Amazon Top Grocer

The Whole Foods Market on Westlake Avenue near Amazon’s Seattle campus. (Whole Foods Photo)

If the Amazon acquisition of Whole Foods goes through, Amazon could become the top grocer in the U.S. by 2030, says Brittain Ladd, who worked on global expansion for the online retail giant’s grocery arm, AmazonFresh.

Combining the leading online retail company with a respected grocer is bad news for competitors such as Walmart, Kroger and Target. Ladd, who also worked on supply chain, logistics and delivery during his three years at Amazon and is now a strategy and supply chain consultant in the grocery industry, predicts Amazon will rapidly gain market share against these companies over the next few years.

Ladd predicts Amazon will pass Kroger to become the number two grocer in the U.S. by 2025, and surpass Walmart to claim the number one spot some time between 2027 and 2030. To get there, Amazon will have to figure out how to streamline Whole Foods’ operations, open new stores — both under the Whole Foods flag and its own — and grow its distribution footprint.

Brittain Ladd.

Amazon announced the $13.7 billion acquisition of Whole Foods, its biggest deal ever, last month. During his time at Amazon, Ladd said, he recommended the company acquire a grocer such as Whole Foods or HEB. Not only does the move dramatically expand Amazon’s physical retail footprint — Whole Foods operates 465 stores in North America and the United Kingdom — but even more important, Ladd tells GeekWire, Amazon is gaining a wealth of knowledge and dataabout the grocery industry, something it lacked as it tried to grow AmazonFresh.

With Whole Foods in its pocket, Amazon’s online grocery business is poised to take off. Ladd described how Whole Foods can help Amazon gain customer trust, and how that will help both its physical and online retail sides.

Amazon can offer grocery customers a greater value proposition than stand-alone grocery retailers like Albertsons and Kroger and even Walmart. Amazon will leverage their physical stores to gain trust with consumers that Amazon can offer the freshest of fresh fruits, vegetables, meat, milk, eggs, dairy and baked goods. In turn, Amazon will prove to consumers that if they order groceries online for delivery, the quality and freshness will be the same. In addition, Amazon will educate and incentivize customers to turn to Amazon for all of their retail needs such as shoes, apparel, electronics, auto parts, furniture and even appliances. In essence, what Amazon can offer is an endless retail aisle capable of meeting the needs of all customers.

Ladd said Amazon should let Whole Foods operate independently for at least the next year or so. In that time, Amazon can learn more about the grocery business from Whole Foods and take a hard look at Whole Foods’ supply chain and operations. The grocer was struggling, and changes will need to be made.

One thing Ladd doesn’t expect to see is the implementation of the Amazon Go checkout-free technology as it exists today in Whole Foods stores because they are just too big. But the technology could come into play with the 365 by Whole Foods stores, a concept Amazon could look to expand.

“Once Amazon has a better understanding of current state operations, I anticipate that Amazon will develop and begin to implement the Whole Foods future state, which will include expanding 365 by Whole Foods to go after Walmart and Kroger shoppers as well as compete against Lidl and Aldi,” Ladd said. “365 by Whole Foods also allows Amazon to stock store shelves with some of their own private label products.”

365 by Whole Foods Market
The check stands at the 365 by Whole Foods Market before it opened in Bellevue, Wash., in September 2016. (Kurt Schlosser / GeekWire)

Ladd went on to describe how Amazon might grow its grocery operation in the future, and the challenges it will face. To reach the top of the grocery mountain, Amazon will have to expand its footprint, through new Whole Foods stores as well as building out more locations for its Amazon Go and AmazonFresh Pickupconcepts. Ladd believes Amazon will at some point rebrand Whole Foods to focus more on Amazon.

Amazon will also open additional stores throughout the United States in order to create an ecosystem of stores capable of meeting the needs of the majority of Americans. Instead of just building Whole Foods stores, Amazon will strategically use different formats to ensure they can serve the most customers. For example, Amazon Go, Amazon Fresh Pickup, and multi-format stores will all serve a role in the Amazon grocery ecosystem. Amazon will have to design and build additional distribution centers focused on consumables, especially fresh fruit, produce, meat, milk, eggs, and dairy. Finally, I believe at some point in the near future Amazon will rebrand Whole Foods to place the focus on the Amazon brand.

Turning to Amazon’s rivals in the grocery industry, Ladd suggested further consolidation is necessary if they want to compete with the Amazon-Whole Foods alliance. Ladd recommended a merger between Target and Kroger to shore up Target’s grocery operations. In such a situation he recommended a couple of different possibilities like building mini Targets into Kroger stores, or the two companies acquiring a company like Instacart for delivery.

