Disrupting Logistics Ain’t Easy

Shyp is a startup that “picks up, packages, and ships anything at the best price, through major international carriers like USPS, UPS and FedEx, for business and everyday use.”

Well, it used to do those things until the company called it quits last Tuesday and shut down its operations.

Shyp and Uber: Pulling the Plug on Disruption

After launching in 2014 and raising a total of $63 million, this “Uber for Shipping” venture (as investors and the press liked to call Shyp) never found a sustainable business model. As Harry McCracken wrote in Fast Company last week:

[Shyp’s service] was a pricey business, a fact [CEO Kevin] Gibbon understood all along. “It’s pretty silly,” he told me in early 2016. “We charge a $5 pickup fee, and that includes the packaging and coming to your home. And all items are not created equal. Shipping your shoes versus shipping your TV, it actually doesn’t sound like it makes a lot of business or financial sense. It doesn’t.”

Speaking of Uber, it pulled the plug on UberRUSH last week too, with operations to end in June. “This same-day parcel and package delivery service… was once viewed as a viable threat to everything from FedEx Corp. to small couriers,” wrote Greg Bensinger in the Wall Street Journal last week. “But Uber never expanded beyond the initial three cities [New York City, San Francisco, and Chicago]…Uber also faced stiff competition in same-day deliveries from a variety of startups and larger rivals, including Deliv Inc. and Amazon.com Inc.”

In August 2014, in a post titled Uber, the Next Amazon?, I wrote the following:

These new services…like UberRUSH make it clear that Uber is building the foundation for a much bigger and broader business down the road — a business centered on logistics services…If you’re a logistics service provider, it would be foolish and dangerous to take Uber (and others like them) for granted.

Then again, here we are almost four years later and that bigger and broader business is still more of an aspiration than a reality. Uber is still moving forward with UberFreight, despite the recent departure of its lead executive Ron Lior, but after more than a year since launching, it hasn’t upended the freight brokerage industry yet. In fact, UberFreight is facing the same challenge others in the industry have run up against: getting drivers to download and use its app. As Erica Phillips reported recently in the Wall Street Journal:

In an effort to attract drivers, Uber Freight this week launched an incentive program offering discounts on fuel, tires, maintenance and the purchase of new and used vehicles. Drivers who use the Uber Freight app to book a load at least once a month are eligible for the discounts under agreements Uber struck with various service providers.

(For related commentary on UberFreight, see Uber: The Newest Entry on Your Carrier Scorecard and Are Today’s Transportation Tech Startups the Uber of Trucking or the Tinder of Trucking?)

Shyp and UberRUSH are just the latest reminders that disrupting the logistics industry ain’t easy. The logistics industry, especially trucking, remains highly fragmented and inefficient, which is why so many entrepreneurs and investors believe it’s ripe for disruption — they’re like sailors lured by the Sirens’ song, straight to a shipwreck.

The fact is that old habits die hard in logistics.

Defining Success in Logistics

Success in this industry, whether you’re a technology-based startup or an incumbent, depends on three things: building critical mass; remembering that transportation is not a commodity and that relationships matter (and taking this reality into consideration in your operating model); and measuring and controlling the quality of the end-customer delivery experience.

(Having a business model where revenues > costs is also very important. But that should be obvious, shouldn’t it?)

Focusing on disruption, which typically implies disintermediation, is also a more difficult and riskier path to success than focusing on the “white spaces” of transportation management (processes such as container matchbacks that traditional solutions don’t address) or on improving (simplifying, automating, adding intelligence to) the way brokers, carriers, and shippers work together. More on the latter in a future post.

Finally, sometimes it’s best to hit the pause button on chasing the next new shiny technology or disruptive business model and just focus on executing better with the systems and processes you already have in place.  As I wrote five years ago in Forget Innovation, Just Execute Better, the benefits from better execution can be as large or larger than what “the next big thing” promises — and with less risk, and perhaps less time and effort too.