Wednesday 7th Dec 2016 - Logistics Manager

The customer that reckons it can do logistics better

Is this the year that will see a major shake up the logistics market? Ocado shares jumped by a fifth in a day last month after rumours started circulating in The City that Amazon was interested in buying the business, as part of plan to launch a full grocery delivery service in the UK.

Malory Davies FCILT, Editor.

Malory Davies FCILT,
Editor.

It’s the latest in a series of reports that have also included suggestions that Amazon is launching its own air cargo operation, and handling its own freight forwarding. It already offers fulfilment services to small retailers, and has the Amazon Logistics delivery operation.

The Ocado rumour has been given credibility by the fact that the company launched Amazon Pantry in the run-up to Christmas. This is a store where Prime members can shop for groceries and household products, and have them delivered to the doorstep for a delivery fee of £2.99 for the first box and 99p for each additional box in the same order. The idea is that this allows Prime members to shop for groceries and household products in everyday package sizes that are cost prohibitive to ship for free.

This article appeared in the February 2016 issue of Logistics Manager.

This article appeared in the February 2016 issue of Logistics Manager.

Press reports from the United States in December suggested that Amazon plans to lease 20 Boeing 767s, and start its own air cargo service. There have also been reports that it has acquired an ocean shipping licence in China, enabling it to operate as a freight forwarder. The air cargo story originated at the “Seattle Times” and suggests that Amazon wants to take control of its cargo operations and avoid delays at third party carriers in the US.

Amazon never comments on such suggestion – so at the moment, this all falls into the realm of speculation.

But, assuming there is some fire behind all this smoke, there are a number of considerations that flow from it – perhaps most obviously the fact that one of the largest and fastest growing retailers in the world is not satisfied with some of the logistics services that it is being offered, and reckons it can do better itself.

Amazon turned over some $89 billion in 2014 and it is growing at some 25 per cent a year. The impact that an organisation with that scale can have on the market is significant. Royal Mail’s chief executive Moya Greene recently warned that “as a result of Amazon’s roll-out of its own delivery network, we estimate that volume growth in our UK addressable parcel market has, on average, been reduced to around one-to-two per cent per annum in the short term”.

How far Amazon intends to pursue these opportunities might not be clear, but what is clear is that the company has no qualms about expanding its activities in the logistics arena. And that in turn could mean that more and more logistics businesses find that their biggest competitor is now Amazon.

Malory Davies FCILT,
Editor