Walmart has been going all out to compete with Amazon, acquiring for $3.3 billion, and then on the day of the Amazon-Whole Foods announcement, announcing a deal to scoop up clothing retailer Bonobos for $310 million. Ladd thinks Walmart should have acquired Whole Foods, if only to keep Amazon from doing so. With that possibility off the table, Ladd suggests Walmart needs to make a major move to compete with Amazon.

“From a strategy perspective, Walmart must do something dramatic to change the entire dynamic within retail,” Ladd said. “Therefore, based on my analysis and experience, I recommend that Walmart divest Sam’s Club and then acquire Costco. Walmart/Costco/Jet has an ability to challenge Amazon on a level never before seen.”

Ladd was recruited to work for Amazon in 2015 after making a case for the brick-and-mortar expansion of Amazon’s grocery arm in his previous role with management consulting firm Deloitte.


Supply Chain Terms

6 Supply Chain Terms Creating the Buzz


Tags: LogisticsSupply Chain

Word! Brush up on the latest supply chain and logistics terms so you can hold your own at the next industry conference.

The business of logistics and supply chain has always been characterized by a full complement of interesting, unique, sometimes confusing, and now and again mind-boggling terms to explain the fundamental process of moving goods from Point A to Point B.

Over time, this laundry list of terms logisticians use to describe what they do, and how they do it, has proliferated, particularly as technology takes a front and center role in how we plan, execute, and analyze logistics.

Every year, more definitions and descriptors enter the logistics lexicon; 2017 was a banner year for technology-related terms.

We saw a year where “software in the cloud” helped to accelerate the “digitization” of supply chains. Meanwhile, “the Amazon effect” forced retailers to rethink the need for “brick- and-mortar” stores, and the “Internet of Things” connected everything to everybody over the “last mile.” And we know all this happened because “big data” analytics told us so.


What does 2018 have in store? Inbound Logistics asked several industry watchers what topped their list of terms that will dominate conversations this year. Some answers were serious, others tongue-in-check. But the consensus of our unscientific poll is that the supply chain community in 2018 will see the following six terms continue to emerge and gain traction in our conversations:

1. Blockchain. This was by far the biggest vote-getter. Known more as the foundation for crypto-currencies such as Bitcoin, blockchain jumped into the supply chain vernacular with the formation of two global alliances, the Dutch Blockchain Coalition and the Blockchain in Transport Alliance.

In January 2018, IBM and Maersk turned up the volume, announcing a joint blockchain-based venture to develop a “global trade digitization platform built on open standards and designed for use by the entire global shipping ecosystem.”

Blockchain is a distributed ledger technology that establishes a shared, immutable record of all transactions that take place within a network and then enables permissioned parties access to trusted, accurate data in real time. The technology holds promise for digitizing global trade processes and enabling participants, in a privacy-secured environment, to collaborate and execute end-to-end global shipping transactions with real-time visibility.

The concept is gaining traction, and the technology will be disruptive, but full development could take five to 10 years, according to a recent Gartner Inc. report co-authored by Bart De Muynck, research director for transportation technology in Gartner’s supply chain research group.

“Right now, the reality is hyped,” noted De Muynck in an interview. “For transportation, blockchain is much more applicable if you can embed it around exiting technologies and processes. It won’t replace an app or database, but it can elevate transparency, visibility, and security.”

2. Simplicity as a Service (SaaS). The increasing complexity of supply chain operations and the technologies upon which they rely has dramatically raised the stakes as businesses struggle to successfully deploy solutions. What have been massive enterprise software deployments can be months and sometimes years in the making, and once fully operational, not deliver anywhere near the value originally promised.

The complexity and time-to-value problems have been key drivers behind software developers’ shift to an original SaaS model: software-as-a-service, or software “in the cloud.” The updated definition: Simplicity as a Service.

It’s described succinctly as “enabling customers to achieve their desired outcomes in an ever-changing business environment with less time, effort, cost, risk and resources,” writes Adrian Gonzales, president of supply chain consultancy Adelante SCM. This new version of SaaS “goes beyond making user interfaces more intuitive and easy to use and deployments faster and simpler,” he says. “It’s about helping companies respond more quickly and intelligently to changing customer requirements, competitive threats, regulations, and other market forces.”

It’s also why business models for third-party logistics providers, software vendors, and consultants are converging.

3. Augmented Reality. Virtual reality (VR) headsets are all the rage with video game players. Augmented reality represents applying this technology to supply chain business processes, particularly in warehouses.

Virtual reality headsets or other wearable technology, such as Google glasses, aid order-picking operations and work such as assembling products on pallets. These wearables use sophisticated software to blend digital imagery and information with the user’s environment to help workers visualize and perform tasks more accurately and efficiently.

