Despite Amazon’s dismissal of the speculation that the company plans to compete directly with UPS and Fedex, Bloomberg says it has seen documents that show the Web retailer plans to do exactly that.
Bloomberg says Amazon has a plan, which it calls “Dragon Boat,” that entails expanding the global reach of Fulfillment By Amazon, the unit that oversees storage, packing and shipping for third-party merchants who sell products through Amazon’s site. Dragon Boat will also place Amazon in a position to take on Alibaba, the Chinese e-commerce powerhouse. The companies are increasingly competing against one another internationally.
Bloomberg wrote that included in a 2013 report to Amazon’s senior management team was an outline 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.”
An unnamed source told Bloomberg that the Dragon Boat operation is “proceeding.”
It’s important to note that Amazon’s net shipping costs reached an all-time high, $1.85 billion, during the fourth quarter of 2015 and surpassed $5 billion for the full year. This was a record expense and may be another motivation for the e-commerce giant to build its own shipping and delivering business.
Geekwire dug into Amazon’s annual 10-K filing with the Securities & Exchange Commission last week, and found a widening gap between what Amazon charges customers for shipping and what the company pays to send those items through outside carriers. Despite generating an all-time high of $2.33 billion in shipping revenue (fees collected from customers) Amazon’s gross shipping costs (the total amount paid to UPS, FedEx and others) also reached a new high of $4.17 billion.
Amazon has in recent months begun to lease planes and registered an ocean freight business, but the company’s ambitions go much further. According to Bloomberg, Amazon plans to launch a new service, called Global Supply Chain by Amazon, which will create a total logistics operation, and this targets some of the “middlemen” who have overseen transnational trade, Bloomberg said.
“Amazon wants to bypass these brokers, amassing inventory from thousands of merchants around the world and then buying space on trucks, planes and ships at reduced rates,” Bloomberg wrote. “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.”
Amazon plans to initially team with third-party carriers, just until its business gets big enough but will eventually phase them out, Bloomberg said.