Uber has changed the way we think not only about getting from A to B but also how business models work in general. The idea that you could have a sharing platform for cars seemed like science fiction ten years ago in the era of government ride sharing schemes, but Uber showed us that with the right combination of business model and technology, you could actually make it work. Now the company is the most valuable “startup” in the world, valued at more than $60 billion.
But when it comes to ridesharing, there’s a new kid on the block. Seattle-based Convoy has been dubbed the “Uber for trucks” and claims that it has a network of more than 10,000 trucking companies on the West Coast and Midwest which can now link together to hire vehicles on an as-needed basis. In fact, the company has been so successful in establishing its network that it is challenging Uber for supremacy in the space. While Convoy’s truck-sharing platform has gotten off the ground in an impressively short amount of time, the world is still waiting for Uber to do the same.
Part of the company’s success comes from its partnerships with leading brands. Already, the company has worked with Unilever and other mega-corporations to secure thousands of shipments and make millions in sales. Now, thanks to its success, the company is receiving billions in new capital from high-brow investors like Marc Benioff, as well as Jeff Bezos who was briefly the richest man in the world last month.
Will Convoy Ultimately Be Successful?
Uber has made it clear that it wants to scrap truck drivers altogether. The company claims that not only are they unnecessary, but also dangerous – something you know all too well if you have had to find an attorney if you were injured in a truck accident. Convoy, on the other hand, doesn’t appear to have any direct plans for making the transition to driverless trucks. Instead, it’s relying on building out a network, just like Uber did for taxi services, and dominating the market that way.
Convoy also faces other challengers, including Transfix, which has managed to raise more than $40 million in capital. But the company says that the extreme value of the overall trucking market, estimated at more than $800 billion in the US alone, will provide ample room for growth. In other words, there are plenty of opportunities to make a profit for new trucking start-ups. There’s space for more than one firm in the industry.
Convoy, and services like it, will disrupt the trucking industry which has essentially remained unchanged for decades. At the moment, if trucking companies want to borrow trucking capacity from other firms, they have to do so through a middleman. Usually, these brokers charge a 20 percent commission or more, making borrowing capacity extremely expensive. New truck sharing apps will help to bring down these costs dramatically by removing payments to middlemen (except, of course, to Convoy), and will enable businesses to pay closer to the costs of the actual service.
The challenge for these companies is to get the industry on board. Although Uber has experienced dramatic success all over the world, it took more than a decade to get there. It’s unlikely that Convoy, Transfix or even Uber themselves will want to wait for another decade for the same to happen in the trucking market. The CEO of Convoy says that the company is focused almost entirely on the nearly one million small trucking businesses currently operating in the US. He hopes that if he can convince enough of them to join his platform, he’ll be able to pay back the $80 million he currently owes his investors.
Things could get awkward for Convoy, however, should other players make a concerted effort to steal market share. Although Jeff Bezos is an investor in the company, he could pull out if Amazon decides that it wants to get involved with the truck brokerage industry. It wouldn’t be surprising if Amazon did decide to enter the market. After all, the company is a logistics powerhouse. But it’s more likely that it will just buy up whichever startup looks to be the most promising or has the best technology. Then, with Amazon’s significant financial weight behind it, the concept will flourish.
Unlike Uber, Convoy is downplaying the role of driverless trucks in the near future. The company claims that there are just so many other efficiencies that can be made in the system that they just aren’t necessary.