Over the past few years, several startups have launched aiming to become “the Uber of Trucking” — or at least that’s the way the media and analysts like to characterize companies like Convoy, Cargomatic, and Trucker Path that are leveraging mobile app technology to bring shippers and carriers together to facilitate the movement of goods.
Just last week, TechCrunch reported that yet another “Uber of trucking” startup, CargoX, was launched in Brazil with backing from Goldman Sachs, Oscar Salazar (who was involved with Uber’s launch), and Valor Capital Group LLC.
And of course, Uber itself has its sights on the logistics market, as it tests various delivery services, including UberCARGO.
Are these startups disruptors, distractions, or something in-between?
That was my first question to Andrew Clarke, CFO at C.H. Robinson, in a recent episode of Talking Logistics. “What everybody is calling ‘the Uber of Trucking’ I actually jokingly refer to it as ‘the Tinder of Trucking’” said Clarke, referencing the dating app that facilitates communication between mutually interested users. He goes on, however, to make an important distinction between what Uber has done in the taxi industry, which is a heavily regulated industry, and what it and other startups are attempting to do in trucking, which has been deregulated in the United States since 1980. Watch the short clip below for the rest of his comments:
“Are we paying attention to what’s happening in the industry? Absolutely, yes,” said Clarke. “Are we leading with what’s happening in the industry? Absolutely, yes. Are we concerned that a mobile-based or app-based company that’s raised $20 million is going to disrupt us? We don’t think they’re going to, but we spend over $100 million a year on technology, and connecting 110,000 shippers with about 70,000 disparate providers of transportation takes a lot more than putting up a mobile app.”
I generally agree with Mr. Clarke. As I wrote back in February 2015 in “The Rebirth of Transportation Marketplaces”:
Back in the dotcom days, more than 15 years ago, numerous startups launched transportation marketplaces in a bid to revolutionize the way shippers and carriers worked together. Virtually all of them failed. These marketplaces (aka “exchanges”) didn’t work for many reasons, but the prime one was that these startups didn’t really understand the transportation market. They assumed that transportation was a commodity, no different than buying paperclips, and so their primary focus was on facilitating reverse auctions, where carriers would bid against each other for shipments to drive down costs for shippers.
But transportation is not a commodity. It is a relationship-based business where trusted relationships matter — because it impacts customer service and satisfaction, and by extension, the shipper’s brand and reputation — which is why the vast majority of freight is moved via contracted carriers, not the spot market.
Will [today’s startups] succeed? The answer will ultimately depend on three things: building critical mass, remembering that transportation is not a commodity and that relationships matter (and taking this reality into consideration in their operating model), and measuring and controlling the quality of the end-customer delivery experience.
But I also believe that it’s dangerous for industry leaders to become too complacent and quickly dismiss startups as threats. As Clarke acknowledges, you have to keep paying attention to what’s happening in your industry, otherwise you might find yourself playing defense instead of offense.
Take Procter & Gamble (P&G), for example. The company’s share of the men’s razor and blade businesses in the U.S. fell to 59% in 2015 from 71% in 2010. Who took 5% of that market share in just five years? Dollar Shave Club, a startup launched in 2011 with not much more than a funny YouTube video, a charismatic founder, and a $1 per month direct-to-consumer subscription model. Last week, Dollar Shave Club, which has 3.2 million members and is on track to exceed $200 million in revenue this year, was bought by Unilever for $1 billion.
I encourage you to watch the rest of my conversation with Andrew Clarke for more insights on what’s happening in the logistics industry, including the role that Amazon is playing and the impact of regulations and mergers and acquisitions.
Are today’s generation of transportation technology startups the Uber of Trucking or the Tinder of Trucking? Will any of them emerge as the Dollar Shave Club equivalent in the transportation industry? Post a comment and share your perspective!