Overdrive Magazine

July 2019

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24 | Overdrive | July 2019 With little fanfare, Amazon in December launched freight.amazon. com, a freight brokerage pilot pro- gram that initially will be concen- trated in five Northeast states. Unlike other brokers, analysts contend, Amazon isn't looking to monetize the brokerage, at least not initially. Instead, the brokerage is part of a larger strategy to build a network of small carriers and owner-operators by assuring them access to loads at predetermined rates. Whether Amazon has loads to keep them rolling is inconsequential: The company is selling that capac- ity to other shippers, sometimes at a loss, via the new brokerage platform, according to analysts familiar with the system. Amazon provided little informa- tion about how the brokerage will operate, but it brushed off assertions that it's undermining other brokers with those cheaper rates. "Analysis suggesting dramatic undercutting of pricing is false," said an Amazon statement. A spokesperson said the broker- age is a "beta program" that will operate in Connecticut, Maryland, New Jersey, New York and Pennsylvania. Amazon's push to build a net- work of smaller carriers is partially intended to ensure capacity dur- ing peak shipping seasons such as Halloween and Christmas, says Carson Krieg, co-founder and direc- tor of carrier operations for Convey, a delivery management platform. In buying up that capacity, says Krieg, Amazon hopes to squeeze its retail competitors by making it harder for them to find capacity during those busy periods. Reports last month suggested that Amazon will offer low-margin or even no-margin rates to shippers, therefore allowing shippers to move freight for cheaper than via other brokerages while still providing car- riers access to freight at the rates Amazon already agreed to pay them. Krieg's Convey works with major shippers that compete with Amazon, such as Walmart and Neiman- Marcus. He says he's worried about the impact Amazon's move might have on those retailers. "It'll have a wave of immediate impact on pricing and margins" for brokers, Krieg says. "Amazon con- solidating buying power" of truck- load services "is the scariest thing," he says. Krieg gave an example: A broker could buy a carrier's service on a load for $800, then sell that to a shipper for $900, earning $100. Instead, Amazon reasons, "We'll just buy up [these lanes] for $850 for 12 weeks," he says, then sell it to other shippers for $875 — a better deal for shippers and carriers than under the traditional brokerage example. Krieg says his provides small car- riers an above-market price, with Amazon either providing loads from its own freight network or selling its pre-purchased truck service to other shippers. Craig Fuller, chief executive officer for data firm FreightWaves, likewise sees Amazon establishing a carrier network, offering their capacity to shippers and selling it at a discount. His firm's analysis of lanes where Amazon's brokerage operates shows the rates offered to shippers by Amazon "were significantly dis- counted versus the published rates that are out in the market." That's not to say the rates were cheaper for carriers. It's simply that shippers weren't paying the usual 12% to 18% markup that brokers add, he says. "Shippers do this all the time," he notes. The difference is the scale at which Amazon operates and the dis- counts on truckload services it can offer to other shippers. Amazon brokerage could upset capacity BY JAMES JAILLET Amazon has built a fleet of owner-operators and small carriers, intending to "soak up a lot of the capacity," says FreightWaves CEO Craig Fuller. "But they have to keep those trucks running" during non-peak seasons by "auctioning off that capacity when they don't need it." INLAND TRUCK Parts and Service acquired Fast & Easy Services, an independent service provider based in Grand Junction, Colorado, and relocated to the larger 14-bay Fast & Easy facility to expand and upgrade its component shop and truck repair offerings. DRIVEWYZE added its weigh station bypass service to four new locations in Pennsylvania as part of a 12-month pilot. The sites are I-83 northbound and southbound in Newberry (York County) and I-79 northbound and southbound near Hadley. HELP INC. provider of PrePass weigh station bypass services, changed its name to the PrePass Safety Alliance. The company said the new name better reflects its nonprofit public- private partnership. GENESIS FUEL announced a discount agree- ment with Roady's Truck Stops to use the Genesis Fuel Card and Digital Diesel at more than 300 Roady's locations. Digital Diesel allows fleets to digitally lock in current diesel prices, store them on the Genesis Fuel Card and convert them to fuel purchases.

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