4. The Bi-Modal Supply Chain. This is a big topic for 2018, according to De Muynck. As the transformation to a digital business ecosystem matures, companies will find themselves running both “analog” (Mode 1) and “digital” (Mode 2) supply chains—or bi-modal.

An analog supply chain is the traditional model, where product is physically placed in a store and displayed for customers. They walk around the store, find and pick the product they want, pay for it, then carry it out of the store.

In the digital supply chain, customers find the product and place the order online. The system directs the order to the nearest warehouse. Robots and other automated systems pick, pack, and label the order, sending it on a conveyor to shipping.

In the fully digital supply chain of the future, a drone or autonomous vehicle would then take the shipment and deliver it to the customer. In this automated process, human hands do little or no touching. And customers can go online at any time and view the status of the order.

Today, “retailers have to support both, not one or the other,” says De Muynck. People still physically handle and move the product in the warehouse, while incorporating more automated systems, such as robotics and other automated picking equipment, as the business of fulfillment becomes increasingly digital.

“This is where new technology comes in, supported by artificial intelligence and machine learning,” he adds. “It helps workers process more volume more efficiently and quickly.”

5. Electric Trucks and autonomous vehicles. Both these developments made great strides in 2017 and will continue to dominate conversations as they move closer to broad commercial adoption.

Following its introduction late last year, Elon Musk’s Tesla Semi electric truck has drawn orders from the likes of Anheuser Busch, Walmart, Sysco, and PepsiCo, as well as fleets including J.B. Hunt and Schneider.

And Tesla is not the only player. Truck manufacturers such as Daimler Freightliner and Navistar also are well into the development of both electric trucks and those with autonomous operating systems. With a projected battery range of 300 to 500 miles pulling a typical 80,000 pounds of trailer and freight, it’s likely these soon-to-come electric tractors will see initial deployment in short-haul runs and city pickup and delivery routes.

6. Autonomous vehicle (AV) technology is expected to be deployed for both traditional diesel-powered trucks as well as electric. The National Highway Safety Administration defines five levels of vehicle automation, from zero (no automated operating features) to five (fully automated operation).

Most of the truck-platoon demos rolled out last year were Level 1 applications; automation that still has some level of driver assistance and/or intervention. At Level 2, trucks would operate with automated steering—accelerating and braking while driving on the highway—but most likely still with a driver in the cab.

As vehicle-to-vehicle communications and other enabling technologies such as adaptive cruise control are further refined and developed, and regulatory issues are ironed out, the prospect of “platoons” of two or more trucks running close together in sequence, particularly for long stretches of less-crowded highways between cities, will arrive.

This technology development offers great promise for improved fuel efficiency, safety, and quality of life for the driver.

Other terms, such as the Uberizing of freight brokerage, the “gig” or shared economy, predictive analytics, disintermediation, and the ever-growing influence of e-commerce will continue to redefine how we talk about what’s happening in supply chain and logistics.

One thing is for sure—the supply chain thesaurus will be adding a lot more pages.


Ocado has ‘need to know’ projects that even some staff don’t know about

ocado van image large
Ocado’s iconic vans.
  • Ocado is working on multiple top secret projects based on robotics, according to its CTO.
  • Some projects are kept secret even internally to “protect our future,” CTO said.
  • The company has publically talked about working on a humanoid robot called SecondHands.

LONDON — Online grocery business Ocado has super-secret internal projects that even many staff don’t know about, according to its chief technology officer.

Paul Clarke told Business Insider at Retail Week Live this week in London: “We’re reasonably secretive about things internally too. We have projects that are on a ‘need to know’ basis. It’s done on a project by project basis. It’s an important part of protecting our future.”

Asked what Ocado needs to protect itself from, Clarke said: “The way that we look at it, rather than obsess about looking out at who’s trying to do what we’re doing, I think what we obsess about it constantly trying to move the puck to somewhere better and different.

Ocado is an online-only grocery business in the UK but has been trying to position itself as a technology business that can help other businesses get into online delivery. In recent months it has signed deals to provide its technology to France’s Groupe Casino and Canada’s Sobeys.

“We expect to sign multiple deals in the medium term,” Clarke told BI. “We’re talking to people on literally every continent around the world apart from Antarctica and a couple of warzones.”

Clarke said that “not very much is public” of what Ocado does, adding: “We own all of the intellectual property for all of the technology we use, particularly now that we’ve got our own robots, and we need to look after that, especially as we’re going to make it available to other people. We just have to be sensible about what we can talk about and what’s appropriate to talk about.”

Ocado has publically disclosed that it is working on a human-like robot called Second Hands that is intended to help humans with tasks around warehouses.

