The "Uber For Logistics" Gold Rush
Brian Schoenbaechler
Supply Chain and Manufacturing Consultant to Fortune 500 and Private Equity
This week I saw an article on TechCrunch, "Uber For Logistics’ Startup Lalamove Lands $10M To Expand In China And Southeast Asia”. Then, I saw this article today about the launch of UberCargo in Hong Kong. I asked myself the question, "Why all the investment in last mile delivery, when there is so much competition?” Small startups all over the world are sprouting up and facing off with big shippers like Fedex, UPS, DHL, and postal systems. What do the big shippers think of the startups? In an interview on CNBC June 18, Fred Smith of Fedex said Uber will “certainly be in the space if somebody needs something picked up and moved on a same-day basis, but we don't see that as a big threat, or quite frankly, a huge opportunity, either.”
After doing some research online, I came to the conclusion that "Uber for logistics" is a gold rush with plenty of room for anyone to stake a claim. I think that we will continue to see more announcements of investment in this space for startups. Yes, there is a lot of competition heating up, but it is not the traditional hub and spoke models of the big shippers like Fedex, UPS, and DHL. These companies are providing same day delivery for a fraction of the cost of the big shippers. They are running point to point routes using the latest internet and smartphone technology. I think this Washington Post article said it best, "Logistics are the logical companion industry to the sharing economy. As the latter grows, so will need for the former. Logistics also represent the unresolved territory of the digital age.”
If we look at the recent rounds of investment in companies in this space, we can see that it is really heating up. Look at the following investments:
- Asia-based Lalamove, a mobile logistics booking platform, has received $10 million in funding this week. link
- Uber raised $1.2 Billion in their Series D Round on June 6, 2014
- GOGO Van, another Asian-based company, raised $6.5 million in their series A Round on June 30, 2014
I think Blake Larson, board advisor to Lalamove, said it best in a TechAsia article, "When asked to respond to Uber’s alleged commitment to entering the logistics industry, Larson said he wasn’t worried. “They’re just capturing the tip of the iceberg in the passenger market, and we’re just capturing the tip of the iceberg in the delivery market.”
I believe "Uber for logistics" is a gold rush with plenty of room for startups to stake their claim. I agree with Blake Larson that we are currently just at the tip of the iceberg in terms of market opportunity with many opportunities in market segmentation (vans, food, courier). It will be interesting to see how this sector plays out, but for now it is a mad dash to stake a claim.
What are your thoughts? All hype or real market opportunity?
Operations Management / Operations Improvement
9yI agree 110%! Using "real time GPS", knowing the closest service provider with availability to transport your "person, package, grocery order, etc", should eliminate much of the costly down-time and empty runs currently in many systems and processes. Compare those long lines of cabs patiently waiting at the taxi stands with an Uber car who gets pinged by the next, closest passenger following a drop-off. The same efficiency gain is transportable into many other transportation systems. The fixed cost portion of the transportation provider stands to be greatly absorbed by much higher utilization. I hope Uber gets their act together, goes public (so I can own a small piece), then expands the technology into other market segments.
Transportation & Logistics: creating growth & managing scale
9yGreat post, Brian. I think there is a lot of opportunity with a fair amount of frothy hype right now that will settle out. In the "real market opportunity" column, I'd put a) omni-channel retailing is making the store a node on the supply chain and driving a growing trend of moving smaller quantities of freight shorter distances to support same day/next day/two day fulfillment. This will be a go-strategy for managing peak season as retail continues to transition to the e-comm model. b) the economic changes in healthcare are pushing a distributed retail delivery model. Hospitals, pharmacies, and laboratory services providers are all emphasizing logistics more than ever, and healthcare is the largest "local business" in the economy. c) The "direct to driver" technology will be applied to other inherently mobile businesses both in logistics and in other sectors, bypassing disptach-oriented businesses. As for hype (my opinion): 1) It's all about the technology. The real logistics opportunity is B2B2C, which will require real operational capabilities as well as intelligent pricing/yield to outsource this function for businesses. 2) It's all about same day. There's just not enough density to support that in all markets. While disruptors have no legacy brick & mortar retail infrastructure, the incumbents do. They won't walk away from that, but are looking to leverage it for in-store pick-up and to more cost-effectively fill next day/2nd day orders out of store inventory. This will drive the inter-market movement of small quantities of goods that I spoke of above. 3) This is a "shared resource" model. While many may look for the cost savings opportunities of on-demand drivers, many others are more interested in a temp staffing model that provides dedicated fleets of contract drivers. The auto retailers and large lab services providers have a well-established model for this that I think others will emulate, managing it with contract drivers and technology-enabled order dispatch. Wow...I didn't know I was that fired up about that. Thanks for stimulating my mind on a Friday afternoon! I'd be interested in your and others thoughts and comments.