Fast technological revolution may mean that the global truck and shipping industry may soon become one of the most valuable online business models in the world.
This would mean that instead of struggling truck drivers who normally spend countless hours on the road making deliveries, and most times charging less, a new generation of truck drivers would mount the roads and steer the best bargain out of their searing sufferings.
Key Insights Into The Global Business of Trucking
- The total global revenue for the trucking industry is $1.2 trillion, according to McKinsey & Co. Of this number, $260 billion, representing 20% of the global market share is generated in the US trucking industry.
- Trucks deliver two-thirds of all products shipped each year.
- The business is highly fragmented, meaning that many players fight for the available market share although publicly traded transportation industry leaders still dwarf the disruptors. C.H. Robinson and XPO Logistics, for instance, maintains between $15 billion and $20 billion in annual sales; UPS has close to $72 billion in revenue.
In a bid to reduce the number of times third party truck drivers run empty trucks, a lot of entrepreneurs and investors have leaped into the market with technology-driven solutions.
A Look Into The Changing World Of Trucking and How Some Start-ups Are Offering a Wider Range of Transportation Services
Convoy:
With the Convoy App, trucks are matched with any available shipments. Drivers can automatically bid for loads, submit their bills and get paid quickly. Shippers on their own can post a job, get real-time quotes and track their shipments.
Convoy was founded by Dan Lewis and Goodale, both former employees of Amazon, where they had a close-up involvement with a massive logistical task. The startup has since reached a $1-billion-plus valuation.
Barely five years old, Convoy has up to 500 employees, raised $265 million and reached a valuation of more than $1 billion. Its investors include Alphabet’s late-stage venture arm CapitalG, Amazon founder Jeff Bezos and venture capital firm Greylock Partners.
According to Dan Lewis, CEO and co-founder of Seattle-based Convoy:
“Trucking is the background noise of America. Companies like Unilever and Starbucks are moving thousands of shipments every day. We’re trying to help trucking companies and truck drivers run their businesses more efficiently.”
Lewis said that Convoy might have succeeded because its timing was just right, when smartphones were just starting to gain widespread use among truck drivers.
To Reid Hoffman, a partner at Greylock and co-founder of LinkedIn:
“Convoy’s mission starts with getting to a world with zero waste, addressing the 40% of miles driven without a load.’’
Flexport
The startup is based in San Francisco. It says it is a digital-first freight forwarder. Apart from trucking, the company also manages sea, air and rail delivery and customs processing, using what it calls its “operating system for global trade.”
With over 10,000 clients and suppliers in 110 countries, 1,100 employees and reported revenue of $441 million in 2018, Flexport has raised more than $1.3 billion in several rounds, including a $1 billion round in February led by the SoftBank Vision Fund, that was backed by Saudi Arabia and Dubai. The company’s valuation was reported at $3.2 billion in its last fundraising round.
“We’re doing this by combining technology, access to physical logistics infrastructure, and industry expertise to build a product that allows our customers to plan, move and even finance their cargo more efficiently,” said Flexport founder and CEO Ryan Petersen.
Flexport is Already Quelling the Trade War
With a highly flexible focus, Flexport is exploiting the tension between China and the US over trade relations. Immediately President Donald Trump announced new tariffs on imports from China, Flexport’s cloud-based software and data analytics platform allowed the company to immediately identify customers who would be affected and begin working with them to mitigate losses.
As an example, the startup required an industrial materials client based in Hong Kong to identify cargoes that would be hit by the new tariffs based on the commodity codes. Flexport prioritized those shipments for loading and rerouting just to avoid the tariffs.
The recently introduced OceanMatch, helps customers to identify available space on ocean-bound containers, which ship on average just two-thirds full.
These Startups Are Already Squaring Up Against Industry Giants
Apart from Convoy and Flexport, major industry players such as Uber and Amazon are or have already invaded the market. Uber launched Uber Freight in 2017 and expanded into Europe in March 2019. The company stated in its pre-IPO filing, that its revenues from Uber Freight reached $373 million. Amazon also has confirmed that it is testing the freight-forwarding market.
Convoy’s Lewis says he is not worried.
“It’s a big market. There’s plenty of space for innovation,” he said
Bottom Line
African entrepreneurs and startups may have opportunities here.
Charles Rapulu Udoh
Charles Rapulu Udoh, a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.