Uber has its sights set on the road freight industry, hoping to disrupt transportation and logistics the way its ride-hailing app upended the taxi industry.
The problem in need of a solution, for drivers, is “deadhead miles” – time spent on the road with little or nothing to haul. At the same time, shippers have been struggling with a shortage of drivers for years. Thus tech firms that focus on transportation and logistics, such as Cargomatic and Convoy, have sprung up, connecting carriers with customers via mobile apps. Convoy once called itself “Uber for freight,” until Uber launched its own road freight business, Uber Freight, in 2017.
The opportunity for transportation disruption is alluring. According to consultancy Armstrong & Associates, global spending on road freight reached $3.8 trillion in 2017. In the U.S., companies spent over $700 billion, The Economist reports. But of this $700 billion, only $72 billion of shipments was managed by freight brokers, and considerably less by digital brokers. Most shippers use their own company vehicles.
Uber considers freight its third most important business after ride-hailing and food delivery. Uber Freight brought in about 3% of the firm’s revenues in 2018, and it is growing faster than any other division. Bookings increased by nearly 450%. Bill Driegert, Director of Uber Freight, believes the firm can usurp most of the brokers’ $72 billion in road freight business, not just the digital share. He touts Uber’s software and traffic data, as well as brand recognition.
The key difference between freight and ride-hailing, Uber’s original means of transportation disruption, is that it is a late entrant. In 2016 Uber acquired Otto, a developer of self-driving trucks, but the endeavour fizzled two years later. The company is also having difficulties scaling Uber Freight. Its European launch earlier this year has met with tough competition from incumbents.
In the U.S., conventional freight brokers are becoming harder to beat as they grow more tech savvy and richer, thanks to a boom in road freight. Goldman Sachs estimates that from January to September last year, Uber Freight accounted for 30% of haulage app downloads. While this is a strong showing, it was bested by three apps from big brokers, C.H. Robinson’s Navisphere, J.B. Hunt’s Carrier 360 and DAT’s Load Board, which accounted for 40% combined.
Chris O’Brien, Chief Commercial Officer of C.H. Robinson, a major logistics and supply chain management firm, challenges Uber’s claims of superior traffic data. Further, he cites the ancillary services that freight brokers can provide, such as warehousing, last-mile delivery, and assistance with customs or unforeseen problems. Brokers are more concerned about the competitive threat from Amazon. It launched an app in 2017 to help drivers deliver merchandise to its warehouses, and is believed to be developing an on-demand freight service of its own.