Clarke said: “We took delivery of the first robot a few months ago. We’re putting it through its paces. It’s doing very well.”

“We’re subjecting it to DARPA type challenges. What can it do, what happens when it fails, if it falls over can it pick itself up? We’re putting it through its paces like that.”

Ocado has also been working on a new generation of grocery picking robots, called SoMa, andexperimenting with driverless cars.

Clarke said: “We have multiple robotics streams underway, not just the swarm Robotics but picking and packing, and other parts of the business that I can’t talk about but that’s the direction of travel as part of our relentless drive to automate more and more.”

“I’ve been there 12 years and quite frankly there really is never a dull moment. You don’t join Ocado for a quiet life. That’s what keeps it exciting. We would not keep the quality of talent we have if there were not big challenges to move on to.”

Kraft Heinz Incubator

Kraft Heinz launches new platform to ‘shape the future of food’

Springboard Brands pillars, Kraft Heinz
Source: Kraft Heinz Co.

CHICAGO — The Kraft Heinz Co. is launching Springboard, a new platform “dedicated to nurturing, scaling and accelerating growth of disruptive U.S. brands within the food and beverage space,” the company said.

The Springboard platform seeks to partner with and help develop brands within one of four pillars: natural and organic; specialty and craft; health and performance; and experiential brands.

Natural and organic products, according to the Springboard web site, may fit the following descriptions: certified organic, plant-based proteins, locally sourced, farm-to-table and nutrient-dense superfoods.

“Terms consumers are increasingly looking for when fulfilling their family needs for a more balanced and healthy lifestyle,” the company said. “A fundamental platform for the future of food.”

Springboard partners will have access to the Kraft Heinz Innovation Center in Glenview, Ill.

Products in the specialty and craft category are super-premium, “expertly-crafted” products, often made using traditional methods and artisan techniques, the web site says. The category also includes authentic ethnic and regional cuisines.

Health and performance products are those that “are fuel for a healthy and active lifestyle,” Kraft Heinz said. These may be superfoods with antioxidants or products that support digestive health with pre- and probiotics.

Experiential brands are those created by more out-of-the-box thinking.

“When brands create memorable, innovative experiences, food becomes something more,” Kraft Heinz said. “Experiential brands are using food as a platform for these experiences and producing activities to change how and what we eat.”

Springboard partners will have access to Kraft Heinz resources, including its innovation centers, management practices, operating scale and food safety and quality capabilities programs.

“We are actively searching for emergent, authentic brands that can expand into new categories and are looking to build a network of founders to help shape the future of foods and beverages.” — Sergio Eleuterio, Springboard Brands

“We are committed to support and partner with teams that will impact the future of our industry,” said Sergio Eleuterio, general manager of Springboard Brands. “We are actively searching for emergent, authentic brands that can expand into new categories and are looking to build a network of founders to help shape the future of foods and beverages.”

Additionally, Springboard is launching an incubator program that is focused on nurturing food and beverage start-ups at a pre-valuation stage. The 16-week program’s infrastructure includes business consulting, mentorship from Kraft Heinz leadership and access to pilot plants and culinary kitchens at the Kraft Heinz Innovation Center in Glenview, Ill. Those accepted to the incubator program will receive $50,000 funding upon acceptance with a chance to earn up to $50,000 more in funding during the program.

“The program was created to turn businesses with disruptive products and brands into thriving companies in the food and beverage industry,” Kraft Heinz said. “Companies invited to the Incubator are given a unique opportunity with an abundance of tools and resources to help make their goals a reality.”

New Food Stores

What will new-built grocery stores look like in 2023?

 by Bill Bishop

Many areas of online shopping have evolved and grown, but in most cases the in-store experience hasn’t changed much, especially in grocery shopping. Change is coming, however – and soon. We often hear retail leaders ask “What will the grocery stores of the future look like?” While no one can predict the future with certainty, it’s possible to develop a good idea of what it will look like if you read the trends. That’s how we created this vision of the grocery stores that will be opening just five years from now in 2023.

3 ways grocery stores will be different in the future

Grocery stores that open in 2023 will be different in three key ways.

1. Smaller footprints

New-built grocery stores in the future will be smaller to allow for lower break-even levels.  Most will have a total footprint of less than 30,000 square feet, and some will be even smaller – less than 12,000 square feet.

2. Competitive shift: Every meal, every day, every week

These stores will compete more aggressively for “every meal, every day, every week,” as well as for share of wallet. They will also furnish comfortable seating for eating in the store.

  • Fresh food will be the main appeal. Exceptional vegetables, fruit, meat, seafood, and floral, will be combined with a range of fresh prepared food designed to appeal to a cross-section of eating occasions.
  • An assortment of unique private brand and local products chosen to appeal to customers living around the store will be refreshed frequently to draw customer interest and maintain the fun of discovery.

