have the power to dictate who vendors can work with, at least without adequately compensating them for their potential loss of business,” said an investor note from Morgan Stanley analysts. “Hence the net result is likely to be neutral at the least to carriers. On the other hand, this report is somewhat consistent with commentary from [JB Hunt] management at our HQ visit last Tuesday, in which management noted plans to maintain/limit JBHT’s DCS (dedicated trucking) exposure to Amazon with the belief that Amazon has plans to fully insource trucking over time.”

That view also aligns with the approach Amazon seems to be taking, rapidly expanding its supply chain options. Amazon is now able to ship goods with its own trailers, local delivery fleet, ocean vessels and cargo planes in addition to its continuing efforts to develop successful drone delivery. And those fleet options continue to grow.

Satish Jindel, president of SJ Consulting Group, made a presentation earlier this month at the SMC3 annual summer conference in Palm Beach, FL, and called the ongoing battle between the two retail giants a “cold war.”

A Walmart spokesperson told DC Velocity that the company’s truck fleet travels over 700 million miles annually, but declined to say how much of that mileage was with for-hire carriers.

Walmart has been on a buying spree lately in an effort to keep up with Amazon, recently acquiring Bonobos and Modcloth, which follows the $3.3 billion acquisition of last August. Amazon has countered with its $13.7 billion deal to acquire Whole Foods. Investors, though, are unsure of that being a done deal, with some suggestion that Walmart may try to mount a counterbid for Whole Foods.

Walmart’s threat to the trucking companies is not the first such warning the company has issued to suppliers. According to the Wall Street Journal, Walmart has told tech companies it does business with to stop using Amazon Web Services (AWS) and instead use Microsoft’s Azure platform.

AWS currently holds 44% market share in the web hosting and services market, according to Synergy Research Group.

“Our vendors have the choice of using any cloud provider that meets their needs and their customers' needs,” Walmart spokesman Dan Toporek, told TechSpot. “It shouldn’t be a big surprise that there are cases in which we’d prefer our most sensitive data isn’t sitting on a competitor’s platform.”

Whether the threat is real or not, trucking companies may need to hedge their bets; do they choose to go with the ever-growing behemoth that is Amazon or do they play it safe and maintain a good relationship with Walmart? There are risks with either choice, but it may be one that fleets may soon have to make.

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