Amazon should be shaking with the biggest freight crisis in history. But far from suffering, the company founded by Jeff Bezos has deployed a whole strategy to emerge stronger from the current situation. The objective is to continue growing, gaining customers and market share, at the cost of its competitors being stranded in any port. No customer will be left without home delivery with this plan.
In the port of Everett, in Washington, cement, wood or aluminum, basic materials for construction, are unloaded. To the surprise of many the Hong Kong-flagged cargo ship Olive Bay arrived with its usual cargo, but in addition, on its deck there were more than 180 containers with the Amazon logo. Most of them were empty, but quickly filled with items from a nearby warehouse of the e-commerce giant. Cases for notebooks, dolls, Christmas trees or stuffed animals, any product that can be manufactured in China at a reasonable price.
The Olive Bay resumed its route and, against the prognosis, it was not going to be a long journey to cross the Pacific. His next destination was the port of Seattle a few miles away.. Amazon is avoiding the collapse of the port of Los Angeles. The freighter was not the only stop he made. Also downloaded in Houston. As many distribution companies grapple with the worst stock crisis of the century, Amazon is poised to break new records this Christmas.
In addition to chartering freighters like Olive Bay, taking advantage of the free space, Amazon has hired 150,000 workers to strengthen the company’s logistics chain, with increased salaries and offering social benefits of up to $ 3,000. The e-commerce giant has put $ 4 billion on the table to withstand the current supply crisis. A cushion that should allow you to assume that your trucks will start their route half empty, but with the conviction that orders will reach their recipients on time. Amazon’s goal is to show that it is well above its rivals. During the pandemic, it showed that despite the difficulties Amazon, it reaches where others are left in the middle of the road.
Amazon’s true competitive advantage is distribution capabilities. “It has its own transport network, with its truckers, its ships and its own factories in Asia,” explains a former worker. Its logistical power has ended up convincing small merchants who were reluctant to use the Amazon platform to sell their products. It involves sharing information about customers and suppliers with the company that is taking over all the retail. But when freight and containers are lacking, Amazon has the hole needed by many small businesses that make a living from importing products. “Amazon had space on ships and I couldn’t say no to my customers“explains David Knopfler, owner of Lights.com, which sells lighting fixtures and home décor.” If Kim Jong UN had a container, I would use it. “
Above, far from abusing the situation, the price of Amazon freight are reasonable. Knopfler assures, Bloomberg, that paid $ 4,000 for a container from China, far from the $ 12,000 that has been paid for freight. Amazon takes care of everything by simplifying the process and taking care of shipping from China to the US. The usual thing in the sector is that the load passes through many hands, generating problems and delays. “It is a one-stop shop from Asia to Amazon,” says Walter González, who sells several products on the Amazon website, including anti-fog cleaner for glasses. The customer assures that he has about 95% of the inventory he needs to satisfy the Christmas demand.
The anticipation strategy
Amazon is not the only company that has its own freighters or has used the empty space of the bulk supercarriers. Since 2005, the company founded by Jeff Bezos has been greasing up shipping machinery to prepare for a time of collapse like this. Steve Ferreira, a transportation consultant, estimates that Amazon operates about 10,000 freighters. And last year, it entered the air transport business, the salvation for many companies in the current crisis.
When the covid broke out in the US, the technology company had a fleet of 85 cargo planes, which allowed him to move merchandise quickly throughout the country. It has already expanded the business to Europe, with Germany as its base of operations. Bernie Thompson of Plugable Technologies is a regular customer of this Amazon service and uses it to receive computer components from China to the US, avoiding saturated ports. Before the pandemic, the main problem with air transport was its cost. It was ten times more expensive than water. The rising cost of sea freight has made it more competitive. It still costs four times as much, but Thompson is willing to pay the difference. “It is always much better than having the merchandise stranded in a port,” he says.
Amazon’s challenge is twofold. Not only must it overcome the collapse of seaports, it must also overcome the labor crisis in the US. The company has improved wages. They’ve gone up to $ 15 an hour in the warehouses, and overtime pays very well. Given the difficulties in finding drivers for its delivery vans, the company has improved the remuneration of Amazon Flex, the system designed for freelancers with their own car to carry the packages. They can earn between $ 40 and $ 50 an hour, compared to the usual $ 18. Amazon is willing to pay whatever it takes for your packages to arrive, whether there is a supply crisis or a collapse at the ports.