Amazon Launches Amazon Freight, a New Freight Brokerage Platform

Just a few weeks after we covered the expansion of Amazon Shipping, Amazon is shaking up the freight brokerage industry with the launch of Amazon Freight, a new digital freight brokerage offering substantial discounts to market rates. FreightWaves broke the news.

We do not yet know what portion of trucks available for booking on the service are Amazon owned versus owned by others in Amazon’s logistics partner network.

Given its scale, we think Amazon is already one of the largest freight operations in the US purely through the management of its own supply chain. Amazon ships goods coming in via ocean freightliners as well as between its fulfillment centers using both its fleet of trucks and trailers and others’ as needed.

The launch of Amazon Freight follows a pattern we’ve seen from Amazon over the years. First, Amazon invests in its own infrastructure as a way of creating a sustainable competitive advantage. (For example, Amazon’s own fulfillment centers/FBA infrastructure and AWS.) Then, having invested large sums into these systems, Amazon opens them up for third parties to pay to use, both in order to recoup costs and over time perhaps even earn some margin — in the process continuing to invest in the systems, leading to an even greater competitive advantage.

A larger Amazon Freight system will also likely offer Amazon some insulation against the price volatility of using third party freight services, particularly around the holidays when Amazon volume spikes. Now, Amazon could let third parties fund a larger fleet throughout the year, and then potentially just take over more of that capacity itself in November and December.

Per Freightwaves, Amazon’s rates are 25 to 33% lower than typical contract rates offered on routes out of Connecticut, Maryland, New Jersey, New York, and Pennsylvania. So, it appears Amazon is willing to run this business at little to no margin or at a loss in order to gain market share and ramp up the flywheel on its freight marketplace.

Ultimately, it was just a matter of time until Amazon opened this up, and we generally expect Amazon to become a meaningful marketplace for third party freight capacity in North America over the coming years.

Subscribe to TJI

TJI is uniquely focused on Amazon. A TJI subscription includes access to our latest information and data about Amazon.

TJI Research provides a comprehensive picture of changes happening across Amazon’s businesses through a combination of primary research and our assessment of new information from around the world.

Choose the subscription plan that best fits your needs.

Share