August 2019 |

A couple of weeks back Supply Management published the news that Uber Freight had launched its first trials with Heineken in Europe. For many, the news that Uber is coming will spark images of wide scale disruption and a new distribution giant transforming the market. But new ventures haven’t always been plain sailing for the rideshare giant, and in Europe, it is entering a crowded market, one full of organisations already seeking to disrupt and gain a competitive advantage.

With many analysts looking at Uber as a “Buy” rating, the market has some confidence in their strategy. So what’s new? How will Uber change the market, or how will businesses need to change their established behaviours to take advantage of the Uber offering?

In this article, Proxima’s Mohammed Ismail considers the news and potential implications.

First, let’s examine the offering. Uber Freight is an App. It matches drivers to loads, offering shippers and drivers the opportunity to create flexible arrangements and lower brokerage charges (than they have been used to). In effect, it is very similar to their rideshare offering but focuses only on freight. You could say it is bolstering a spot market that already exists but has not been widely adopted by large corporates.

Like ridesharing, Uber offers choice to operators and shippers on who they work with, giving them the option to decline business if they are at capacity or do not wish to work with particular shippers (perhaps they take too long to load their goods, for example).

Will it succeed or fail? Ultimately, the market will decide. Uber has some big challenges to overcome, or simply an established market to disrupt….

Uber is good for traditional Operators, right?

The Uber opportunity (creation of a more flexible market) sounds positive, but are Operators ready for it? Can their traditional business models simply adapt to the Uber way? For instance, can carriers, already struggling in a fiercely competitive market place, forego chasing regular secure bookings and thrive in a spot market? The upside is the ability to fill empty space, but is there a “first mover advantage” to all this, or will the Uber model favor new entrants, with different underlying business models?

Are Shippers ready for the Uber model?

Flexibility can also be attractive to Shippers, but there are also hurdles to overcome. Shippers often invest heavily in due diligence, ensuring that each driver/truck meet their requirements, and that each driver is trained, fully insured, and familiar with any specific site protocols.  For LTL loads the Shipper may want to vet and monitor. For example, what quality of vehicle is arriving? What are the goods being loaded with?

Will the administrative burden and associated risks on the Shipper outweigh the benefits of Uber – or are these the early signs of the future changes to the business model?

How does Uber overcome today’s key market challenges?

Although offering a flexible solution, Uber does not address the key fundamental challenges facing the Logistics market in the short term, namely fuel prices and driver shortages.

In this respect, Uber may not be able to cut prices and margins with the same fervor as they have been able to do in the ride share market, although they aim to offer Operators quick payment and lower margins. When considering the long term financial challenges it should not be forgotten that;

  1. Uber is used to taking financial losses when defining a market and it will be backed by analysts and investors alike
  2. Uber’s success in ridesharing has also been defined by their ability to create a more customer-centric offering and better customer experience through technology and lower costs

Will Uber deliver a more customer-centric offering?

Uber stole a march on most established taxi firms by offering a much more customer friendly solution, quickly becoming the choice option. But as we saw in China, when they came up against established market innovators, Didi Chuxing in this case, it can be different.

In Freight, a more customer-centric approach could be to focus more on customer service and offer a support centre and/or software solution that offers a seamless solution and reduces the risk on Shippers. This is something that several 3PL’s already offer today and so Uber has a benchmark at which to aim.

Ultimately, the goal is to give the Shipper the confidence that the goods will be loaded and shipped on time by a reputable operator. This may be a key challenge for Uber to overcome in order to grow quickly in a highly fragmented, owner-operator freight market.

Does Uber align better to SME’s or large corporates?

SMEs who are faced with working with a fragmented supply base with little or no freight visibility may welcome the idea of Uber Freight, especially if they can offer the software and customer service solution that many desire. 

However, the Heineken tie up suggests there is interest at the other end of the market. Larger Customers may take more turning as the leading 3PLs and Brokers already have IT solutions in place, albeit better technology is always desired and this could be an area for Uber to exploit or partner. This idea of partnership could overcome some of the challenges outlined earlier, offering Shippers the best of both worlds.

Does Europe offer up anything special?

An area that could offer a great opportunity in Europe is the Final Mile market.  This market has an increasing and an ever-demanding customer base, with shippers looking for a market place that offers flexible solutions that can deliver results from both a service and cost perspective.

The Uber model could fit well here as increasing environmental demands placed by cities (such as London) accelerate the creation of out of town hubs and consolidation of deliveries. It may also be, of course, that Uber’s investments in automation and driverless tech could come to the fore in the future.

The bottom line

Having said all of this, Uber Freight has still not returned a profit in its years of operation.  For all its perceived advantages, Shippers doing their due diligence may be nervous and question the longevity of the Operation.  Several Uber ventures have fallen by the wayside, so only time will tell. But to assume that Uber Freight is simply trying to compete rather than disrupt may be naïve.

Undoubtedly, Uber Freight will be looking to shape a market, taking advantage of technological advancement, rather than just looking to fill gaps. Simply entering the market does not address the key fundamental challenges the Logistics market is facing however, it could work closely with current operators in order to succeed and transform an extremely competitive market.

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