Ships and terminals through Amazon’s eyes

Industry Database

COMMENT: Lately, there has been much talk about the entry of new disruptors into ocean shipping, with Amazon most frequently referenced, writes Peter de Langen.

When ‘entry’ is understood as providing ocean freight services, this is now happening: Amazon is already handling shipment of goods by ocean for Chinese merchants that sell on Amazon’s site. In addition, Amazon has entered the market for delivery services for businesses, competing with the like of UPS and FedEx. It has not gone unnoted that Amazon owns and leases more than 40 cargo planes and invests in airport hubs in the US.

This raises the question of whether Amazon may at some point start to own/charter containerships and container terminals. I may have to eat my words in the future, but I think that unlikely. Yes, the logic of Amazon creating a competitive edge over other e-commerce companies by leveraging its huge scale through building a parcel distribution network is straightforward and can be summed up as ‘distribution is the key’.

However, this logic is less sensible when applied to investment in terminals and ships as these assets are not needed or valuable in developing superior distribution networks for specific consumer shipments. In this respect it is relevant to note that Cainiao, the logistics arm of Alibaba also invests in airplanes and airports – but not in ships and terminals.

Even without ‘entry’ through investments in assets, these developments deeply affect shipping lines, not least because they make the market more ‘contestable’: the threat of potential entrants, either traditional freight forwarders such as Kuehne & Nagel, or new players such as Amazon, reduces the ability of shipping lines to raise prices. This may be a relevant insight for competition regulators that assess the effects of concentration in container shipping. In addition, ports that are dreaming of a ‘Global Amazon Gateway Terminal’, in their port may need to consider a more traditional plan B.

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