NASHVILLE, Tenn. – International freight forwarders are going to face the same existential threat from Amazon and Uber Freight that domestic truck brokers are facing, FreightWaves founder and CEO Craig Fuller told a gathering of air logistics professionals here.
The war is being waged over scale.
Amazon founder Jeff Bezos has indicated he wants to control 10% of the $8.5 trillion logistics market by 2025, essentially bypassing the legacy FedEx and UPS shipping networks. As truckers are discovering, Amazon and Uber are difficult to compete against on high-density lanes with repetitive, similar shipments because they have the technology to optimize tedious processes and investors willing to subsidize heavily discounted rates for long periods.
“You can’t beat them. They’re going to do what they want to do. So you have to find something that they can’t do well, which is typically nonstandardized, non-high-volume freight,” said Fuller, a tech entrepreneur himself who is familiar with the Silicon Valley mindset behind Amazon and Uber. Using data to eliminate price discovery in negotiations is the primary way the tech giants compress margins and keep growing market share, which is what venture capital demands at this stage.
Amazon now operates as an ocean transportation intermediary and runs its own air network with leased aircraft.
“If your business is high volume, easily commoditized freight, you’re at risk because Amazon, Uber and all these venture capital-backed companies can optimize that hourly. But if your business is handling specialized product X where it takes human intelligence, or coordination, or it’s a niche, perhaps a very specialized service, not high volume, then you’re going to thrive in that environment,” Fuller said Tuesday in a keynote presentation at Air Cargo 2020.
The event brings together a diverse audience from the Airforwarders Association, Airports Council International and the Air & Expedited Motor Carriers Association. Early in his career, Fuller ran an express trucking division serving airlines with airport-to-airport moves. FreightWaves aggregates huge amounts of freight-related data to model market changes.
According to a FreightWaves’ analysis of Amazon’s freight brokerage operation last year, certain truck lanes were as much as 30% cheaper than the market rate.
Truck brokers’ gross margins are going to plunge by a third, to 10%, by 2025 unless they quickly adopt technology that can digitize load matching and offer instant pricing, Fuller predicted. But the cost of capital and the low-rate environment make it difficult for most companies to make the needed investments.
The Amazon and Uber playbook, much like that of Walmart before them, is to grab as much market share as they can with little regard for rules and business niceties, and then improve their practices to gain broader acceptance, Fuller said.
“Amazon is not your friend. If you do business with Amazon, you need to keep a very healthy distance between your business because they can put you at risk,” as FedEx has found out.
Last summer, frustrated by demanding expectations for high service and low yields, FedEx ended its ground delivery and air service relationships with Amazon.
“They’re a really tough competitor that doesn’t need to make a profit with a well-respected brand,” Fuller said. “I would not want to do business with Amazon. In fact, they would not be a good customer. But as a consumer, I absolutely love the Amazon service. But I would not want them as a customer, unless I get to set the rules of engagement, which they would not like.”
Noble1= Shamash (Shemesh/Utu) the Babylonian God of the Sun(god of justice, morality, and truth-(enforcer of divine justice )
Quote:
“You can’t beat them. They’re going to do what they want to do. So you have to find something that they can’t do well,”
BINGO !!!
I’ll tell you one thing that they currently can’t do well . They can’t pay driver employees well ! At least not at fair value . What are these so called logistic geniuses worth without drivers in this industry ??? ZERO until the autonomous trucks come into the picture !
Quote :
“If your business is high volume, easily commoditized freight, you’re at risk because Amazon, Uber and all these venture capital-backed companies can optimize that hourly. But if your business is handling specialized product X where it takes human intelligence, or coordination, or it’s a niche, perhaps a very specialized service, not high volume, then you’re going to thrive in that environment,” Fuller said Tuesday in a keynote presentation at Air Cargo 2020.”
You wouldn’t believe how ill managed those specialized services are as well ! When you speak about intelligence and coordination , that’s exactly the cause of the problem . THE LACK OF IT ! Had this not been the case , the trucking industry would have been much better structured and managed from the get go .
That being said , they still depend on drivers for now . I just wish a bolt of lightening would strike and wake them up to unite !
If you really want to take a good look at tech , has anyone , and I mean anyone attempted to give “Microsoft Windows” a run for their money ??? Nobody worth mentioning , thus nil !
Bitcoin ? LOL ! This was a given that the big boys would take control . So that idea pretty much was a wash . The big boys control its value on Wall Street !
In the early 90’s I thought about doing something similar along the lines of UBER but didn’t see the profitability in it . So scratched that one out .
Then in the late 90’s I was approached by a couple of associates who wanted to partner with me . I suggested domestic pet insurance . They laughed in my face and I didn’t bother with it any further . The following year or two Merrill Lynch announced that they netted $80 Million in domestic pet insurance . Today pet insurance is a cash cow .
At the age of 7 I began saying that hydrocarbon emissions should be filtered . AT 7 YEARS OLD ! At the age of 12 I even gave a suggestion implicating government where they would have capitalized tremendously . Again I was laughed at . So shelved that idea as well . What is the main concern in that regard today ? LOL ! FILTERING IT ! Believe it or not at the age of 3 I asked my parents where did the exhaust go that was released from watercraft . I found this to be illogical . When they told me and confirmed what I thought , I freaked at age 3 !
Now the challenge in this industry is to get drivers to unite . I was told that I would never succeed . Perhaps due to the race against the clock facing autonomous trucks . Too bad though , but I certainly won’t give up . I shouldn’t have allowed myself to be discouraged from entering this industry 30 years ago . No regrets though . Whatever will be will be .
In my humble opinion ……