The A-Team: Alibaba and Amazon force a rethink of distribution
They’re here to stay and a force to be reckoned with - Alibaba, Amazon and a host of other enterprising companies occupying the cyber space between production and consumer. Jack Ma’s Alibaba is now the world’s largest retailer accounting for more GMV (gross merchandise volume) than rivals Amazon and eBay combined. The Chinese internet retailers’ online sales and profits surpassed all US retailers including Walmart, Amazon and eBay. Perhaps more importantly, Alibaba Logistics through the OneTouch service (which it bought back in 2010) is partnering with freight forwarders (and forwarding networks such as the WCA) and now even ocean carriers.
In December 2016 Maersk (CGM-CMA has since also signed up) announced it was teaming up with Alibaba, enabling the ocean carrier to list freight spaces on Alibaba’s import/export platform, which allows Chinese shippers to make shipping reservations online. According to the press release at the time, “The initial launch …allows existing Alibaba OneTouch (registered) users to lock in the price of required cargo spaces on selected routes by pre-paying a deposit amount.” These moves put Alibaba firmly in the middle of the supply chain as facilitator on a potentially grand scale.
Amazon’s role in logistics may be even more significant. Amazon’s sales account for a reported 60.5% of online sales growth. The hard charging company has put the pressure on not only other retailers but logistic service providers throughout the supply chain. Amazon’s warehousing is among the most enterprising, using robots and drones and highly automated systems (see Peter Buxbaum’s article) to provide both volume and velocity. Other innovations include Amazon’s Prime Air, a drone service designed to deliver shoppers product within 30-minutes of order placement. Recently Amazon began testing a new service for “Prime Wardrobe” that allows Prime members to try on the latest styles before they buy at no upfront charge, bridging the gap between brick and mortar and online retail. Customers have seven days to decide what they like and only pay for what they keep. Shipments arrive in a re-sealable box with a pre-paid label for returns. Amazon said more than a million pieces of clothing and accessories are eligible and include brands like Calvin Klein, Hugo Boss, Theory and Levi›s. This month Amazon announced it was buying Whole Foods Market for $13.7 billion upping the ante in its battle with Wal-Mart for the lucrative grocery sector in retail. Yet without a massive online service platform and the supporting warehousing and distribution system, neither foray would make much sense.
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