Oct. 11, 2016 | InBrief

Uber entering $700 billion freight hauling business

Uber entering $700 billion freight hauling business

Uber Technologies announced last month plans to build its freight network to help match freight to available haulers in an attempt to capture a portion of the $700 billion freight hauling market. After the recent acquisition of self-driving truck company Otto, Uber is already leveraging acquired industry connections and technology to compete with freight brokers and 4PLs.

Currently the "Uber for Trucking" market is segmented with local and regional players (Convoy, Cargomatic, Transfix, etc.), but Uber has the brand recognition to attract shippers and carriers alike nationally to help move freight in the long haul market more efficiently. This translates to more efficient use of assets and infrastructure by specifically reducing empty miles and miles driven with underutilized equipment by allowing carriers to easily find freight multiple days in advance across the country. The ability to gather a fragmented carrier network of mom and pop companies and consolidate them onto a single platform will be an important key to success.

Offering lower pricing to shippers, higher pay to carriers, and operating long-term with minimal margins will allow Uber to capture a major share of the brokered freight market and threaten even the largest of 4PLs. If Uber’s freight business follows its ridesharing model, it will operate at a loss, accelerating the adoption of shippers and carriers and disrupting the market at a rapid pace. Building a large national carrier network and national customer base will make Uber a fierce competitor to many brokers and a dominating force that can leverage economies of scale for unmatched pricing.

In my point of view, Uber will be successful and its freight business should help alleviate the impact of electronic logging device (ELD) regulations and the resulting driver shortage by enabling more efficient use of available capacity in the market. Uber will help carriers increase utilization of assets, help shippers access on-demand capacity, and be more attractive from a pricing perspective. With strong financial backing, Uber will likely be successful and outlast smaller competitors, possibly even acquiring them after driving down market prices.

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