Yellow Files Bankruptcy, Biggest Amazon Warehouse in Australia, TikTok Enters Fulfillment Service
What's buzzing in the warehousing, commerce, and logistics space.
Welcome back to CrossDock,
Last month, the stand-off between UPS and the International Brotherhood of Teamsters almost hurt the US economy. But all is well now. Deals were drafted, promises were made, and what could have been a significant blow to the American economy and UPS is averted – at least for now.
Sadly, not all stories have a happy ending. For Yellow, the 99-year-old trucking company, Teamsters' strike was the final nail in the coffin. The trucking giant, for years, has been struggling with mounting debt and financial stress. Yellow has now filed for bankruptcy costing 30,000 workers their jobs. While announcing the bankruptcy, the company’s chief executive Darren Hawkins said Yellow intends to entirely repay the federal loan it received in 2020. We will further discuss what led to this downfall and the ripples it will create in the market in detail.
In this newsletter:
Yellow files for bankruptcy
South California’s Warehousing Market Cools Off
Amazon discontinues the small and light program
TikTok launches fulfillment services in the UK
Amazon to decrease private label offerings
Amazon is building the largest robotic warehouse in Australia
DHL’s CVG hub expansion
Freight, Shipping, and Warehousing
Yellow Files Bankruptcy, 30,000 Workers Lose Their Jobs
Yellow, one of the biggest less-than-load (LTL) trucking companies in the US, filed for bankruptcy owing to financial debt and a feud with the Teamsters' Union, which brought the nearly 100-year-old company to bankruptcy. While filing for chapter 11 bankruptcy protection, its chief executive Darren Hawkins said, "It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business."
Yellow's Freight History
The iconic Nashville-based trucking company was founded in 1924. It was the US's third-largest LTL company, making up about 9% of the LTL market. Before ceasing operations, Yellow was a $5.2 billion business (until last year). It moved around 50,000 daily shipments and owned 12,000 trucks and dozens of freight terminals nationwide. The trucking company was known for its cut-rate prices, and Walmart, Home Depot, and hundreds of other smaller businesses were part of its customer base.
Financial Crisis and Union Standoff
Yellow faced liquidity challenges this year due to a decrease in shipping demand, which resulted in reduced freight volumes and a decline in rates. The company’s cash holding fell to $112 million at the end of the quarter from $235 million in December last year.
Industry experts believe mounting losses and debts, coupled with a recent standoff with the union, drove the company to file bankruptcy. Yellow succumbed to the financial troubles owing to the debt it had accumulated through a series of mergers and the $700 million federal Covid relief loan it received in 2022 during the Trump administration. It further owes $500 million to private equity firm Apollo Global Management.
Yellow’s misfortune further accelerated after a standoff with the Teamsters union – about 22,000 Yellow employees out of 30,000 belong to Teamsters – who opposed the company's proposed operational overhaul and threatened to strike.
Closure and Settlement
The closure of Yellow has now made 30,000 employees jobless. Interestingly, Yellow's competitors in the LTL segment have witnessed a surge in business since mid-July. Also, the trucking giant has said it has enough real estate and equipment to sell and settle the $700 million federal government debt and the $500 million Apollo Global Management debt.
Warehousing Vacancy Rates Increase in South California
Source: The Wall Street Journal
South California, a region deemed fully occupied a year ago, is now experiencing a rise in vacancy rates for industrial real estate. The area was known for its tight industrial real estate market for several years. However, according to experts, companies have started to look for warehouses elsewhere because of soaring renting costs, limited space, and dropping import volumes.
According to real estate services firm Savills, the vacancy rate in Inland Empire, a logistics-heavy region in Southern California, jumped 3.8% in the second quarter – the vacancy rate was 1.2% in 2022. The increase in empty warehouse spaces within the region coincides with a broader trend of the industrial real estate market slowing down nationwide. This deceleration follows three years of intense leasing and construction activity fueled by the surge in imported goods to satisfy the increased e-commerce demand during the pandemic.
