More startups and e-commerce challengers muster up the courage to grow their own logistics businesses. Should the established carriers feel uneasy?
This is the second part of the series of articles exploring the ever-changing balance between the startups, the challenger companies and the established players of the logistics markets.
Part II. Startups going directly to the customer vs leveraging partnerships.
A growing number of startups choose to skip on being merely technology stack suppliers and decide to go directly to the customer with hopes to achieve profitability even before the economy of scales kicks in or to provide living proof of their business model to the prospective investors.
Uberization of road freight.
Transportation network companies are gradually turning their sights on road freight. There is also a steady stream of newcomers, each introducing their own booking platforms.
Most notably, Uber Freight was launched as a road freight marketplace in May 2017 aiming to simplify onboarding for truck drivers and bypass the slog of paper form packets that traditionally come with signing up to move road freight. At the same time, Uber Advanced Technologies Group (ATG) put efforts into the development of autonomous trucks. The company had high hopes for the project. However, it hits a number of roadblocks, most prominent of which was the ill-fated acquisition of Otto. The purchase resulted in a prolonged lawsuit between Uber and Alphabet’s subsidiary Waymo over intellectual property infringements and in 2018 Uber shut Otto self-driving truck project down.
Despite these setbacks and earlier rumours that the mobility giant may abandon the freight market altogether to focus on ride-hailing business, Uber recently announced the launch of Uber Freight service in Europe, starting with Netherlands in 2019.
Global digitalisation… and automation.
All across the world more transportation network startups take some of the concepts behind Uber and apply them to trucking and logistics. Among them, Convoy, Coyote and Transfix who all offer their own platforms to connect shippers and transporters in the United States. Developers of these platforms see their goal in eliminating the middlemen brokers, streamlining the booking process and thus levelling the playing field for smaller and medium carriers and lowering cost for the shippers.
Brazilian scalable carrier CargoX, Ezyhaul from Malaysia, Kargo in Indonesia and Tirport of Turkey have launched similar platforms in their respective markets. These freight network companies often employ unique growth strategies. For example, one of such startups, DOFT, bet on creating its own cryptocurrency to serve as the backbone for their decentralised platform between shippers and transporters.
A number of autonomous truck companies were quick to pick up the staff in the fallout of Otto’s demise: Einride, Embark, Ike, TuSimple and Waymo to name a few. There is a possibility that self-driving truck startups will start their own carrier subsidiaries in the future akin to Amazon launch of its own cargo airline. Would truck manufacturers like Daimler, Volvo, and Tesla, who are also developing their own autonomous driving technologies, follow the suit and launch competing for road freight marketplaces utilising their own vehicles? Time will tell.
New platforms for marine and air freight.
In the air and on the seas digital freight forwarders like Flexport (US) and FreightHub (Germany) start gaining weight in the market.
Founded in 2013, Flexport runs a fully digitised freight tracking and handling platform. It has recently raised a $1 billion funding round led by SoftBank and was named one of 10 fastest growing companies of this decade. Flexport handles complete freight cycle, import-export matters, warehousing and even provides options to offset the carbon footprint of the shipments to its clients. Their software helps the customers optimize each route to prioritize speed, reliability, cost or a combination of the three. The versatility of Flexport’s platform helped it win clients over from established freight-forward giants and to compete with the likes of UPS.
In the Asia-Pacific region Freightos of Hong-Kong, founded in 2012, received the backing of the Singapore Exchange to grow their online freight marketplace that lets users book, manage and track shipments with more than 1,200 logistics providers. Their competitor, Australian startup Temando, is offering a different solution and a selection B2B or B2C carrier services through their multi-carrier fulfilment platform.
In contrast, logistics blockchain companies CargoX and dexFreight collaborate in providing digital bills of lading and other APIs, partnering with the carriers to integrate with their existing systems.
Dawn of the delivery robots.
In the field of delivery robotics Starship Technologies and Kiwi Campus opted for letting customers use their autonomous couriers directly through their mobile applications rather than waiting on partners to widely adopt their devices.
Kiwi enjoyed popularity and social media spotlight with their miniature delivery robots on Berkeley and Stanford Universities campuses in California. Starship Technologies boasts completing thousands of deliveries every week employing six-wheeled autonomous robots. It has launched local neighbourhood grocery and parcel delivery marketplaces (where they act as goods and parcel forwarder) in Milton Keynes, the UK in 2018, as well as focusing on takeaway deliveries through a partnership with Sodexo on campuses of Intuit in California, George Mason University in Virginia and Northern Arizona University in Flagstaff.
Both companies indicated that they are planning to expand into business to business deliveries, and have ambitions of directly providing local businesses with delivery services.
On the other hand, autonomous delivery vehicle developer Nuro chose to partner with one of the largest grocery chains in the USA, Kroger, to offer grocery deliveries in Arizona and Texas, starting late 2018.
The right strategy?
A strategy of going directly to the customer is a page that logistics startups took directly from the book of their Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) predecessors in other industries. For now, it remains to be seen if the same methods would help the challengers successfully scale their businesses in the world of logistics.
Did you enjoy this article? Read the first of the series about The Amazon in the Room here.
Photo: Kiwi Campus