Remember Cargomatic? The Los Angeles start-up snagged attention and investor capital by promoting itself as an “Uber for trucking” but laid off a substantial chunk of its staff a year ago after failing to attract enough customers or hit other business milestones.
Today, Cargomatic appears to be a shell of its former self. That’s not the case for other companies in the nascent on-demand freight business, which is gaining momentum like a truck on a 6 percent downgrade.
On-demand freight start-ups such as Transfix, Flexport, Loadsmart and Convoy continue to add partners, and executives at those companies maintain revenue and profits are growing as a result. Their clients include major grocery chains, consumer goods manufacturers and others using the services for full trailer-load (FTL) shipping.
Executives at the start-ups say their online platforms are attracting hundreds of carriers and thousands of drivers as truckers seek alternatives to dealing with traditional brokers to secure the most lucrative loads.
Start-ups aren’t the only ones enticed by the prospect of disrupting the $700 billion U.S. freight industry. Uber Technologies is moving into the business through its Uber Freight division, though the company won’t discuss current operations or plans. Amazon is reportedly working on an on-demand freight service that could launch as soon as this summer as part of a broader strategy to gain more control over its delivery channels.
It’s still early in the life of on-demand freight services, which use cloud-based platforms and mobile apps to outperform traditional brokers in matching freight loads with truck fleets or owner/operators who are available to haul the load and meet other qualifications.
But less than 5 percent of U.S. trucking lines use the services, said Wallace Lau, a commercial vehicle industry analyst at Frost & Sullivan.
“That’s the biggest challenge, it trying to steal market share from established players,” Lau said.
That hasn’t stopped venture capital firms and other investors from pouring more than $200 million into at least a half dozen on-demand freight start-ups (see chart).
The more carriers that on-demand freight start-ups add to their networks, the more lanes they can cover, and the more attractive they are to prospective shippers, which today include companies such as Unilever, Anheuser-Busch and Safeway/Kroger.
To that end, start-ups offer truckers a variety of incentives to coax them to create an account, which adds the carrier to a database from which the vendors or their shipping customers can search for freight haulers. Some of those free incentives include real-time load tracking, fleet management apps and mobile apps that truckers can use on the road to find truck stops, rest stops and other amenities.
The biggest incentive, though, could be paying trucking companies more quickly.
Executives at Transfix and Loadsmart say they pay for loads within 48 hours, a drastic reduction from the 30 days or more that traditional brokers take to pay.
“That’s powerful cash flow,” said Diego Urrutia, Loadsmart’s chief commercial officer.
Despite the incentives, the vast majority of carriers have yet to try on-demand freight services. H&S Enterprises Inc., a Phillipsburg, N.J., carrier, uses existing load boards run by TruckStop.com and DAT, neither of which offer the same level of service or amenities. Jeremiah Apgar, H&S Enterprises’ general manager, said he’s not particularly interested in a cloud-based platform with mobile apps.
“We wouldn’t use them,” Apgar said of the latter, “because we work in an office.”
Jack Sher, owner of Jagim Transportation Inc., an interstate carrier in Williamsport, Penn., with a 15-truck fleet, also uses DAT and TruckStop.com. Sher said he’d never heard of Loadsmart, Transfix or Flexport.
Pacific Northwest Motor Freight Lines Inc. has yet to sign up with an on-demand freight service either.
But the outdated ways brokers do business make them ripe for being overtaken by competitors offering more modern services, said Carleton Morrow, the Seattle carrier’s operations manager. Brokers still use paper logs, paper bill of ladings, and phones for everything, Morrow said.
“Some even rely on load boards that are literally boards on walls in truck stops,” he said.
Problems at Cargomatic
Cargomatic was among the first start-ups to tout its ability to offer carriers a better deal. In a March 2016 Trucks.com interview, then-Chief Executive Jonathan Kessler said the business was focused on short hauls and was aggregating independent operators on its site to appeal to major shippers.
The company’s downfall was entering the less-than truckload, or LTL, business — a smaller, more complex market that’s tougher to crack than the FTL business, executives at other start-ups told Trucks.com. The company was operating in only a few markets but faced competitors with much larger footprints, said Drew McElroy, Transfix founder and chief executive.
