What is the Amazon Effect and how has it impacted freight forwarders?
In the first quarter of 2021 alone, e-commerce giant Amazon generated net sales of more than $108 billion — up a full 43 percent from the same period in 2020. For consumers, the explosive growth of Amazon means that it’s now possible to purchase almost anything, anywhere on-demand.
For freight forwarders, meanwhile, this so-called “Amazon Effect” is a mixed bag.
Some forwarders have been able to piggyback on Amazon’s success by offering consolidations and other shipping services. But that doesn’t come without added pressure, and shoppers and business consumers alike now expect the same shipping speed and delivery service from any online vendor or logistics services provider.
The result is both a challenge and an opportunity for freight forwarding companies — while legacy inventory and supply chain management systems could handle more traditional package volumes and speeds, they’re no longer capable of keeping pace with packages at the speed of Amazon.
Here’s what you need to know about the Amazon Effect, its impact on freight forwarding, and how companies can adapt to changing market expectations.
What is the Amazon Effect?
As noted by Investopedia, the Amazon Effect broadly refers to “the impact created by the online, e-commerce, or digital marketplace model on the traditional brick and mortar business model.”
It’s called the Amazon Effect after the biggest driver of these changes — the e-commerce behemoth that is Amazon. In practice, this effect has impacts in multiple areas such as:
- Consumer shopping patterns
Amazon makes it possible for consumers to get anything, anytime, often with free hyper-speed shipping. As a result, shopping patterns are shifting away from brick and mortar retail stores and into online marketplaces. While Amazon is the biggest beneficiary of this move, it also has trickle-down effects for other online retailers. From customers who prefer specific brands to more generic items on Amazon, or those looking for specialty or hand-crafted items, the reliability of Amazon has significantly bolstered the positive perception of e-commerce retailers at scale.
- Customer expectations
Along with positive perceptions, the Amazon Effect is also tied to increasing customer expectations, even in the B2B world. From low prices to free shipping to speedy delivery and real-time tracking, customers want a “Prime” experience — no matter the source. In effect, these expectations have become ubiquitous as consumers now regard best-of-breed delivery and shipping as a fundamental function of e-commerce stores, rather than an Amazon-specific benefit.
- Shipping conditions
The Amazon Effect has also changed the way shipping companies calculate package weight. In an effort to streamline package processing and meet growing consumer demand, many national and international shipping firms have implemented pricing based on “dimensional weight”. Unlike actual weight, dimensional weight is calculated by multiplying the length, width, and height of a package. This weight is then compared to actual weight; most carriers now charge based on whichever weight is higher. For logistics companies, this speaks to the need for more efficient packaging that helps reduce total costs without sacrificing package safety.
How does the Amazon Effect impact freight forwarding?
Informed by their experiences on Amazon, consumers now want the same level of speed, service, and shipping reliability no matter which online retailer they select. As a logistics services provider to these businesses, freight forwarders, in turn, have a much higher standard to meet — in effect, they need to replicate Amazon’s efficiency and service, without Amazon’s resources.
In practice, this means that customers want faster shipping, lower prices, full transparency, self-service tracking, and easy customer service — all without having to pick up the phone. They want to know when the item is being picked in the warehouse all the way to when it has arrived on their doorstep — all in real-time.
For many freight forwarders, however, their existing supply chain, inventory, and package tracking systems simply aren’t up to the task of meeting Amazon-driven expectations.
How can freight forwarders adapt to changing expectations?
While it’s impossible to match the scale and scope of Amazon when it comes to freight forwarding, there are ways for companies to adapt and better meet these changing expectations, including:
- Using the Magaya Digital Freight Portal for self-service tracking and visibility
Tools such as the Magaya Digital Freight Portal make it possible for companies to implement out-of-the-box automated customer service and package tracking, accessible via both web portals or with any mobile device. This gives their customers the visibility and control they’re used to having from online shopping.
- Implementing modern freight forwarding software
Modern freight forwarding software from Magaya is designed to improve operational efficiency, reduce costs, and limit errors by automating key manual processes and delivering real-time visibility into inventory tracking, shipping estimates, and any applicable compliance conditions.
- Deploying advanced quoting solutions
Along with increasing consumer expectations, e-commerce retailers are looking for freight forwarders that deliver top-tier service without breaking the bank. Tools such as Magaya Rate Management allow self-service access to rates with fast custom quotes, digital bookings, and streamlined rate data.
- Automating slow warehouse processes
As the number of packages processed by warehouses increases exponentially, companies need ways to reduce reliance on slow, manual processes. One common bottleneck is package dimension measurement. Dimensioner by Magaya provides accurate weights and measures in a flash, reducing errors and dramatically speeding up package handling processes. Companies can boost measurement efficiency by several minutes per item and charge more accurate fees, in turn boosting overall ROI.
- Leveraging Type 86 Entries
Type 86 entry filings make it possible to reduce shipment release times by voluntarily providing the CBP with section 321 shipment details for low-value goods. The caveat? This only works if your type 86 filings are accurate and error-free. Advanced customs filing software from Magaya can help freight forwarders make the best use of Type 86 entry options, which can reduce clearance times, allow the filing of multiple entries with a single upload, facilitate the importation of goods subject to PGA, and improve shipment security.
Bottom line? Your freight forwarding business is not Amazon, but that doesn’t mean you can’t keep pace with the Amazon effect. By understanding its impact on consumer expectations (both the end consumer and your immediate customers) and warehouse operations, it’s possible to deploy advanced logistics software that targets potential areas of friction and delivers superior service and speed to e-commerce shipping partners.
Keep up with the Amazon Effect. We’ll show you how!
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