Amazon plans ocean shipping foray

The stand of Amazon China at an industry expo in Hangzhou, capital of Zhejiang province. [Photo/China Daily]

Global retail giant Amazon.com Inc has registered to provide ocean freight services through its Chinese unit, a move that will give it more control over shipping products from Chinese factories to shoppers in the United States.

Amazon China has submitted an application to the US Federal Maritime Commission, sources said, adding that the company has sought a non-vessel operational license, indicating that it will not buy or own fleet. Instead, the company will subcontract the business to shipping companies.

Once Amazon obtains this license, it will be able to deliver the goods produced in China to US companies and consumers directly, skipping the intermediaries. Industry sources, however, said that such a move will hurt the profits of distributors and disrupt their business models.

The registration is the latest indication that Amazon plans to expand its logistics reach to cut costs for its retail business and potentially provide third-party logistics services to other industries. Its new status as a freight forwarder, or "non-vessel operating common carrier", will give Amazon a foothold in the $350 billion a year ocean freight business, said a Reuters report.

Amazon's decision has also been partly influenced by the growing number of Chinese exporters using its services. The number of Chinese retailers reaching overseas markets via Amazon increased 13-fold in 2015. During the first three quarters of last year, the total sales revenue of Chinese exporters more than doubled with the number of products sold jumping by 87 times.

Amazon China officials, however, refused to comment on the matter, when contacted.

Doug Gurr, president of Amazon China, said that the company's innovative progress is a combination of the growing demand and its unparalleled advantages.

Last year, Amazon rented a Boeing 737 plane to start experimental services between the United Kingdom, Poland and Germany. In October, it launched a "logistics plus" strategy in China to provide comprehensive logistics and warehousing services with the rest of the world.

Some industry experts, however, opined that Amazon has entered the shipping industry at a rather difficult time. The Baltic Dry Index, the barometer of shipping industry and global trade, hit a historic low of 383 points on Jan 14. The index has dropped more than 15 percent in the first two weeks of 2016.

Xu Kai, a senior analyst with Shanghai International Shipping Institute, said that about 90 percent of the global trade and logistics are completed via shipping. Therefore, it is crucial to combine e-commerce and traditional shipping to come up with new business models.