Uber and scads of startups are rushing to disrupt the trucking industry. Here's why old-school incumbents aren't bothered.
- Amazon, Uber, and Oracle, along with startups like Convoy and Transfix, have rushed into the trucking space.
- And large incumbents have matched that Silicon Valley interest with their own apps and technology.
- Now, analysts say the big trucking names are "gaining momentum" as they match innovation with their brand names.
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Silicon Valley is challenging the trucking industry's biggest companies, and trying to automate the process in which America's 1.8 million truck drivers are matched with jobs. That would put the industry's nearly 20,000 freight brokers out of work and unseat big names like C.H. Robinson and TQL.
You'd expect someone like John Le Starge, a Salt Lake City-based freight broker who spends his time calling and emailing truck drivers, to be freaked out about his livelihood.
He's not.
"We are all not super worried about it, because, you know, when you a have big experiment it takes a while for it to work out," Le Starge told Business Insider. "Everybody thinks, 'Ah, everything is going in a year.' But it takes time for things to adjust and change."
Le Starge's viewpoint is echoed by the incumbents in the $80 billion freight brokerage industry, which is a market that's expected to grow to $118 billion by 2022, according to Armstrong and Associates. Even as tech giants and startups alike set their sights on trucking, traditional giants in freight brokerage aren't bothered.
It's not because brokerage incumbents have their heads in the sand. Rather, these traditional giants have been quietly funding technology already.
"J.B. Hunt has 58 years of experience in the transportation and logistics industry, and a decade of that working with brokerage," J.B. Hunt chief commercial officer Shelley Simpson, who is also president of highway services, told Business Insider.
"We provide something that startups and technology industry players can't - industry expertise coupled with technical capabilities," she added.
C.H. Robinson, which announced in September that it would double its technology spend over the next five years, echoes that.
"Our $1 billion investment over the next 5 years is about continuing to bring new innovations to market," Chris O'Brien, who is the chief commercial officer, told Business Insider. "For us, it's tech plus global experts and tech plus local knowledge that drive better outcomes."
Techies began setting their sights on trucking in the early and mid-2010s
For several years, Uber and scads of startups like Convoy and Transfix have been focusing their attention on disrupting freight brokerage - the process in which truck drivers and loads are matched up. "Over the past few years, we have seen a large uptick in the amount of venture capital investments entering the trucking market," according to a July 10 Goldman Sachs analyst note.
Read more: Why Alphabet just led a $185 million investment round in a trucking startup
Those companies are invested in the idea that freight brokerage can be automated. Rather than truck drivers needing to call or email freight brokers, the leaders of these new ventures - many of whom come from outside of the trucking world - say truckers can be autonomously matched with loads. It's similar to the idea of finding a ride through Uber or Lyft, rather than calling individual taxi companies.
"Trucking is more than 100 years old as an industry, and very little innovation has happened in it," Ziad Ismail, Convoy's chief product officer, previously told Business Insider. "Today, every truck driver has a mobile phone with a data plan. This is really a moment where we can reinvent the trucking industry and build something different."
Along with simply being more convenient, these entrepreneurs argue that autonomous load matching would help truck drivers eliminate empty miles and a slew of other inefficiencies that dampen their quality of life.
"Digital brokerage represents less than 5% of the market today but over time we believe the market will become overwhelmingly digital and automated," Jonathan Evans, an equity analyst at Barrow, Hanley, Mewhinney & Strauss, told Business Insider.
Uber Freight grew out of the ride-hailing giant's previous push into automated trucks. It's jumped from $67 million in 2017, when it launched, to $359 million in bookings in 2018 - making it one of the 30 biggest brokerage firms in the US.
Other giants are eyeing the space. Amazon, long suspected to be building out a third-party logistics network, launched a digital freight brokerage platform earlier this year. Oracle integrated automated freight matching into its logistics platform in July.
And before that, truck drivers started downloading apps like Convoy (founded in 2015), Transfix (2013), Loadsmart (2014), and NEXT Trucking (2015) to find new loads.
As of January to August 2019, Uber Freight comprised of 65% of all trucking app downloads, followed by Convoy (24%) and Transfix (11%), according to an October 15 UBS analysis of iOS and Google Play downloads.
But the incumbents have tools to fight back, and they're faring well so far
This increased tech investment - and the uptick of analysts asking about those competitors on quarterly earnings calls - seems to have motivated legacy brokers to invest in their own technologies.
"These market players are now big enough to impact market pricing, and we believe this is causing established players to accelerate technology investments to drive higher productivity as they look to defend or expand market share," Stephens Inc. analyst Jack Atkins recently wrote to investors.
Read more: There's a 'revolving door' at Amazon, where company insiders are ditching the retail behemoth to expose its inner workings and make a fortune
A recent report from UBS transportation analysts Thomas Wadewitz and Alex Johnson revealed apps from traditional incumbents are seeing "rising momentum" - while UBS wrote that Uber Freight and Convoy are seeing their downloads as "moderate."
According to the UBS analysis, C.H. Robinson saw its app download share jump from 7% in 2018 to 9% in 2019 through August, and 12% in August 2019 alone. TQL (which launched its trucking app in 2015) and XPO (whose app launched in 2018, but has long been involved in automated freight brokerage) saw similar upticks. J.B. Hunt's app has been seeing a slowdown in downloads as these other options take hold.
Some believe that incumbents have a long-term advantage over the techies due to their brand name and existing relationships. As the equity analyst Evans said, "J.B. Hunt is a brand name that is known and trusted by carriers and shippers alike."
And a senior broker at C.H. Robinson, who asked that their identity remain anonymous, pointed to the same idea.
"People don't really care as much, at least not yet, because the big piece that I don't think a lot of those guys like Uber and Convoy have figured out yet is that customer service is king," the broker said. "It's not where they like moving a simple passenger that just wants to go from Point A to Point B. There's a lot of other variables that come into play with regards to size of freight, packaging, and then customer expectations."
Both sides are looking more and more like each other - and neither of them are likely to win it all
Those deep relationships are getting chased by the tech companies through new offices outside of traditional startup hubs. Uber Freight is hiring more than 2,000 in its new Chicago office, while Seattle-based Convoy opened an Atlanta office last year.
The ultimate result may be that the two sides resemble each other more and more as consolidation takes hold. "This will likely not be a winner-take-all market at maturity," Evans said. "We envision a 3-5 player oligopoly with a mix of tech platforms and incumbents."