November 1, 2016

Uber launches trucking marketplace

UberFreight could bring load-matching efficiencies, surge pricing, self-driving trucks.

By Ben Ames

Ride-hailing pioneer Uber Technologies Inc.'s decision to expand its load-matching technology from personal transportation to freight hauling could bring big changes to the industry if Uber applies its "surge pricing" system to trucking rates.

The San Francisco-based ride matching service recently launched an "UberFreight" website and could launch a live app by early 2017. The sparse web page offers no details about the venture but invites shippers and carriers to enter their email addresses to receive updates as it develops.

Other than the website launch, however, the company has been tight-lipped about its intentions since it announced plans to expand its ride-matching platform into the trucking sector after acquiring autonomous trucking startup Otto in August for $680 million.

In a statement, Chelsea Kohler, an Uber spokeswoman, said that "UberFreight is a marketplace that will connect truck drivers with the right load wherever they are." Kohler added that the platform developed by Otto and Uber is "designed to operate in the current market with regular trucks. Over time, the platform will be merged with Otto's self-driving technology, creating a freight network that is constantly learning and improving."

Uber's move could affect the trucking industry by bringing its advanced web-based platform to a sector that has traditionally been reluctant to embrace modern technology. The launch could also force change in the industry's market structure should Uber apply its "surge pricing" strategy to freight rates.

Uber is known in the ride-hailing industry it developed for using surge pricing, a flexible fare scale that boosts the cost of a ride when demand exceeds supply. The company says the system works as an incentive to get more drivers on the road during peak hours, which in turn would correct that imbalance. However, while that model has generated increased revenue for Uber in the passenger sector, the approach would not work as well in freight, one expert says.

Surge pricing can be inefficient because it establishes a fixed minimum price beyond which rates will not drop, even if there's spare capacity, according to an email comment from Zvi Schreiber, CEO of the online price-quote platform Freightos Ltd. That means Uber may choose to pursue a more flexible pricing model for its freight division, he said.

"While Uber is still working out some details regarding how its marketplace will function, if it manages to accumulate enough buyers and sellers on the marketplace, it has the opportunity to be even more efficient than the surge pricing model with live dynamic pricing, driven by huge datasets," Schreiber said. "There will likely be surge pricing during increased demand, but that would also enable reverse-surge pricing when extra capacity exists."

That means Uber's entry into the freight market could make its biggest short-term impact by providing increased transparency into availability for both carriers and shippers, he said.

And in the long term, Uber would have a much larger impact on the sector if it develops self-driving trucks. "The real threat for trucking looms in the autonomous trucks," said Schreiber. "In the long run, if Uber does indeed flood the market with automated trucks that can drive around the clock, it could pose a huge challenge to 'traditional' trucks."

Most industry watchers predict that autonomous trucks will not start plying American highways until 2025 at the earliest.

The transition from carrying passengers to hauling freight is not a new concept for the company. Uber runs courier services, such as its "UberEats" restaurant order-delivery service and its "UberRush" on-demand delivery service, which is used by small businesses such as florists and grocers.

The company also has an enterprise version of UberRush, which allows large retailers to embed links to the service on their sites. This enables customers to elect an UberRush option for deliveries and returns, Uber says.

About the Author

Ben Ames
Senior Editor
Ben Ames has spent 20 years as a journalist since starting out as a daily newspaper reporter in Pennsylvania in 1995. From 1999 forward, he has focused on business and technology reporting for a number of trade journals, beginning when he joined Design News and Modern Materials Handling magazines. Ames is author of the trail guide "Hiking Massachusetts" and is a graduate of the Columbia School of Journalism.

More articles by Ben Ames

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