The combination of fresh and unique packaged products will be what makes the store a destination.  These stores will encourage frequent shopping and deliver a great shopping experience.

3. Rebalanced layouts

New stores will offer a complete range of packaged groceries, but these won’t be presented in the traditional center store layout.

  • Pantry replenishment products will be displayed in the “background” of the fresh department so they don’t draw a lot of attention, much the way grocery products are displayed in Fresh Market stores.
  • Most of the replenishment grocery section will be housed in a “dark zone” instead of on the sales floor. Many customers will order these products online (or via in-store kiosks in more automated operations). The traditional grocery products offered in the store will be supplemented by a broader range of items that customers can order for pickup or delivery.

Trends that are driving these changes

Shopper, retail, and technology trends are combining to drive these changes.

Consumer shifts

Consumers are moving toward two key shopping occasions: fresh/discovery and replenishment.

  • Fresh/discovery is about engaging with products and store associates. On this occasion, customers are shopping fresh products; they want to see, touch, and even taste before buying, and they are open to and interested in discovering new ideas and products.
  • Replenishment is about buying familiar products that are used regularly, so they can be purchased with confidence.

This change in shopping behavior is reinforced by:

  • A preference for smaller stores that enable faster in and out shopping.
  • A growing willingness to shop more frequently for fresh food as part of a healthy diet.
  • The increasing use of online grocery shopping combined with resistance to buying some fresh products online.

Retail pressures

Retailers face increasing pressure to reduce operating costs and sharpen their differentiation versus competition.

  • Strong fresh offerings will increase traffic and open the way for greater differentiation.
  • More tailored packaged goods offerings will reduce costs by lowering labor and inventory expenses – and increase sales by reducing out of stocks and offering more unique items for customers to discover.

Technology developments

Several developments will enable a retailer to efficiently serve either or both shopping occasions.

  • More efficient store-specific plan-o-gram tools will help lower inventory investment and increase inventory turns across the store.
  • Online shopping platforms will make it easier for consumers to think about “replenishment shopping” as a distinct, almost automatic way to handle this part of the task.
  • Robotics and automation will reduce the cost of product handling and assembling customer orders.

Looking Ahead

The trends driving the grocery store of the future – shifting customer preferences, the pressure on retailers to improve profitability, and improving technology – are already making themselves felt in the marketplace. As new stores are built in response to these trends, the majority of existing stores will need to make adjustments to accommodate the same needs and economic pressures.

Making the shift to the store of the future, whether new or remodeled, will be easier when both retailers and suppliers work from the same mindset – one that that enables them to:

  • Adopt new technology more confidently
  • Build the needed new capabilities more completely
  • “Test and learn” more quickly
  • Implement change more rapidly

Less than Truckload

2018 Less-than-Truckload Market Expecting Substantial Growth

Buoyed by surging demand, less-than-truckload (LTL) carriers are revving up for 2018, warning that tightening capacity means sharply higher rates in a new era of pricing.

Less-than-Truckload Resources

After nearly a decade of so-so profits, the $36 billion less-than-truckload (LTL) sector of the trucking industry is poised for impressive – if not spectacular – growth in 2018.

Nearly all trucking analysts agree that consistently steady industrial and retail demand, the tightening of overall trucking capacity throughout the industry, and LTL’s special operational niche all are factors in creating sparkling market conditions unseen in that sector in at least 10 years.

As Stifel analyst David Ross recently summed it up to the investor community: “Structurally, LTL still is set up really well for success.”

For example, unlike truckload (TL), there are few new entrants in LTL because of the steep initial economic outlay to replicate most carriers’ complex hub-and-spoke, brick-and-mortar terminal networks. At the same time, shortening supply chains, more emphasis on smaller and lighter loads, tighter capacity throughout the entire trucking industry as well as the e-commerce boom all point to more business for LTL carriers.

In the meantime, LTL carriers have certainly realized additional leverage from the tightening TL market. Recently, some large TL carriers started rejecting lighter loads of 5,000 pounds to 10,000 pounds, and that freight is now in the LTL space.

However, this era of tightening capacity is bad news for shippers, who stand to face another year of sharply higher rates – perhaps 5% or more.

Even with higher demand prospects, LTL carriers are weathering a blistering rise in costs – not just for drivers, but also for equipment and insurance. And while ecommerce demand is attractive for some LTL carriers, that additional business comes with sharply higher costs to reach remote locales with very little freight density in those markets.

In this article we’ll take a deeper dive into what LTL shippers can expect and all the factors that are forcing market analysts, as well as carrier executives, to predict stiff rate hikes for shippers in 2018.

