Amazon has acquired cloud-based customs startup INLT in a move to strengthen their offering to importers to the United States. What does this tell us about Amazon’s broader logistics strategy?
INLT is a small team made up of customs brokers, developers, freight forwarders, and attorneys. Their cloud-based solution provides clients with full visibility to the customs clearance process, offering detailed milestones, and great customer experience to importers. Having raised a $1million seed round in March 2018, the startup is exiting after only two and a half years of operations. INLT has stopped accepting new customers, while they will continue to serve their current customer base, they will now be focused on integrating their tools into Amazon’s workflows to serve the retail behemoth’s 5 million third party sellers.
A point to make clear at this point is that Amazon is not a logistics operator and they aren’t trying to be. Around 50% of the turnover of Amazon Marketplace comes from third-party sellers and in the last year, they added nearly 3,000 sellers every single day. Their sole focus is on making it easier for SMEs around the world to access this huge market. Amazon FBA offers warehousing and fulfilment as a service already. In the last two years, they have successfully experimented with freight forwarding, and they are now betting on customs broking as the next problem to solve for the sellers on their platform. Amazon is making a big, but necessary, bet on third party sellers, and offering first class logistics services is simply a means to an end rather than a goal in its own right.
One of the reasons for Amazon’s success is its obsession with customer experience. It is clear with this acquisition that they are carrying that obsession forward to their suppliers too. Speak to any small Amazon seller or FBA user and most will tell you that the experience is pretty poor. Customs is just one of a list of problems that Amazon doesn’t currently have the capability to offer any real support in. Depending on where in the world you are; freight forwarding, trade finance, and cash flow management are problems that the retail behemoth is now beginning to look seriously at solving. In 2016, Beijing Century Joyo Courier Service Co, a wholly owned subsidiary of Amazon Logistics, registered as a freight forwarder to give Chinese sellers better access to the US market. The move was considered to be part of a “soup-to-nuts” approach to selling in the US, with Amazon offering to handle everything from the moment the goods leave the factory in China to the last mile delivery in the USA. As of January 2019, Amazon Logistics had shipped 5,300 containers from mainland China to the USA, not massive numbers equally not insignificant. Further, Amazon has recently made it possible for sellers to share their account data with third party finance providers who can use it to algorithmically approve credit applications.
Amazon is known for building great technology in-house. Buying a small customs broking startup could easily be perceived to be a departure from that strategy. But the simple truth is that customs broking, as with so many components of global trade, is a business area that needs more than great technology. INLT’s small team is made up of people who clearly share Amazon’s passion for customer experience and have the expertise to deliver on it for importers. Though Amazon has its own customs expertise in house, managing imports on behalf of SMEs is an altogether different and more nuanced process. This acquisition helps Amazon move faster than they could have on their own and makes clear that they are happy to buy instead of building new competencies when it comes to logistics and trade flows.
Customs, and the acquisition of INLT, is just one facet of a broader strategy to radically improve the seller experience on Amazon. This isn’t just about making their seller experience better than it was, but about making it better than selling direct to consumer or through other channels. For Amazon, it is about becoming the defacto choice for anyone who wants access to major consumer markets. You source the product and, if you choose Amazon, they will remove every barrier that exists between you and the consumer. Whatever barriers stand in the way of this goal, they will knock them down, whether through acquisition or other means. It is a gargantuan task and ambition, but that makes it squarely in Amazon’s ballpark.
