Uber Freight had its coming-out party today, formally launching brokerage operations in Texas as the first step in its much-publicized plan to revolutionize truck transportation by connecting shipper loads and carrier capacity through a smartphone app.
The brokerage unit of San Francisco ride-hailing pioneer Uber Technologies Inc. began accepting loads on a pilot basis several months ago before going live with its app in March. It chose to formally start in Texas because of the state's large volume of traffic, according to Eric Berdinis, Uber Freight's senior product manager, who joined the company after Uber bought autonomous trucker Otto last August for $680 million.
The app has been specifically developed for owner-operators and for fleets of 10 trucks or less, said Berdinis, adding that there are no near-term plans to market it to mid-size or large carriers. All large carriers use owner-operators along with employee drivers.
Truckers and drivers should expect to be paid twice a week for the loads they deliver, Berdinis said. The carrier and owner-operator are Uber Freight's customers, he said in a phone interview late yesterday.
Berdinis confirmed reports that Uber Freight has opened full-service brokerage offices in Chicago and San Francisco, and that it has hired an undetermined number of staff to support the digital operations. Traditional brokers have long maintained that experienced support professionals are essential to not only facilitate transactions but to be available in the event something goes wrong in the shipment process.
Since Uber Freight hit the drawing board, there has been much speculation that it will underprice its traditional broker rivals, thus compressing the traditionally hefty margins generated by mark-ups to the shipper. Berdinis did not directly address the issue, saying that "we see ourselves as the next evolution" of truck transportation and that the company is striving to inject efficiencies into the load-matching process. Whether that translates into margin compression for traditional brokers remains to be seen, he said.
It has also been speculated that Uber Freight's long-term strategy is to build market share through low pricing and funnel freight through the Otto self-driving truck network. Berdinis would not comment on whether there would ever be operational overlap, saying only that the Uber Freight and Otto teams are functioning on separate paths at this time.
Berdinis acknowledged that Amazon.com Inc., which has designs on the freight brokerage segment as part of a broad strategy to develop a vast transport and logistics footprint, would bring massive volumes and its own network to the table. However, he added that Seattle-based Amazon is likely to focus on handling its own freight, while Uber Freight will carve out a strong niche as a neutral provider. "We see ourselves as a Switzerland" in freight brokerage, he said, a reference to that country's long-standing policy of geopolitical neutrality.
Over the past year, a number of brokerage startups have come to market with similar models. What sets Uber apart is its scale—it operates in 460 cities around the world—and a blend of IT and operational expertise that rivals can't match, Berdinis said.
He noted that Uber Freight has the benefit of having two of Uber's top executives working for it: Curtis Chambers, Uber's seventh employee, as head of engineering, and Kevin Novak, considered within Uber as the godfather of its "surge pricing" model in ride hailing, as head of operations and pricing.
