Amazon is not a threat. It’s an opportunity.
Transport operators in Australia have been warned by analysts that Amazon is a potential threat to their businesses.
They have noticed that the company is moving into the transportation market to cut costs and is investing heavily in autonomous vehicles and delivery services. In the words of New-York based Morgan Stanley analyst Ravi Shanker, “the entire transportation space should prepare for a future where Amazon and other giant shippers are potentially competitors.” Now this is obviously distressing news to anyone who has been living under a rock and was unaware that Amazon is, first and foremost, a logistics company. But is it really as simple as that? My view is that far from being a threat to transport operators, Amazon and others of its ilk might actually be a saviour.
For some time now, margins have been falling for transport operators. The difference between profit and loss is getting ever smaller, and the ability for operators to invest in themselves has suffered as a result. That investment is very much needed because, as we have discussed before, there is a massive skills shortage in the transport industry. The average age of a truck driver in Australia is pushing 50. In the USA it’s 55. The existing drivers are moving on and the industry is not attractive to young people. As an industry, transport needs help. That help may come in the form of the likes of Amazon.
What the analysts haven’t said much about is that Amazon is investing. Amazon is actively looking for partners. They are apparently in talks to take a stake in a Chinese autonomous truck maker, for example. Their stated goal is to bring the first self-driving truck to market. Amazon has already taken a stake in Aurora who are a US developer of technology for autonomous vehicles. Things like autonomous driving, electrification, last-mile and digital brokerage services are all of huge interest to Amazon and all of them require a large amount of capital to bring to fruition. They are also exactly the kind of thing you need if you are a trucking company with a workforce that is three steps away from a rest home. The point is you can’t develop any of it yourself and, in most cases, can’t necessarily afford to buy it either as a transport operator. But what you can do is partner with the people who can and here is the opportunity.
If you are a large transport operator looking for an exit strategy, Amazon and other players like them are probably it. They are moving onto your turf, but they are not setting up from scratch. They are investing. They are looking for partners they can have a stake in and grow.
If you are a smaller transport operator, Amazon still needs you. The last mile is still a long way from being solved and it’s an area where a little bloke can do really well. Last year, Amazon started a delivery service partner program targeting the little guys who wanted to lease Amazon-branded vans to help deliver its packages in the US. That kind of thing allows those little guys to compete with the bigger transport operators in smaller markets. It’s only a matter of time before Amazon expand that kind of thing internationally. Moves by Amazon into freight brokerage also provide the little bloke with exposure to more consumers and a wider market.
The reality is that transport in Australia is not only changing but needs to change in order to prosper. The investment needed for that change is enormous and unlikely to come from the cash-constrained existing players. Rather than threatening those players, Amazon and the newcomers they represent might just be the shot in the arm the industry needs to survive and thrive.