There are a slew of companies striving to become the ‘Uber of Trucking,’ including startups such Convoy and Truckerpath. These companies have created mobile application platforms designed to streamline the process of booking a load and improve the visibility of freight during a shipment. Much like Uber ride, the idea behind these startups is to make booking a load as easy as pressing a button. There is increasing interest in this technology with Convoy alone raising significant amounts of capital from illustrious members of the tech industry including Bill Gates and Jeff Bezos.
Uber Enters Race to Become the Uber of Trucking
In light of this technology, it is unsurprising that Uber, the multi-billion dollar Silicon Valley behemoth, has taken notice and has decided that introducing innovative tech in a growing eight-hundred billion dollar freight industry could mean massive profits. Uber initially launched the beta version of their own mobile trucking app in Texas, working with owner/operators and small carriers with ten or less trucks, to work out some of the glitches within their platform. The company went live with their app nationally in May of this year. The primary premise behind the app is that truckers can search for loads on Uber’s load board and instantly book a load with a pre-determined and guaranteed rate without having to speak to a broker on the phone. The rates for each load are determined based on the type of load, the number of miles, and market conditions for particular areas of the country. According to Uber Freight product manager Eric Berdinis, “In building Uber Freight, we’re really trying to bring a community of drivers together around a product that pays fairly, pays quickly and can bring some of that transparency and trust back into the industry.” The app is geared towards small trucking companies and owner/operators who do not have the means or contacts to build direct relationships with shippers.
Outside of the ability to instantly book a load, it appears that Uber Freight operations are similar to those of any traditional freight brokerage company. Drivers who experience any issues with their load, including detention at a shipper, malfunctioning equipment, or those that simply fail to update their status, will receive check calls. Executives at a recent Transportation Intermediary Association (TIA) panel discussion believe that Uber Freight will be “just another broker.” Chad Lindbloom, CIO of C. H. Robinson, agrees telling Michelle Rafter, a reporter for Trucks.com, that “Yes, they are competition. But there are tens of thousands of competitors out there.” Currently C. H. Robinson, one of the largest freight brokers in the United States, has only a three percent share in the U.S. freight brokerage business. It has become both a fragmented and a saturated market.
Though it is entering into a competitive marketplace, Uber Freight does have several things working in their favor. The first is name recognition. As Uber enters into the freight hauling sector of the transportation industry, their name will be recognized and many truck drivers, particularly owner/operators, will be curious about testing the technology. Uber also has a large pocket book. The company is reportedly now worth seventy-one billion dollars. Such resources will allow Uber to post very competitive load rates as they try to gain footholds in different parts on the country. It also allows them to pay drivers faster, usually within seven days of delivery as they don’t have to wait for payment from shippers.
However, Uber will face some obstacles as they seek leave a permanent mark on the trucking industry. In recent months, Uber has been plagued with scandal after scandal which prompted founder and former CEO Travis Kalanick, to resign. Uber is also facing a number of legal battles, including allegations of corporate espionage filed by a company called Waymo. Waymo is a tech firm owned by Alphabet, the parent company of Google. Their main project is developing self-driving technology. The basis of the suit are Waymo’s claims that 14,000 of their top secret documents were taken by former employee, Anthony Levandowski, who left the company to form his own tech startup, Otto. Otto was bought for $680 million dollars shortly after its inception by Uber.
Uber has also faced several lawsuits in recent months from their own drivers. One lawsuit has been filed over driver employment status. Are they independent contractors or employees? A more troubling lawsuit against Uber comes out of New York. Under new New York laws and regulations, Uber must charge customers an 8.875% sales tax on each trip, as well as a 2.5% surcharge for a state workers’ compensation fund. According to many drivers Uber has misrepresented how they pay their drivers and has taken money directly from their drivers to pay these taxes. From the broker standpoint, they have a number of issues to work out as they find their niche in the transportation marketplace.
Here Comes Amazon…
A larger concern for many in the freight industry is the interest Amazon has taken in developing their own freight shipping mobile platform. Jeff Bezos, the founder and CEO of Amazon, has invested heavily in the fore mentioned startup Convoy, and if his past investments are any indication, a forward thinking Bezos believes mobile platforms such as the one created by Convoy are the future of the trucking industry. According to an article, written by Erica Phillips of The Wall Street Journal, Amazon is bringing their logistics operations in house. The company has recently invested in their own truck fleet, has leased forty planes from Boeing, and has registered to arrange ocean shipments. Phillips argues that a mobile application would be used to track and manage their own fleets, but the natural next step would be to provide their services to non-Amazon shippers, much like the company did with their cloud technology. As Amazon has already established connections with major retailers their leap into third party logistics and brokerage would be much smoother than it has been for many startups and even Uber.
The Race is on
What should individuals in the freight business take away from this? In any industry, keeping up with new innovations is crucial. Companies that fail to evolve fail. Many freight brokerage companies have already automated many portions of their businesses, creating their own mobile platforms to better serve their customers and improve carrier efficiency. The advantage that traditional brokerage firms have over competition like Uber Freight is an extensive knowledge of the industry and the ability to provide customers with customized solutions that fit their business needs. Applications such as Uber Freight make booking a load easier, but they are a tech company entering into a freight hauling industry that is becoming more and more tech savvy every day. It will be a long-haul for companies such as Uber Freight who will compete toe to toe with companies that already have the knowledge and are adopting the technology to go along with it.