TrueBlue, a staffing company that helps Amazon hire its warehouse and delivery workforce, is seeing less demand from the e-commerce giant, and says it could be a sign of the company going more in-house for work in those areas.
Steve Cooper, CEO of TrueBlue, made those comments during the company’s quarterly earnings call on Wednesday, adding it could impact companies like FedEx and UPS, which are Amazon’s delivery partners, in the future. He said:
“The main thing I think is control and knowing that they are controlling their own processes more. So in-sourcing previous things all the way to where they stand with UPS and FedEx and wanting to control delivery right to the customer. So it’s just part of a broader strategy that they have been implementing, and tested a few things here and there, but fairly quickly at the temporary labour aspect.”
Amazon, TrueBlue’s largest customer, had already informed the staffing agency in the April quarter that it would be downsizing the use of its service in its US fulfillment centres. But Amazon decided to further reduce its reliance on TrueBlue last quarter for workers in its sortation centres and delivery stations, Cooper said.
As a result, TrueBlue’s revenue from Amazon is expected to go down from $355 million last year to $165 million this year. TrueBlue’s stock went down by as much as 8% on Thursday.
More control of logistics and costs
Cowen & Co.’s John Blackledge estimates Amazon could save about $22 million by reducing TrueBlue’s service. That’s not a lot for Amazon, but it could have broader implications, he notes, as it shows the company is likely reducing spending on other third party staffing companies outside of TrueBlue as well, while being better prepared for the holiday season ramp, which caused some shipping problems in the past.
“We view the news as further proof Amazon is taking over more control of its logistics operations and more importantly, controlling costs,” Blackledge wrote in a note Thursday.
But most importantly, it signifies even Amazon partners are starting to take notice of Amazon’s broader ambition in the shipping and delivery space. It’s been rumoured for some time that Amazon is planning to build its own in-house delivery network that would rival UPS or FedEx, and the WSJ recently reported there’s even an internal project name for it called “Consumer the City.”
“What we do know and what we’ve seen from being in meetings with [Amazon], it’s part of a broader strategy to in-source many functions that they had previously outsourced, especially within regard to shipping and delivery,” TrueBlue’s Cooper said during the call.
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.