Beyond questions about Flexport’s ocean freight volume, and past efforts to mask its volumes, lies a potentially bigger issue: what are the company’s ultimate service aims?
Ryan Petersen, founder and CEO of the San Francisco-based freight forwarder, has in the past used companies such as Kuehne + Nagel and Expeditors International as measuring sticks for his company’s growth. As recently as early 2019, he gave two presentations comparing the swiftness of Flexport’s revenue growth over its first five years to that of Expeditors International. But it appears Flexport might view Amazon as its ultimate competition in the race to provide a “logistics-as-a-service” offering.
“Customers only care about their products,” Petersen said in a Feb. 21 interview with JOC.com. “They should be telling us, ‘I’ve got to get these products from here to these customers and you figure everything out.’ Instead, customers are doing the routing and saying, ‘I’ve got to ship 1,000 containers from this port to this port.’ It’s like if you called FedEx and told them, ‘I’ve got this parcel to ship, I need you to send it to Memphis and then stop at your Kentucky waystation and get it to Pittsburgh to that truck.’ You wouldn’t do that.”
Some shippers, of course, would quibble with the notion of wanting to outsource so much of their logistics function to any provider, much less a single one, and one that’s barely five years old.
“I think that’s a long-term evolution,” Petersen said. “And we have to build the network that has the attributes where you can put cargo in and it comes out predictably on the other side. And you know when it’s going to arrive and there’s a distribution curve of outcomes and you have preferential pricing based on the different outcomes. And customers will have peace of mind to know that if I put products into this network, I know when they’re going to arrive at my customer’s door. That’s what they’re trying to achieve.”
Customer or competitor?
In the same interview, Petersen juxtaposed Flexport’s position within the logistics market to that of the e-commerce behemoth.
“The world’s changed. You didn’t need to do two-hour delivery [when Flexport was founded]. That was crazy five years ago. And right now, Amazon’s the only really, really great company at doing this. We’re much more about [creating] a neutral commerce platform, a neutral infrastructure for global commerce. Neutral in the sense that we don’t sell products that compete with our customers the way Amazon would.”
If that seems like a thinly-veiled shot across Amazon’s bow, it might be particularly telling in how Petersen wants to change the perception of Flexport among the large beneficial cargo owners (BCOs) he needs to court to grow market share significantly in the years ahead. The company has left little doubt it wants to court larger BCOs as it seeks to justify, through growth, the $1 billion in venture capital funding it received in a February investment round led by the SoftBank Vision Fund.
A Flexport spokesperson told JOC.com, however, that it doesn’t see Amazon as a competitor, at least not yet.
“At this point, Amazon only ships for brands selling or buying within its own platform,” the spokesperson said. “That actually includes a percentage of Flexport’s freight volume. We support the logistics and business operations of the world’s fastest-growing brands, many of which are sold through channels outside of Amazon. We’re not myopic; we understand what it means when Amazon moves into a new industry and are following the company closely.”
Flexport’s global head of ocean freight, Nerijus Poskas, also downplayed the threat on a March 28 webinar with JOC.com.
“We don’t see Amazon as a competitor,” he said. “Ten percent or so of our freight moves through Amazon warehouses. And to my knowledge, Amazon is only moving freight, or proposing to move freight, for companies that are buying and selling on Amazon. If you look at global market share of Amazon, yes they have a lot. But there is the whole universe of brands and other consumers that need a solution like ours. To me, it’s not so much about Amazon. Is it a threat? I personally don’t think so.”
According to research by Ocean Audit CEO Steve Ferreira, Amazon was Flexport’s sixth-largest customer by volume in 2018. But Petersen may not be worried about losing Amazon’s volume — whether direct or via Fulfillment by Amazon (FBA) sellers — if the ultimate aim is to provide a logistics-as-a-service offering that competes with Amazon. In that scenario, it would benefit Petersen to position his company as an alternative to Amazon, a neutral logistics provider that isn’t trying to re-engineer a customer’s products. Petersen has even invested money into Deliverr, a startup providing fulfillment services to online sellers that could be considered a competitor to the FBA program.
In fact, Flexport is eyeing opportunities to extend its services beyond what most forwarders offer, essentially building a supplier network for importers while also providing trade financing for buyers.
“We want to connect all suppliers to the Flexport platform so that when a client decides to partner with a new supplier, we make it very easy to get them online quickly,” the spokesperson said. “We envision a future where when a new client joins Flexport, they find that all their suppliers are already on the platform, eliminating on-boarding time and accelerating go-to-market.”
Of course, Flexport wouldn’t be the first to build such a network, although most similar existing networks are provided by software-as-a-service (SaaS) providers such as Infor Nexus, E2open, and Elemica. Infor Nexus (formerly GT Nexus) does so through its 2013 merger with the supplier network TradeCard, while E2open has long been a network to connect electronics makers with their suppliers. Of note, in 2018 E2open acquired INTTRA, an ocean freight booking platform that is heavily used by forwarders, companies that would be competitive with Flexport. Then there's Elemica, which in the past operated as a third-party logistics provider (3PL) but is now best described as a software-based buyer-seller network in the chemicals and petrochemicals markets.
As for the financing aspect of Flexport’s aims, the company announced its Flexport Capital product in a blog entry in August 2018. The product is offered in partnership with Wells Fargo and provides customers with working capital for its suppliers.
“Our goal is to ensure that clients have access to the working capital they need to buy and ship their product,” the spokesperson said. “We are today already handling logistics and customs clearance for thousands of companies, and see a strong synergy between providing trade finance and providing logistics, customs and other services. We know our clients’ supply chains intimately, and that allows us to provide a better, more flexible financing solution.”