April 7, 2017

Freight brokers say Uber not ready for prime time

But its presence will still change the game, they say.

By Mark B. Solomon

Traditional freight brokers aren't overly concerned about the competitive impact of ride-hailing pioneer Uber Technologies LLC's penetration into the brokerage segment, although they acknowledge the presence of Uber's low-cost model should be a wake-up call to the brokerage community to operate more efficiently.

Those attending a panel session yesterday on technology trends at The Transportation Intermediaries Association's (TIA) annual meeting in Las Vegas were polled on Uber's relevance to the industry. The consensus was that Uber presented no near-term impact on brokers, and that the company will move the needle only when autonomous trucks become mainstream—a process that could take years, depending on the pace of technology improvement and regulatory approvals.

Uber last year acquired self-driving trucking company Otto for $680 million, and speculation has it that Uber's brokerage unit will bid on loads at very low, almost loss-leader prices for the purpose of building market share, then divert the transport of those loads to Otto. A source close to San Francisco-based Uber said the company is not dampening such speculation.

Of all the comments made about Uber during the TIA panel session, perhaps the most telling was that it's "just another broker."

A trucking operations executive at the conference, who asked not to be identified, agreed with the prevailing wisdom. "Uber is way behind. They are not a player, although people here are spending a lot of time talking about them," the executive said.

The biggest threat, according to the executive, is Seattle-based e-tailer Amazon.com Inc., which has designs on the brokerage space through a start-up called Convoy, a Seattle-based company that Amazon Chairman and CEO Jeff Bezos raised capital for. Amazon reportedly plans to launch a freight-matching app in mid-2017 as the first step in its brokerage strategy.

Amazon's threat to brokers stems from the relationships it has built with thousands of customers through its fulfillment services. Amazon can leverage current and future revenue streams the likes of which Uber can only dream of, according to the executive.

Still, brokers need to be concerned about Uber's sheer size, its aggressive culture, and its willing to underprice traditional brokers, broker executives said during the panel session. "Uber's coming, and they're going to get market share," said Tom Heine, CEO of Aljex Sofware Inc., a Transportation Management Systems (TMS) provider based in Somerville, N.J. "They are going to change expectations in the marketplace."

Heine's advice to traditional brokers is to "automate as much as you can" to improve operational efficiencies.

Jonathan Drouin, founder and COO of HaulFox LLC, a Dallas-based broker, added that, for brokers, Uber's expansion will mean that operations that would be supported by, say, 100 employees would need to be equally efficient with about 30. The key is figuring out "how to get to that point," he said.

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

More articles by Mark B. Solomon

Transportation Videos

Join the Discussion

After you comment, click Post. If you're not already logged in, you will be asked to log in or register.

Subscribe to DC Velocity

Feedback: What did you think of this article? We'd like to hear from you. DC VELOCITY is committed to accuracy and clarity in the delivery of important and useful logistics and supply chain news and information. If you find anything in DC VELOCITY you feel is inaccurate or warrants further explanation, please ?Subject=Feedback - : Freight brokers say Uber not ready for prime time">contact Chief Editor David Maloney. All comments are eligible for publication in the letters section of DC VELOCITY magazine. Please include you name and the name of the company or organization your work for.