Amazon’s Influence on Delivery and Payment
Former hedge fund executive, Jeff Bezos started Amazon in 1994 as a way to sell books to any reader anywhere. Amazon’s business strategy, however, was not that of a retailer. Bezos has widely touted his company to be a technology company whose business was to simplify the online retail experience. Within a few short years, Amazon had grown its reach boasting over 1,000,000 customer accounts with over $610 million dollars in revenue. Bezos had clearly accomplished his mission and captured an audience. The company is growing fast and expanding offerings from books to music and entertainment and even food with its recent purchase of Whole Foods, an investment of $13 billion dollars. Bezos has clearly disrupted the way we do business, and in turn, we have embraced his technology company — a company that has influenced everything from online customer experience, digital content delivery and payment functionality. With such an expansive reach in product and innovation, it is no surprise that the impact has touched the trucking industry in delivery and in fleet payments.
Amazon’s impact on the trucking industry has been enormous and not only in the ways that many consider with transportation, shipping and logistics as the most obvious. However, let’s start there. The US Department of Transportation projects that by 2040, US annual freight volume will increase by 45% to 29 billion tons and with most of that volume will be hauled by a truck. Over 51,000 drivers will be needed to meet that kind of demand and the industry is struggling to meet the challenge. With shipping costs increasing and transportation costs following suit, prices are rising for any and all products that are carried on the trailer of a truck. Just this year even Amazon boosted the cost of an Amazon Prime membership 20% in an effort to address the cost of 2-day shipping. Giant consumer goods and food companies are raising prices of everything from Cheerios and cake mixes to meat and construction equipment. The demand for drivers continue to grow but the labor forces is not.
Joyce Brenny, chief executive of Brenny Transportation in Minnesota, gave her truck drivers a 15 percent raise this year, but she still can't find enough workers for a job that now pays $80,000 a year.
In order to address the “Amazon Effect” and critical need for drivers, Joyce Brenny and other fleet owners and contractors are offering drivers as much as they can in order to get inventory delivered. These companies have realized that drivers are expecting more than sizable fleet payments. The benefits of time off and home for the holidays along with tools like fleet cards or the Mastercard fleet card are making the job easier and life more balanced. The Mastercard fleet card advantage provides benefits to the fleet managers but also the drivers. The access and efficiencies that the Mastercard delivers is not to be taken for granted.
- Accepted wherever Mastercard is accepted for Purchasing and/or T&E expenses
- Cash price for fuel in the EFS truck stop merchant network
- Superior purchasing controls
- MCC/TCC Categories/Velocity Limits in Mastercard network
- Level III+ data
The Amazon Effect is forcing the transportation industry to adapt to Amazon practices. As outlined in an article by Cindi Brandt, Sr. Director of Product Marketing and Alliances with Omnitracs, these are the 3 areas that will see the most impact.
1. E-commerce continues to grow
Retailers are placing huge bets on new online selling channels to compensate for declining foot traffic and sales in their physical stores. The trend is forcing huge changes in the logistics and transportation sector as consumers demand more online shopping and shipping options.
2. Distribution models are shifting
The dominant distribution model over the last couple of decades typically included giant regional warehouses and sorting facilities. Typically located in a semi-rural area, these distribution centers could keep stores in a whole state or large region fully supplied. But with the emphasis on very short delivery schedules, more and more retailers are finding it necessary to build smaller warehouses closer to big markets to allow their fleets to make multiple quick delivery runs to storefronts as well as to consumers’ homes, offices, or public drop-off locations. These new demands are forcing trucking companies to adapt.
But the steady, strong growth of online retail does likely mean that the mix of trucks on the road will shift over time to include a higher percentage of somewhat smaller commercial vehicles better suited for short runs and home delivery. Trucking companies will need to find ways to attract and retain quality drivers willing to work shorter runs and to handle at-home and at-office deliveries.
3. Fleets are relying on technology to maximize efficiencies
Just as importantly, the Amazon Effect will increase the already intense pressure on keeping delivery costs low. Consumers today see online shopping as a way of buying what they need at the best price without having to visit a crowded mall or supermarket.
Now more than ever, efficiency matters in trucking. The increased use of technology will improve efficiencies through better route planning, truck progress monitoring, and vehicle and driver performance tracking. Additionally, trucking companies also will have to continue adapting to their customers’ needs by tracking individual products through the supply chain from factory to final destination. With thousands of more data points to monitor, trucking companies will have to become more comfortable with onboard technology and the insights that can be gained from it.
Payment industry leaders like WEX and our EFS division have recognized these same needs for the trucking industry and has developed the technology to help. By leveraging payment data and technology, they are able to enhance fleet payment systems and streamline the process. Powerful fleet solutions provide the speed, accuracy, and transparency needed in all fleet payment transaction including vendor payment and payroll. In addition to the convenience of the Mastercard fleet card, EFS offers the power of Mastercard in their Mastercard payroll card that allows a simplified payroll distribution, while providing employees with increased security, access, and personalization. Through a single-file load, payroll funds are loaded to the card and employees can conveniently use the payroll funds anywhere Mastercard is accepted. Tools like these are just a few of the innovations that companies like EFS are developing to address the industry requirements.
In a way, the Amazon Effect has helped to push the industry forward while companies like EFS enable that progress by supplying the technology to keep up.