Fuller to forwarders: Adapt to Amazon or perish

Blue Amazon Prime truck on one side, man speaking to audience on right

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.”