Explaining the Capacity Crunch

Because of steady demand and tightening capacity, this is probably the best freight market for truckers in at least a decade. But this has repercussions for shippers, as regulations have tightened regarding driver hours of service.

This tightening of capacity is coinciding with booming freight demand while e-commerce continues to soar, meaning more freight for all carriers – even those not specifically chasing that market.

Pitt Ohio president Chuck Hammel

“Because we’re not an Amazon or Walmart carrier, we haven’t seen the surge that companies that do business with them have seen”Chuck Hammel,
President, PITT OHIO

On a scale of 1 to 10, Pitt Ohio president Chuck Hammel calls today’s LTL market conditions “a 6 or a 7. Our capacity is tight, but we have room for some more business,” he says. “Because we’re not an Amazon or Walmart carrier, we haven’t seen the surge that companies that do business with them have seen. I consider this a good thing.”

According to Wayne Spain, president and COO of Averitt Express, the current market “is an 8 out of 10.” He cites the recent mandate for electronic logging devices (ELDs), the tight driver supply and the overall economy as the key drivers for this high score.

“While the ELD mandate may lead to more tightening of capacity after the April 1 leniency deadline, another factor to look for is the effect of the new tax law,” he says. “We may also see a surge in companies ramping up production as they seek to grow their market share in 2018,” he says.

Darren Hawkins, who assumed the role of president and COO of YRC Worldwide on Jan. 1, says that having three straight quarters of GDP growth in excess of 3% was a sure sign of a great freight market. He adds that this is the strongest U.S. industrial market since 2008.

“We’re a reflection of the economy,  a leading indicator,” says Hawkins. “Overall economic fundamentals are the big thing. Our customers have more balanced inventory with constant replenishment needs. That keeps freight flowing consistently, without the ebbs and flows.”

Drivers, drivers, drivers….

According to Myron “Mike” Shevell, chairman of the Shevell Group, parent of New England Motor Freight (NEMF), one factor working against the carriers is the growing lack of qualified, available drivers.

The tight overall labor market is crimping supply at the same time that tighter driver regulations are serving to limit their pay – as most drivers are paid by the mile, not the hour.

“The driver situation is just pathetic, says Shevell. “And it’s going to continue to get worse. Drivers continually are under tighter scrutiny whether it’s for drug use, terrorism protection or the government continuing to crack down on fatigued drivers.”

Wayne Spain, president and COO of Averitt Express

“We may also see a surge in companies ramping up production as they seek to grow their market share in 2018”Wayne Spain, president and COO of Averitt Express

Shevell’s advice for shippers to better manage this situation is to “work with your carriers” to take costs out of their networks, reduce waiting time at docks and other facilities and realize that truckers have to make a profit as well. “Ninety-nine percent of our industry is just making pennies on the dollar as far as profits,” he says.

“In the meantime, we’re making huge investments in trucks, drivers, and facilities.”

Finding drivers in LTL wasn’t always as much of an issue as it’s been in the TL market. With shorter line-hauls and average lengths of haul, LTL carriers could nearly guarantee most drivers could be home every few days – unlike TL drivers who hit the road for weeks at a time.

“It’s becoming a problem in the LTL industry too,” says Pitt Ohio’s Hammel. “As an industry, we need to start recruiting young employees and train them as drivers. Our industry has mostly baby boomers and they’re beginning to retire.” He adds that most trucking companies merely “poach” drivers from other trucking companies, “and that is not sustainable.”

Giving new drivers sign-on bonuses – as much as $10,000 after one year – is all the rage, adds Hammel. “However, that’s not helping the overall supply of drivers. What we need more than anything is to increase driver pay substantially. In fact, I could argue that truckload driver pay needs to increase at least 40%.”

LTL drivers can make in excess of $60,000 annually, substantially more than the average TL driver. In truckload, driver pay starts around $40,000 and peaks around $50,000-$55,000, depending on experience.

Rick O’Dell, president of LTL carrier Saia, says that indeed, the driver market continues to be challenging. “But in the long-term, in order to achieve an economic return on capital, rates will increase in order to compensate for continuing driver wage pressures, benefit costs, and the substantial equipment and technology investments required to meet customer expectations.”

Satish Jindel, the principal of SJ Consulting, a firm that closely tracks the LTL sector, says that LTL carriers ought to use the well-publicized driver shortage as ammunition in rate negotiations with shippers. “Drivers are a factor in terms of capacity, but everybody is facing it,” he says. “It’s an opportunity to raise prices. It’s simply supply and demand. If you’re not making money now, maybe you should get out of the business.”