Buffeted Port Volumes
Over the last few years, many companies have shifted their cargo from the Pacific Coast to ports in the East and South to avoid labor negotiations with dockworkers on the West Coast and other bottlenecks. As the Wall Street Journal reported, ports along the East and Gulf coasts now manage a significantly larger share of import containers than during the pre-pandemic days.
Retail and E-commerce
Amazon Stops Small and Light Program in Europe
Following its suit in the US market, Amazon has stopped its specialized fulfillment program for small, lightweight, and low-priced goods in Europe. These items will now automatically be part of the new low-price FBA rates from September 6.
Amazon introduced the Small and Light program in 2015 to help merchants sell small and lighter products for reduced FBA rates.
Increased FBA Rates
The discontinuation was announced in the US earlier this year and will be effective from the end of August. According to Amazon, the new low-price FBA rates will be $0.30 more than the previous small and light product rates. But, it will be, on average, $0.77 lower per item compared to current FBA rates.
Threshold for Pricing
Amazon employs region-specific pricing thresholds across Europe. The benchmark for reduced fees in Germany is 11 euros, whereas, in France, Italy, the Netherlands, and Spain, it's set at 12 euros. The United Kingdom maintains a threshold of 12 British pounds, while in Sweden, it is 140 Swedish kronor, and in Poland, it is 55 zloty.
TikTok Launches Fulfillment Services in the UK
Social networking company TikTok recently launched its fulfillment service 'Fulfilled by TikTok' to its sellers in the United Kingdom. According to the statement made by the company, TikTok Shop will store, pack and ship merchant products to the TikTok community.
Fulfilled by TikTok offers:
Same day, automated fulfillment for all orders made by 7 PM Monday to Saturday
A next working day premium delivery service
Improved customer feedback and ratings through our instant messaging service
Dedicated customer service employees
Improved metrics in terms of reduced delivery times
Amazon Plans to Decrease its Private-label Offerings
Earlier this week, Amazon officially announced its intention to reduce its range of private labels. The company also disclosed its strategy to rebrand its popular existing brands, such as Amazon Basics and Amazon Essentials.
Move to Reduce Private Labels
According to the Wall Street Journal, Amazon has cut its overall number of private-label brands to less than 20. In the past year, the retailer retained only three out of its original 30 clothing brands. As reported by the WSJ, the retailer is discontinuing its private label furniture brands, Rivet and Stone & Beam.
Data from the 2022 Numerator report stated that Amazon holds a comparatively smaller portion of the private label market than several of its competitors. While Amazon's private label share is more prominent in home goods and consumer electronics, the company's private label share stands at 3% in categories such as household items, health and beauty, and the groceries sector.
Amazon to Set up the Largest Robotic Warehouse in Australia
Amazon will set up its largest robotic warehouse in Melbourne by the end of 2025 – the biggest and first of its kind in Australia. This ambitious project is reported to cost Amazon $8.4 billion.
Increased Job Opportunities
The fulfillment center will be constructed in the suburb of Craigieburn in North Melbourne. The project will create 2,000 jobs alongside the robots, Amazon Australia said in a press statement. Additionally, 2,000 jobs would be created during the construction and fit-out phase.
Previously, the largest Amazon fulfillment center was its facility in Western Sydney. This new facility is 9,000 square meters bigger than Amazon’s existing Western Sydney site.
DHL Invests $192 Million in its CVG Hub
DHL, the global leader in the logistics industry, recently announced a $192 million investment in its CVG hub located in Cincinnati.
According to DHL, this investment will support its growing aviation fleet with a 305,000-square-foot, state-of-the-art aviation maintenance facility with additional space for aircraft components storage, offices, three maintenance parking gates, and eight new aircraft gates.
The CVG hub is a crucial point connecting DHL’s express network to the rest of the world. The CVG superhub operates on 194 acres with 67 aircraft parking gates and 6.4 million square feet of ramp area. It processes about 50 million international shipments bound for the U.S., Canada, Mexico, and Latin America annually.
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