Amazon and Walmart are poised to disrupt the trucking industry, and more large shippers may follow.
Walmart is moving to leverage its dedicated trucking network to attract third-party shipments in the US, and has invited truckers in its network to participate in its freight brokerage programme.
“We’re connecting with a select group of carriers like yourself to embark on an initiative that will transform the way we deliver to our customers. By joining us, you’ll have the opportunity to secure steady freight and play a crucial role in ensuring our freight reaches all our customers,” Walmart wrote to these truckers.
The retailer has increasingly courted third parties to use its logistics infrastructure. Last August it offered to handle transport goods from sellers on its marketplace platform from Asia to their US warehouses, as well as fulfil orders and manage returns from any e-commerce website.
Meanwhile, speculation is rising about Amazon planning to set up its own LTL operation and market that to third parties. The latest fuel to the fire came when the e-commerce giant posted job openings for LTL product managers and network design specialists.
Amazon currently offers LTL as part of its services under the Fulfilment by Amazon umbrella. In the truckload sector, it opened its lanes and capacity to shippers of all sizes in 2019 under the Amazon Freight banner.
In a research note, JP Morgan predicted that Amazon could enter the LTL market next year, which would likely hit the valuations of existing LTL carriers.
Satish Jindel, founder and president of SJ Consulting, commented that Amazon’s primary reason was likely a desire to have a better grip on ‘the customer experience’, which has been a key element of its growth strategy.
“They don’t care about brokerage. They want to control the customer experience, and they want to control the inbound volumes for that,” he said.
In a LinkedIn message, industry consultant Scooter Sayers noted that Amazon moved large numbers of shipments on LTL carriers. Taking just this in-house would be a big threat to commercial operators, even if it did not market surplus capacity in the open market, he explained.
Mr Jindel agreed, noting that Amazon has huge LTL volumes and that a lot of merchants sell through its platform. The cake would shrink for LTL carriers and brokers, and LTL pricing would take a hit – “not suddenly, but gradually,” he reckoned.
And he was not surprised by Walmart’s move to open its trucking network to third parties. In fact, he predicted that more large shippers – like Target, Home Depot – would follow suit, taking large volumes out of the market.
These developments are a threat to the trucking industry, both to carriers and brokers, said Mr Jindel.
“Everybody in the industry should be worried. If your biggest customer has the ability to be a provider of service, this is creating an environment where the pie is shrinking. Your ability to get that business again is practically gone.”
In part, the industry itself is to blame, he added, accusing it of complacency and sluggishness to develop solutions unless prodded by customers.
“It just keeps doing what it has been doing.”
