Amazon on the High Seas
Amazon, racing to get products from factories to our homes, lures merchants with chartered cargo ships.,
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Mammoth shipping containers packed with dehumidifiers in the Pacific Ocean provide a glimpse at how the pandemic and Amazon might be shifting shopping as we know it.
Earlier this year, a company called Aterian was in a jam with its hOmeLabs brand of dehumidifiers. You may have read about how difficult and expensive it has become to move goods around the world, and Aterian was feeling the pain.
The company was being quoted prices of $25,000 or more to haul a shipping container of products from factories in China to its shoppers in the U.S. The same shipment typically costs about $3,000, Aterian’s chief product officer, Michal Chaouat-Fix, told me. Then Amazon got in touch and offered to put the dehumidifiers on cargo ships that it chartered across the Pacific for a significantly lower fee.
“It was a huge relief,” Chaouat-Fix said. Amazon brought the goods to port, and Aterian arranged to truck them from there to its U.S. warehouses. Those dehumidifiers were then available to buy on Amazon, as well as from Walmart, eBay and the hOmeLabs website.
I keep close tabs on Amazon, but I didn’t know until Aterian told me that the company hires cargo ships for some of the merchants that sell in its digital mall. Amazon’s ocean freight service is not new, but it became more relevant as global shipping went haywire this year. Amazon has also added new options to what the company told me was a still relatively small service that’s available to few merchants.
Amazon’s adventures on the high seas are an intriguing wrinkle in the war to get products to our door. It’s also another example of Amazon’s growing network of warehouses, package hubs, trucks, airplanes and delivery vans that show that the company is becoming a force in the entire life cycle of products from factories to our homes.
Aterian told its investors this week that Amazon’s ocean freight service helped it “secure very competitive shipping rates” for products that are expected to generate half of its expected sales in the next year. (Aterian’s best-known product, the Squatty Potty, is made in the U.S. No cargo ships required.)
Amazon and merchants like Aterian have a shared goal: Making sure that there are enough products on virtual shelves for us to buy. Amazon has the money and the heft to arm-twist ocean cargo companies so its merchants can send their products at an affordable price.
The ocean freight service is one of many options that Amazon offers the millions of merchants — whether a small Texas toy company or the Chinese electronics conglomerate Anker — that sell products to its shoppers. For added fees, they can store their inventory in Amazon warehouses, ship their products through its delivery network and pay Amazon for more prominent online displays.
Merchants often find these options handy, but also a source of frustration at times because of the costs and the feeling that they rely so much on a sometimes mercurial business partner. Aterian’s chief executive, Yaniv Sarig, was pragmatic about the power of Amazon and other mammoth gateways to consumers. “That’s a reality of our world,” he told me.
It’ll be interesting to see what happens next with Amazon’s ocean freight ambitions. It once seemed preposterous to imagine that Amazon would be in the same league as FedEx as one of America’s biggest package shipping companies. It is now.
This rapidly expanding Amazon logistics machine is a superpower for the company, and figuring out transport from Asian factories is a logical next step. Sarig and some other close watchers of Amazon have said they wonder what the company might do next, like operate its own U.S. commercial port or ocean shipping fleet. (Amazon didn’t want to discuss this speculation with me.)
The coronavirus pandemic and the global product snarls that it helped cause will (hopefully!) be temporary. But this might be a moment that will permanently alter shopping and shipping.
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Before we go …
China’s government mutes a shopping party: Singles Day, the annual shopping holiday invented by the Chinese e-commerce titan Alibaba, is normally a wild extravaganza of consumerism. My colleague Ray Zhong writes that the government’s crackdown on big internet companies has forced a quieter Singles Day aimed at consuming “with care.”
He is VERY EXCITED about computer chips: Farhad Manjoo, a columnist for New York Times Opinion, explains why Apple’s self-designed computer chips supercharged its laptops and are an important breakthrough in technology.
Government digital payments that don’t stink: Togo, one of the world’s poorest countries, set up pandemic-related emergency benefits for its citizens, and was able to make the money instantly available to people via their mobile phones. Bloomberg News explains how Togo got the digital payments system running in less than two weeks. (A subscription may be required.)
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