In poker, the all-in strategy can be a good bluff. Its success depends on gathering as much information as possible, and keeping a constant eye on all the opponent’s moves.
In logistics, the situation is similar, as shown by Amazon. The e-trader has analyzed the business models adopted by parcel delivery companies for many years, by cooperating with them very closely. So, it can be assumed that Amazon knows the specifics of its partners’ commercial models from A to Z, which it can use as a blueprint for achieving its own goals.
The consequence of this, is that the e-tailer decided it could do better by going it alone, saving money, and offering the company’s fast-growing number of customers integrated door-door air and transport services whilst, quite incidentally, gathering valuable market data and thus cementing its strong market position.
What has been said here is not entirely new knowledge. However, it should illustrate, how consistently the online seller is pursuing this expansion strategy which has resulted in Amazon building its own fleet of cargo aircraft. This was underpinned last week when it announced the purchase of 11 freighters; the first all-cargo jetliners owned directly by the company. Amazon did not communicate the price of the planes of which 4 are from Canada's Westjet, and seven provided by Delta Airlines. All have flown as passenger aircraft and still have to undergo P2F conversion before flying in the livery of Amazon Air. Once operational, Amazon Air will manage a total fleet of 80 freighter aircraft.
All from a single source
This fleet step heralds - roughly speaking - the third phase of collaboration between integrators and Amazon, and it could well be the last. It began with Amazon shipments being carried on UPS, FexEx, and DHL freighters, as well as on many regional feeding airlines. Next, the e-tailer came up with Prime Air, which was rebranded in DEC17 to Amazon Air. Although the name of the trading platform was displayed on the hull of the planes, which already hinted further developments, these were operated by leasing companies, such as the Irish airline ASL, Atlas Air, and others, thus not by crews listed on Amazon’s payroll.
This division of labor will remain in place in future as, once the freighters now purchased by Amazon have been handed over to their new owner, they will also be piloted by cockpit crews from contract airlines. This means that, at least according to current knowledge, Amazon is not planning to build up its own pilot corps but will continue to rely on cooperation with other airlines.
Nevertheless, the basic direction of the fleet policy is obvious: Amazon wants to keep the supply chain from A to Z in its own hands, and thus become a large-scale logistics provider. The online retailer is increasingly becoming a department store, offering own shipping services to the customer's doorstep.
While UPS and DHL continue to cooperate with Amazon despite the company’s latest fleet development, their peer FedEx has banned Amazon shipments from the main decks of its freighter fleet. Its motto: No cooperation with a competitor that pursues an aggressive expansion strategy to the detriment of FedEx when it comes to shipping goods.
FedEx closed its doors to Amazon
Yet, leaving aside FedEx’s concerns, the time for Amazon’s move is extremely favorable. This, because brick-and-mortar retail is at rock bottom due to the Covid-19 crisis which, conversely, is constantly driving e-commerce business to new heights. The problems of global rival Alibaba, whose boss Jack Ma has been missing for eight weeks (see our article in this CFG issue), should also play into the U.S. e-tailer’s hands, although there is no official statement on this from the management.
Ma‘s unexpected disappearance was certainly not foreseen even by the smartest poker player.
We always welcome your comments to our articles. However, we can only publish them when the sender name is authentic.