What Amazon is doing with its supply chain could devastate the competition
Amazon, regardless of how many sales you think you've
lost to it, I am here to tell you that it's about to get much
worse. This is because of a huge global supply chain move
planned by Amazon, one that could disrupt product
access, sharply lower Amazon's costs and accelerate
product delivery to shoppers.
How can some changes to the supply chain do all that?
Let's look at what we know.
The news started with a report from Bloomberg Business
that detailed a multiyear plan to have Amazon compete
with UPS, FedEx and — most interestingly — Alibaba.
This includes leasing planes and registering an ocean
freight booking business. The plan, according to
documents Bloomberg examined, is for "a global delivery
network that controls the flow of goods from factories
in China and India to customer doorsteps in Atlanta, New
York and London. The project, called Dragon Boat, is
proceeding."
The plan is massive in scope, entirely bypassing brokers
that deal with cargo and global transit paperwork.
Amazon would then be "amassing inventory from
thousands of merchants around the world and then
buying space on trucks, planes and ships at reduced
rates. Merchants will be able to book cargo space online
or via mobile devices, creating what Amazon described as
a "one click-ship for seamless international trade and
shipping."
Think is just some optimistic plan floated before the
Amazon board, but something that will never happen? So
did I, until Kwetu shy blog reported that Amazon "had
gotten its license to act as a wholesaler for ocean
container shipping from the U.S. Federal Maritime
Commission on Nov. 13." The story added that the
Chinese Ministry of Commerce granted the license on
Sept. 17. "The license was given under the name Beijing
Century Joyo Courier Service Company Limited, one of
the trade names for Amazon China and Amazon Global
Logistics China, according to documents posted on the
Ministry of Commerce website. Having licenses on both
ends means Amazon can now buy space on shipping
containers at wholesale rates and resell it at retail
rates."
What this all means is that Amazon is actually doing this,
and it may get fully under way in time for this year's
holiday shopping season. Until now, Amazon's threat was
that it could deliver simplicity, speed and a healthy dose
of "one-stop shopping" (that last one courtesy of its
massive third-party seller program).
With pricing, though, Amazon's only play was waiving
shipping charges — sometimes. But its base price was
usually within pennies of what Walmart and Target were
selling things for. Amazon's pitch was a superior and
effortless experience.
This supply chain gambit could change all of that. In
theory, this move could sharply cut Amazon's costs. A
normal retailer would simply add it to margin, but that's
not how Jeff Bezos sings. He'll forgo profits every time
if it means boosting market share and eliminating
competition. In effect, this is Amazon's rather
sophisticated twist on Walmart's original attack plan for
smaller physical chains.
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