Last-Mile Conundrums

President & Chief Operating Officer at YRC Worldwide

“Our customers have more balanced inventory with constant replenishment needs, and that keeps freight flowing consistently, without the ebbs and flows”President & Chief Operating Officer at YRC Worldwide

The boom in e-commerce has created a surge in demand for home delivery of everything from diapers to dishwashers, and most LTL carriers have a unit and more than a few trucks and drivers reserved for this business since rates are higher generally for home-delivered goods than general freight.

However, carrier costs are much greater to fulfill this demand due to the many remote delivery destinations with little freight density in the area – and rarely a backhaul. “We’re not chasing this market at all, but by default, we are getting a lot more of this business anyway,” says Pitt Ohio’s Hammel.

“I’ve heard some horror stories about service problems with Amazon carriers due to the tremendous surge that Amazon creates.”

So LTL carriers face a conundrum of sorts. How badly do they chase the last-mile market? Executives are wrestling with that question, weighing the benefits of all that ecommerce freight with the additional costs that last-mile deliveries have in remote locales.

“It’s good business, but it’s too soon to make a judgment,” Shevell explains. “It’s going to be part of the LTL process, but it’s very costly. In New York, with all its crazy regulations, the politicians want everything delivered in the middle of the night. I got news for them: They’re not going to get drivers to work in the middle of the night delivering small packages, it’s just not going to happen.”

Analyst Jindel adds that e-commerce should be a boon to volumes, revenue, and profitability, the bottom line depends on how that freight is priced. “When you boil it down, that’s a function of pricing discipline,” he says.

Jindel’s advice for carriers: “Don’t bring on a customer because it’s a big name,” he says. “It doesn’t matter when you go to the bank whether it’s Amazon or some small XYZ company. Amazon can be a great customer but that’s up to the carrier and how it prices its freight. In the end, that’s not Amazon’s problem, it’s the carrier’s problem.”

As Hammel alluded, even carriers that aren’t chasing e-commerce are benefitting because it’s adding volume they never thought would affect them. “And LTLs should take advantage of that,” says Jindel.

Rick O’Dell, president of LTL carrier Saia

“Rates will increase in order to compensate for continuing driver wage pressures, and the substantial equipment and technology investments required to meet customer expectations”Rick O’Dell, president Saia

LTL executives are trying to do exactly that, but they say they must guard against promising too much in the e-commerce space without getting adequately compensated. NEMF’s Shevell says that e-commerce giants like Amazon have to be treated like any other large shipper.

“If they need you, they’ll be your friend,” he says. “At end of the day, Amazon needs carriers just like everybody else.”

Rates Up, up, up…

Taking all of these factors into consideration, LTL shippers should brace for rate increases of 5% or more this year, but that’s only part of the bad news. It’s not just the base rates that are rising, experts say.

“There is better dimensional pricing and charges for accessorials such as Saturday deliveries, inside deliveries and other special needs,” says Jindel. “And shippers should realize this environment is not temporary; in fact, it should continue for most of 2018.”

Pitt Ohio’s Hammel says that most shippers are “very aware” of the new environment for LTL freight. “They realize it, however, they still fight to keep their rates from increasing too much. Some are putting their business up for bid elsewhere and receiving rate increases anyway.”

NEMF’s Shevell says that savvy shippers realize if more companies exit the business – more than 7,500 have done so since deregulation in 1980 – that means fewer choices and probably higher rates.

Shevell, who’s been in the industry for 60 years, recalled that in 1935, when regulation started, it was because the carriers were beaten up due to the Depression and couldn’t make a decent return on investment. He emphasizes that he doesn’t want a return to the regulated environment, but the situation with some carriers recently has been very dire.

Jindel adds that his analysis shows the operating ratios of the LTL carriers he tracked in 2017 showed a decent profit – an operating ratio of around 90%, collectively. “Pricing discipline has improved since the Great Recession 10 years ago,” he adds. “They need to maintain that. Once you get that discipline in place, you never let go.”

Whole Foods/Amazon

Bit by Bit, Whole Foods Gets an Amazon Touch

The Whole Foods flagship store, in Austin, Tex., has many of the new changes Amazon has made to the grocery chain. CreditDrew Anthony Smith for The New York Times

Some signs are subtle, like the “Whole Foods + Amazon” one near the bananas. Others are more obvious, like the kiosk with Amazon devices for sale.

It has been six months since Amazon took over Whole Foods, a $13.4 billion deal that made the internet retailer a major player in the world of brick-and-mortar retailing. For the most part, the 470 stores are still the same upscale, expensive healthy food emporiums that they have always been.

Amazon has grander ambitions as well. The company’s executives are busy devising ways to connect its Prime membership program, which offers benefits like fast and free shipping and video streaming, with the stores.


