Amazon's "demanding" contracts helped kill a trucking company earlier this week. And on Thursday, one of the trucking industry giants said that Amazon's move to in-house shipments was reducing its bottom line.
The leaders of XPO Logistics, who managed to make UPS the leading logistics company in 2017, told investors Friday that their "biggest customer" was reducing two-thirds of its business. An XPO spokesperson could not comment on the customer's identity, but four major cargo analysts identified the customer with Business Insider as being Amazon.
The logistics company provides trucking, warehousing and other services on the last mile to Amazon. The estimated loss of this business has reduced XPO's revenue forecast for 2019 by $ 600 million, he said in a document filed with the Securities and Exchange Commission.
Read more:Amazon Web Services is supporting this technology in a $ 1 billion driverless trucking start-up. It shows how Amazon wants to control its supply chain and reduce its shipping bill by $ 28 billion a year.
After finding that XPO had reduced its forecast for 2019, XPO's CEO, Bradley Jacobs, said during a phone call to investors, "We can not ignore the fact that our biggest customer is cutting back on two-thirds of its business with us – this customer in brokerage, last mile and logistics – but we think most of these resources should be redeployed in the next few quarters. "
XPO based in Greenwich, Connecticut, has more than 50,000 customers. XPO's largest customer accounted for about 4-5% of their bottom line, Jacobs said. Now that it is cutting about two-thirds of its services with XPO, the logistics company's top five customers will account for about 8 percent of its total revenue, which stood at $ 15.38 billion in 2017 .
The main activity of XPO with Amazon was to take parcels from the company and ship them via the US Postal Service, otherwise known as "postal injection," said Sterling's Seaport Global analyst, Kevin Sterling. . This is a last mile service.
Amazon declined to comment.
Amazon speeds up internal shipments faster than expected
The sudden reduction of services with XPO came in December 2018. Mr. Sterling said that he had surprised the logistics giant.
"It took XPO by surprise, a bit, how fast that happened," Sterling said.
Amazon is quickly building its internal distribution network as its shipping bill increases more and more. It spent $ 27.67 billion in shipping costs worldwide in 2018, and shipping costs jumped 23 percent from the fourth quarter of 2018.
Read more: UPS President David Abney finally admitted he considered Amazon a competitor
In 2018, Amazon has extended its shipping availability two days to "almost anywhere" in the United States with its additional Amazon Air capacity. It has a capacity of 100 aircraft in its air hub and tens of thousands of branded semi-trailer tractors. It even goes so far as to make ocean freight so that it can transport its goods from China to the United States without outside interaction.
All this saves the e-commerce giant money: with this model, Amazon pays $ 6 to ship a box, instead of the $ 8 or $ 9 it would pay for a shipment by UPS or FedEx.
"Amazon makes a wise gesture by saying," Look, I can build it myself and I have the ability to do it myself, "said Business Vice President of Business Insider. Kearney, Joshua Brogan.