Cargomatic added to its troubles by simultaneously trying to get into the drayage business, looking to pick up LTL work at ports in Los Angeles and New York, among others.
Serving ports, though, “is an entirely different business,” McElroy said. “So then they had two different products, and (got) spread too thin too quickly.”
A little more than a year after raising $10.6 million in a Series A round of venture financing, Cargomatic slashed its staff, laying off 50 to 60 people.
A pilot project Cargomatic teamed up on with the Port of Los Angeles’ West Basin Container Terminal has shut down, according Arley Baker, a port spokesman.
Cargomatic has working a phone number and website, and has advertised openings for three jobs in Long Beach and Atlanta on the Indeed.com jobs website in the past 30 days. But a job board linked to the company’s careers page is closed, and the company blog hasn’t been updated since May 2016. Brett Parker, Cargomatic co-founder and president, initially responded to a Trucks.com interview request by saying “All is going very well at Cargomatic,” but did not respond to additional requests for comment.
Other on-demand freight start-ups are making better headway, though some balk at the “Uber of trucking” label because they’ve found remaking the freight business is more involved than getting someone from Point A to Point B.
Start-ups are looking at a variety of ways to differentiate themselves in a business that’s getting more crowded by the month. In February, Transfix began testing a private-label version of its platform with one customer. If the test goes well, the company plans to license the technology to companies that want to manage their own freight delivery networks, McElroy said.
Loadsmart built a database of 900,000 trucking lanes, or routes, from Miami to Los Angeles on its network so that shippers it works with — such as Walmart and Best Buy — can book a coast-to-coast shipment in less than seven seconds, said Felipe Capella, the company’s co-founder and chief product officer. The majority of the carriers that Loadsmart uses average 25 trucks.
“Those owner/operator carriers for us have been extremely helpful,” said Urrutia, Loadsmart’s chief commercial officer. “We’ve seen a better level of service from them. And they benefit because we can get them home quicker,” by giving them loads for return trips.
Flexport sets itself apart from other on-demand freight services by acting as an international freight forwarder, with a cloud-based platform that clients from ocean liners to trucking lines to customs brokers can use to communicate instead of email.
“Our customers sometimes call it Facebook for freight,” said Sanne Manders, Flexport’s chief operating officer.
The San Francisco company has grown to approximately 1,800 FTL, LTL and drayage customers since starting four years ago; has offices in Los Angeles, New York and Hong Kong; and is growing 20 percent to 25 percent a month, Manders said. In Los Angeles, Flexport has three or four preferred carrier partners, medium-size companies with 100 to 250 drivers that don’t have their own fleet management network “or what they haven’t isn’t very good,” he said. “We give them an alternative that’s free, and it makes their operation better, and it makes our operation better.”
Uber, Amazon Testing the Waters
If there’s one company that might not mind the “Uber for trucking” label, it’s Uber. The ride-hailing giant launched Uber Freight from assets acquired when it bought autonomous trucking start-up Otto in August.
Uber Freight is in development and offering early sign ups, according to an Uber spokeswoman. She declined to make Uber Freight executives available for an interview but shared the following statement from the company: “Right now, we're focused on talking with carriers and drivers across the country to better understand the types of solutions they're looking for so we can make sure our app best meets their needs. We’re excited to be seeing a lot interest from shippers, carriers and drivers.”
Uber isn’t the only tech leader eyeing the market. Amazon is building out its delivery infrastructure, including leasing Boeing 767s and getting licensed in the U.S. and China to operate as a freight forwarder for ocean container shipping. As part of that push, Amazon also is working on an app that matches truck drivers with shippers, according to Business Insider.
Scheduled to launch this summer, the app would offer many of the same features found on existing cloud-based on-demand freight matching platforms, including real-time pricing, driving directions, tracking information and extras such as truck-stop recommendations. Apart from Amazon’s own activities, company founder Jeff Bezos was an early investor in Convoy, which like the online giant is based in Seattle.