At the Whole Foods store in Austin, some branding is subtle, like on this sign for bananas. CreditDrew Anthony Smith for The New York Times

Vanessa Valenzuela helping a customer at the Whole Foods store in Austin, Tex., where Prime members get 5 percent back on Whole Foods purchases made with an Amazon-branded Visa card.CreditDrew Anthony Smith for The New York Times

The company has said that Prime will eventually become the Whole Foods customer rewards program. It recently took a baby step in the direction of weaving together Prime and Whole Foods by giving Prime members 5 percent back on Whole Foods purchases made with an Amazon-branded Visa card. Whole Foods has signs about the offer all over its checkout stands.

Some of the changes Amazon has made are experiments limited to a few locations. Others, like price cuts on grocery staples, are widespread and a sign of more to come, its executives say.

“We’re determined to make healthy and organic food affordable for everyone,” Jeff Wilke, the chief executive of Amazon’s worldwide consumer business, has said.

Here are a handful of notable changes Amazon has made to Whole Foods so far.

(WATCH: Mr. Wilke, speaking at The New York Times’s New Work Summit, explains his strategic vision for the retailing giant and the critical role Whole Foods will play.)

Home Delivery


Charlton Holmes packing groceries for delivery at the Whole Foods store in Austin, Tex. CreditDrew Anthony Smith for The New York Times

Last month, Amazon allowed people to buy thousands of different items from Whole Foods and have them delivered by Prime Now, a speedy Amazon delivery service that uses contractor drivers in their personal cars. The service, available only for Amazon Prime members, offers free two-hour delivery of orders and one-hour delivery for $7.99 on orders over $35. (Driver tips are optional.)

Amazon introduced Prime Now delivery for Whole Foods stores in Austin, Tex.; Cincinnati; Dallas; and Virginia Beach. The company said it would expand the service to the rest of the country in 2018. Inside the Austin store, Prime Now orders in brown paper bags wait on shelves and in refrigerators for drivers to come pick them up and spirit them to customers’ homes. A banner at the entrance to the store promotes the delivery service.

(Some) Price Cuts


Amazon announced price cuts after it acquired Whole Foods, but much of the selection in Whole Foods stores still carries premium price tags.CreditDrew Anthony Smith for The New York Times

A few days before Amazon completed its acquisition of Whole Foods, it announced a series of price cuts on grocery items, a move to change the perception of the chain as “Whole Paycheck.” It slashed the price of a dozen Organic Valley large brown eggs by 27 percent and cut the cost of a 16 ounce jar of 365 brand crunch almond butter by 13 percent. For Thanksgiving, it made turkeys cheaper, and for Valentine’s Day, it dropped the price on roses.



Shoppers at Whole Foods in Austin, Tex., can now pick up an Echo, Fire TV or Kindle.CreditDrew Anthony Smith for The New York Times

The most conspicuous sign of Amazon’s agenda inside Whole Foods is the kiosks containing Amazon electronics that now lurk near store aisles. Not far from the Honeycrisp apples and bulk bins of granola, shoppers can now pick up an Echo, a Fire TV or a Kindle.

In a handful of Whole Foods stores, including in Denver and Chicago, Amazon has opened big electronics stands called pop-up shops, which are staffed by Amazon employees who can answer questions about the devices. The pop-up shops, which are at dozens of shopping malls around the country, give shoppers an opportunity to try the devices in person, something they cannot do when they browse online.

Amazon Order Pickup


Amazon lockers at the parking garage of the Whole Foods store in Austin. CreditDrew Anthony Smith for The New York Times

For years, Amazon has been installing banks of lockers inside and around supermarkets and other buildings, giving people who order items on Amazon a secure place to pick up their packages. The lockers can also be used to return items ordered on Amazon.

Since the Whole Foods deal closed, Amazon has put its lockers inside all of the chain’s stores. In some stores, the lockers are smaller and tucked among the wine and other goods. The Austin store has a huge bank of lockers near a set of escalators.

Bolstering Private Label Foods


365 Everyday Value, Whole Foods’ line of foods for budget shoppers, can be purchased at the Amazon Go location in Seattle. CreditKyle Johnson for The New York Times

So far, much of the changes have gone in one direction: injecting a little Amazon into Whole Foods. But a little Whole Foods is being added to Amazon, too.

Amazon has sought to bolster Whole Foods by making the chain’s private label products available through its various online outlets. Whole Paws, the grocer’s pet food brand, and 365 Everyday Value, its line of foods for budget shoppers, can now be purchased through and AmazonFresh, an existing grocery delivery service run by the internet retailer.

Amazon even dedicated an area of its automated convenience store in Seattle, Amazon Go, to Whole Foods private label goods.