When thinking about the largest US industries in terms of spend, employment or other metrics, this one might not come as a top of mind. However, at $800 billion of annual revenue, accounting for nearly 6% of all full-time jobs, and responsible for 71% of all goods transported across the country, the trucking industry represents one of the main arteries of the US economy. Moreover, were it a country, the US trucking industry would be approximately the size of Turkey in terms of GDP, ranking as the number 18 economy in the world. With origins in the early 20th century, this old, massive, and highly fragmented industry saw fundamental change and transformation in 2015 with the entrance of a new player.
Enter Convoy, or “the Uber for trucking” as it is popularly known. Backed by notable investors such as Greylock Partners, Y Combinator, Jeff Bezos and Salesforce CEO Mark Benioff, this now $2.75 billion company (latest post money valuation after Series D 2019 funding round) was founded in 2015 with the objective of disrupting and modernizing freight brokerage, a fragmented and oftentimes analog business that still relies on telephone and email to match loads from shippers with truckers. Before the arrival of Convoy, and given the highly fragmented nature of the industry with 92% of fleets operating 6 or fewer trucks, both shippers and carriers relied on large freight brokerage firms such as C.H. Robinson (a Fortune 500 company) to match supply and demand. However, the lack of an integrated digital freight network to contract trucking services resulted in lower efficiency, limited flexibility and higher total costs for everyone in the system. Evidence of this is the fact that 35% of all miles driven are “empty miles” (trucks moving between points with no load), resulting in 72 million metric tons of CO2 equivalent emissions.
So, what did Convoy bring to the table? By using machine learning and automation to connect shippers with carriers to move millions of truckloads, Convoy has grown explosively to become the largest and most efficient digital freight network in the US, handling tens of thousands of loads per week over 100 routes across the main economic hubs. In doing so, they’re saving money for shippers, increasing earnings for carriers, and eliminating carbon waste for our planet. Win-win for everyone but for the legacy freight brokers, with the largest one seeing an 8% decline in revenues and 13% decline in operating income in 2019.
In terms of value, Convoy is doing a great job in creating and capturing it. For carriers, the company helps keep trucks full by providing no hassle, free access to all loads through the Convoy mobile app or website. Carriers can find, bid on, and win loads 24/7 with no phone calls or emails required and get paid quickly with no fees. In addition, the app has an automated reload suggestion system that identifies opportunities for backhaul and reduces empty miles (which would otherwise generate no revenue). On the flipside, Convoy saves money and time for shippers through real-time pricing, automated load matching and pricing, and TMS (Transport Management System) integrations with most popular providers. They’re getting the reliability of owning a fleet with the flexibility of working with a broker, in addition to transparent data and insights via real-time tracking and customized reporting to improve overall supply chain management. How does Convoy make money? By taking a percentage of each transaction done on its platform, a small cost to pay for all the value being generated.
Finally, even though Convoy has been a clear winner so far in the digital transformation and innovation of the trucking industry, their success has prompted the entry of robust competitors who also want a slice of the US trucking brokerage market. One such competitor is Uber, who launched their new Uber Freight service back in 2017 and which has seen impressive growth so far. Furthermore, legacy freight brokers including C.H. Robinson, XPO Logistics and Coyote Logistics (part of UPS) have been investing heavily in IT, software and digital transformation to catch up and regain lost terrain. Although none has fully automated its services to match Convoy and Uber Freight, the space is expected to heat up soon. Convoy’s latest $400 million Series D funding round is aimed to scale business amid an increasingly competitive market. Will it be enough to stay ahead of the curve and keep winning?