Amazon Expands into Logistics-as-a-Service

Amazon (NASDAQ:AMZN) is venturing into the Logistics-as-a-Service (LaaS) market, tapping into a $100 billion opportunity by leveraging its extensive infrastructure.

Supply Chain by Amazon

This initiative, branded as “Supply Chain by Amazon,” aims to provide end-to-end logistics solutions not just for Amazon’s marketplace but also for third-party sellers, both online and offline.

Natural Extension of Services

Analysts see this move as a natural progression following Amazon’s success with AWS, which transformed from an internal tool into a global cloud leader.

Truist Securities analysts noted, “With Amazon now controlling approximately 48% of U.S. e-commerce and with AWS and advertising growth normalizing, the company is setting the foundation for its next growth driver.”

Comprehensive Logistics Solutions

The initiative offers a suite of services managing the entire logistics process for merchants, including:
– Pickup at manufacturing facilities (commonly in China)
– Customs clearance
– Ground transportation
– Storage
– Last-mile delivery

These services cater to various client needs, from large enterprises transporting bulk freight to smaller direct-to-consumer businesses.

Revenue Potential

Truist suggests this venture parallels Amazon’s successful experience with AWS, which grew from $1.8B in 2012 to a $105B revenue run rate by 2Q24. Amazon aims to turn logistics costs into significant revenue, potentially doubling freight services revenue and expanding its share of the global third-party logistics market from 10% to 20%.

Strategic Advantages

• Market Access: Amazon can engage with the vast offline commerce market, constituting over 80% of all U.S. and global commerce.
• Cost Efficiency: Integrating logistics with existing e-commerce and cloud services lowers unit costs, enhancing competitiveness against other providers.

Robust Infrastructure

Amazon operates in over 100 countries with more than 150 fulfillment centers, achieving $750 billion in gross merchandise volume (GMV) in 2023, now accessible to non-Amazon merchants.

Challenges Ahead

Despite the potential, analysts caution that this undertaking has operational and financial risks due to the need for precise coordination across vast capabilities and investments amid fierce competition. However, they believe Amazon holds a significant advantage due to its existing logistics network’s size and scope.

Analyst Ratings

Truist analysts have a Buy rating on Amazon stock, with a price target set at $230.