By adaptive - March 8th, 2016
Susan Kuchinskas reports on the companies trying to muscle into the hauling business with mobile apps and integrated services.
It's a familiar story: An internet startup looks at a 100-year-old business model and says, "We can make an app for that." It worked for Amazon and Airbnb; it worked for Lyft and Uber – and now a gaggle of new companies wants to bring the transportation networking model to the freight-hauling industry.
Like the taxi industry, the freight industry runs on phone calls and paperwork. Drivers may sit idle while shipments linger on docks waiting for a truck, losing everyone money.
Brokers sit in the middle between shippers and carriers, trying to match shipments with available drivers, taking an estimated 10, 20 or 30 percent of the deal. Brokers aren't necessarily incented to get the best prices for shippers or haulers; nor do they let either party know what the other is paying or receiving.
The mobile trucking upstarts aim to make this process much more efficient by letting haulers browse available loads from their phones, while shippers can find carriers on demand.
We count at least nine companies raising money from venture capitalists hoping to get a big chunk of that:
• Cargomatic
• Convoy
• CoyoteGO
• Internet TruckStop Group
• Keychain Logistics
• LaneHoney
• On the Move Systems
• Transfix
• TruckerPath
Mobile startups also provide price transparency. Instead of negotiating with a broker, mobile apps let shippers and haulers see pricing for shipments on the app. The startups take a percentage of the deal, just like brokers do. Most of the startups are what Frost & Sullivan calls "mobile-based freight brokerages," providing a mobile interface while still acting as brokers – and not letting parties negotiate directly. Forrester Research estimates the 2025 market for freight brokering through a mobile platform to be $26.4 billion dollars.
Exactly how each startup handles the pricing issue could be a differentiator, according to Roseanne Stanzione, CEO of LaneHoney. She describes LaneHoney as an open, transparent marketplace, where shippers and haulers can transact directly. Shippers can post their shipments and request quotes; haulers can browse available shipments and see the lowest current bid. Truckers also can announce their locations and get tender offers delivered to their phones.
While brokerages are incented to maximize their transaction fees, Stanzione says, "We optimize the price, not the spread."
Other mobile brokerages declined to speak, did not respond or did not provide contact information on their websites.
Sweetening the deal
The biggest differentiation may be the services provided in addition to matching shippers and haulers, according to Wallace Lau, an automotive and transportation industry analyst for Frost & Sullivan. Those value-added services can include automating contracts, billing and payments; vetting and pre-certification of drivers; time-stamping truck departure and arrival times; providing proof of delivery; status alerts for shippers; real-time tracking of shipments and trucks; and mobile services for drivers.
"That is the value proposition that will attract carriers to start using the solution," Lau says.
Although TruckerPath has not yet launched what it says will be an automated marketplace for brokers and drivers, it offers a long-established mobile app for drivers that provides route planning, real-time status information on weigh stations, and information and reviews of truck stops, parking places and rest areas. Stacy Hill, a driver for Tri-Pol Enterprises in Calgary, Canada, swears by the app. Simply knowing if a truck stop has a shower available can save him 20 to 30 minutes, he says.
Hill is interested in the promised TruckerPath marketplace, but he has concerns. He'd like to avoid brokers and deal directly with shippers. "If I can make a deal with someone, they pay 10 percent less and I make 20 percent more. But if you piss off a broker, you don't get any more loads from them. There's always that balance. The question becomes, what will TruckerPath charge for that service?"
A piece of $8 billion
There is plenty of untapped opportunity in for-hire fleets, according to Lau, without their needing to disrupt the current brokerage model. "They won't be taking away market share from freight brokers. Right now, they are fully entrenched and still highly useful to the freight logistics industry," he says.
Small and medium-sized fleets, often without logistics applications of their own, are the biggest immediate target. They can benefit not only by greater efficiency but also by gaining access to back-office applications provided by mobile brokerages, according to Lau.
The analyst says just as a large majority of taxi-alternative drivers keep both the Uber and Lyft apps open when they're working, freight haulers will do the same in the near term. The biggest competition right now is getting more shipments into their systems, he says.
Frost and Sullivan believes that by 2025, the market will favor mobile-based services and platforms over Web-based freight brokering – but Lau says there might be considerable consolidation, along with competition from traditional carriers like Coyote that launch mobile services.
According to LaneHoney, for every shipment that gets a truck, 14 more wait, creating some $2 trillion in unmet demand. Therefore, mobile brokerages could grow the total market without stepping on each other's toes.
Stanzione says, "It's a big, untapped, gorgeous wild west. We can unlock that market."