Amazon and Target come from opposite ends of the spectrum. The former has few stores to leverage, so they had to build their own logistics business to reach consumers more efficiently than using traditional carriers.

Target has over 1,800 stores in the United States and knew it had to invest in its supply chain infrastructure to stay close to their consumers. Target couldn't afford to take the Amazon approach, so it bought and invested in several startups ahead of others, to prepare itself for rising eCommerce.

Most brands can't afford to take either approach. They must rely on forward-thinking, low-cost service providers that align with their view of the world. I predict many will eventually end up using Amazon's logistics infrastructure - they control too much volume and growth to not make this an interesting battle.

Prateek Haralalka noted that Shopify has also been investing in “building out their fulfilment infrastructure.” He asked if I think “smaller brands (at least those that operate their own websites) might gravitate towards Shopify over Amazon?” At the very low-end, yes. Shopify has a lot to learn though. Ultimately Amazon's capabilities will be too great to ignore for many. Particularly because I think for ground, increasingly the only alternative is UPS.

Miles Thomas weighed in with some thoughts from across the pond:

First order of business for Shopify is to offer a pre integrated carrier management solution with labelling, manifesting, with a good range of carriers (incl. Tier 2) ready to turn on as soon as retailer has set up contract for collection or trailer swap. This needs to include international carriage with electronic customs export declaration and access to cost effective duty prepay, groupage brokering services to create a predictable experience for international customers and reduce costs of dispatching from US (US to UK is twice the price of UK to US, ditto Italy to UK is hella expensive vs. UK to Italy).

Prateek responded to that, asking about the “percentage of a typical ‘smaller’ retailer’s business comes from outside the US?” He speculated:

If it’s less than 10%, which I think would be the case, I think Shopify will first focus on getting things right domestically. I agree with what you said about them being able to switch on as soon as a pick up request is made. There too, I’m assuming (given how small Shopify’s network is at the moment), a retailer would have to store goods at a Shopify warehouse, in order to be able to use the platform’s delivery network. That would hopefully make things easier. Having said that, yes, they’re late in the game, and I don’t see them as being able to compete with Amazon’s vast fulfilment infrastructure. Little factoid here: Amazon’s fulfilment footprint was 180 million sq ft at the end of 2019. It will have reached 290 million sq ft by the end of THIS year.

Side note: that “little factoid” is worth re-reading. Amazon’s fulfilment footprint was 180 million sq ft at the end of 2019. It will have reached 290 million sq ft by the end of 2020. Wow.

Miles responded to Prateek’s inquiry, saying “most US retailers have little international trade, or maybe only Canada. A few will have a lot more. But Shopify is trying to sell internationally and some countries have much higher international sales. NB eBay and Amazon have international delivery (including brokerage/groupage) as a default capability (both with 3rd parties), Shopify do[es] need to keep up.”

Rich Richardson shared an interesting perspective (and some great info on transportation) here:

Jeff [Bezos] takes the long view on almost everything. The Amazon Global Supply Chain is a work in progress that really accelerated about 5 years ago when Amazon realized how fractured the transportation market is:

- ~84% of freight spending is on trucking, an ~$800B market that's been historically frugal and slow to adopt new technologies...

- Most trucking companies are tiny, 90% own < 6 trucks

- Jeff envisions a global delivery network controlling the goods flowing from China, India and other low-cost areas to customers doorsteps around the world.

- By offering ocean and air freight services, FBA makes it a no-brainer to move goods into their logistics network.

- Amazon’s ocean freight services will be very attractive to Chinese sellers who will love cost efficient direct access to Amazon’s vast American and global customer base.

After a pilot Amazon Logistics launch this year, I think the transition in the US will start in 2021-2022 as an independent carrier.