UBS: Brokerage incumbents reign supreme. Disruptors not a major factor.

  (Photo: Shutterstock)

(Photo: Shutterstock)

One of the main challenges for freight brokers is developing and maintaining a reliable carrier base. Overall, that is one of the primary takeaways from UBS’s most recent report, which looks at the trend in app downloads over the past several years comparing the share of downloads across a group of conventional brokers, new tech-focused brokers, and load boards.

The data supports what FreightWaves has reported over the past several months now, that digital broker apps are still not gaining significant industry traction. This doesn’t mean, however, that scale is not achievable. It just might take a little longer than some in the technology space might expect. This is due to several complicating factors, not the least of which is the sheer size of the incumbents, and their ability to also play in the technology sector.

While C.H. Robinson’s scale and reach remain unmatched, a number of competitors have realized strong growth and have achieved significant scale over the past ten years. Total Quality Logistics (Cincinnati) was formed in 1997, and has become the third largest with nearly $3 billion in gross revenue. Coyote was founded in 2006 and it also followed a sharp growth trajectory rising to over $2 billion in gross revenue in 2014 (Coyote was acquired and is currently part of UPS's Supply Chain and Logistics segment).

The report shows the development of TQL, Coyote, and other competitors such as J.B. Hunt's ICS business drove increased competition for C.H. Robinson over the past eight years with a notable effect between 2011–2013. They suggest that the addition of new competitors such as Uber Freight and Convoy could very well prove to achieve similar results.

The report also measures downloads, even if they are not specifically attached to revenue share in the sector. Downloads are important for a number of reasons. The most significant is that they show how well brokers and other transport service companies are connecting with the broader fleet of trucking companies and individual truckers. The connection with trucking companies and truckers is important as it provides visibility into finding available capacity which is a key value add for brokers.

The UBS Evidence Lab estimates that owner operators account for roughly 20%-30% of capacity in the for-hire trucking market, but a large portion of the owner operators are associated with trucking companies; Swift owner operators who are dispatched by Swift for instance.

Independent owners operators likely account for only 5%-10% of industry capacity. This brings up a point that FreightWaves analyst Zach Strickland has pointed out before: The fragmented nature of the transportation industry is a root cause for why digital apps may be focused on the wrong audience. From our CarrierLists data, we’re still seeing that carriers report load boards have only accounted for 12% of the volume of total loads sourced. Roughly 88% of the loads are coming through contact with shippers and brokers.

Within the app analysis one name stands out as showing remarkable traction in terms of downloads but an apparent lack of commercial success based on our conversations with multiple companies in the brokerage industry. Trucker Path and the Truckloads app realized the largest share of downloads in 2016 and 2017, and it shows up in second place in 2018. As a private company detailed financial information is not readily available for Trucker Path, but conversations with multiple industry contacts indicate that strong downloads likely have not translated to significant revenue from the parking availability feature while usage of the load board functionality is also in question. In December 2017, Renren Inc. acquired 100% ownership of Trucker Path, as previously reported by FreightWaves.

Based on UBS’s conversations with a variety of small, medium and large truck brokers, there is little evidence of a disruptive effect from the new technology focused truck brokers Uber Freight and Convoy. They estimate that Uber Freight is running at a pace of about $200 million in annual revenue, which makes it about 20% of the size of Hub Group's truck brokerage activity and 2% of the size of C.H. Robinson. While the new competitors are focused on leveraging technology to drive efficiency, there is evidence that the new players also rely on important tools of a conventional broker such as the use of Truckstop.com and DAT in order to source capacity.

C.H. Robinson's app, Navisphere, has consistently held a meaningful share of downloads in the range of 7% to 17% from 2015 – 2018 to date. The third and fourth largest truck brokers are Total Quality Logistics (TQL) and Coyote. Both TQL and Coyote show consistent traction in app downloads with share of 3% to 14% from 2015 – 2018 to date.

DAT and Truckstop.com remain central hubs for accessing capacity and loads and appear to be gaining traction, rather than losing it. While other players have load board functionality, the pure size and scale of their networks give them incredible moat. As the new entrants disrupt (or attempt to) disrupt the old guard, it forces carriers to rethink their load sourcing strategy and no one has as rich of a source of loads as the load-board duopoly. In UBS' report, DAT ranked 3rd in downloads and Truckstop ranked 7th. According to sources at DAT, they continue to break internal records by nearly all metrics. The number 2 player, Trucker Path's Truckloads' growth has slowed down and is declining by over 50% each year, hinting that DAT will soon be the second largest downloaded freight app. Don Thornton commented that mobile only tells part of the story. Because of the richness of their online toolset, users that have the mobile version still visit the browser version on a regular basis. 

 The value of incumbency and scale is significant and this principle also applies to the brokers. There is considerable value in the networks of large brokers in terms of both the strong flow of freight through their systems and the broad access to capacity through a large network of carriers. Strickland has detailed as much in a recent discussion about CarrierLists merging with SaferWatch.

Overall, the analysis shows there is competition among brokers to get carriers/drivers to download their app, which can provide visibility and a connection with sources of capacity. The report concludes there is no evidence yet of disruption in brokerage and concludes that performance of brokers is likely to be driven by the cycle and their own execution.

New players (Uber, Convoy) have traction, but so do the incumbents. Uber Freight has realized traction in app downloads with a share of 19% and 21% in 2017 and 2018 to date (Convoy at 5% & 6%), but the conventional brokers also show traction with C.H. Robinson in a range of 7%-17% of downloads over the past four years and TQL and Coyote in the 3%-14% range from 2015 – 2018. They note that the app connection with drivers is most meaningful with independent owner operators who have potential to book freight. This group, however, is only 5%-10% of the for hire market.

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