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Why Amazon Is Expanding Logistics to the Ocean Freight Market

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Shipping goods from China to the US

E-commerce giant Amazon (AMZN), after having made its move into trucking and air freight, is planning to expand its logistics operations to the sea. The company’s subsidiary, Amazon China, has registered itself with the US federal agency to become an ocean freight forwarder.

In 2004, Amazon acquired Chinese-based Joyo.com, which it renamed Amazon China. The license will allow Amazon China to cater to Chinese suppliers’ shipping goods from China to target US consumers. The company’s move will impact the resellers who buy goods from China (FXI) and sell them to consumers in the US. Moreover, the expansion would mean Amazon moving into the $350 billion ocean freight market.

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Amazon relies on carrier partners

Unlike Amazon’s current delivery options such as Prime delivery, one-day delivery, or express delivery, the ocean containers will take around four to five weeks to deliver goods to their respective destination. It is more likely that the company will sort goods in China and then deliver them to the US Postal Service (or UPS) for final delivery to consumers.

For the 4Q15 earnings call, Brian Olsavsky, CFO of Amazon, said, “The Amazon trucks, we did invest in those – this past year. We use those primarily for movement between our warehouses and our sort centers.” This indicates that Amazon still relies on its carrier partners and will continue to work with them in the near future.

The SPDR S&P 500 ETF (SPY) is a portfolio of 507 stocks. eBay (EBAY), Microsoft (MSFT), and Amazon (AMZN) constitute 0.17%, 2.3%, and 1.3%, respectively, of the ETF.

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