Report says Amazon is working on an Uber for trucking app

Uber and Amazon are alike in many ways, in that they are well-capitalized, forward-thinking companies that could also be viewed as two of most ubiquitous names in business, or society for that matter.

Another way in which they are closely aligned is on the freight transportation and logistics sides of things, too, with Uber’s recent acquisition of self-driving truck startup company Otto for roughly $680 million and its intent to become both a freight hauler and technology partner for trucking, as well as Amazon’s 2012 $775 million acquisition of Kiva Systems, a developer of mobile-robotic solutions that automate e-Commerce order fulfillment and warehouse operations, air cargo deals announced earlier this year, and reports suggesting it is the early stages of building out larger-scale transportation and logistics operations to add capacity beyond existing providers, to lower logistics expenses, and ultimately, to offer specialized 3PL services to third parties.

And it is not stopping there either, with a recent Business Insider report stating that Amazon is at work on an app expected to be released in the summer of 2017, which was billed in the report as “Uber for trucking, that matches truck drivers with shippers looking to move freight, while also removing “the need for a third-party broker, which typically charges a commission of about 15% for doing the middleman work.”

The Business Insider report added that the Amazon app will also feature real-time pricing and driving directions and more personalized features like truck stop recommendations and a suggested tour of loads for pick up and drop off, and possibly tracking and payment options to accelerate shipping processes.

What’s more, the article observed that this presents a major growth opportunity for Amazon with around 84 percent of freight spending allocated for trucking and worth $800 billion based on data from Convoy, a trucking startup. And given the sheer scale of Amazon’s customer base and global reach and density, the article said that Amazon has an advantage in that it does not require the traditional supply and demand needed for Uber for trucking, as it, instead, already has a large shipping network and growing package volume, making it less challenging for drivers to find a load match via the app.

While the Amazon app would appear to lend further credence to the theory that the company is sharply focused on expanding its logistics and transportation footprint, it is not entirely unexpected either.

“This is not a surprise, because it makes sense as Amazon has its own density already and can leverage its own network,” said Tommy Barnes, president of Chicago-based project44, a technology services provider offering standardized, secure Web service API (application programming interfaces) integrations. “In some ways, it gives them control over costs and visibility to costs and transactions. Amazon doing this is not a surprise, but Uber for trucking is tougher than those give it credit for but the difference between what Uber and Amazon are doing is that Amazon has a larger end game in mind.”

The reason for this, he explained, is bigger than just Amazon having a brokerage, with a focus on free-flowing commerce and how to better influence consumers and control consumer activities.

As for Uber, its rationale for starting a brokerage is to create enough density, or a path, for autonomous trucks, Barnes said.  

“What that all means now or for the next few years is that the entrance for both companies creates massive margin compression for traditional brokers, and they will compress margin because they have a bigger vision that enables them to lose money now in pursuit of a bigger goal,” he said. “I think that will drive margins down, and that means a traditional broker, whether it is a $1 billion or $500 million one, will have to work much more efficiently, because their new normal gross margin is going to be significantly lower and the only way to offset that is through internal efficiencies, as most brokerages are viewed as cost centers.”  

As for the subsequent impact of Amazon and Uber in the brokerage market, Barnes said the potential for market disruption is there, due to the fact that both companies have bigger goals in mind, which, in turn, can be disruptive to the typical brokerage space.

Cowen and Co. analyst Jason Seidl observed in a research note that the Amazon app plays directly into his firm’s long-term thesis on the truck brokerage industry, which he said is a highly fragmented, lower barrier to entry business.

“Traditional truck brokers have been under assault for several years by asset-based trucking companies rapidly growing their own brokerage operations as well as several VC-backed start-ups,” Seidl wrote. “The start-ups are seeking to do something similar to what Amazon is reported to be working on, which makes it more likely that these businesses are potential acquisition targets by traditional brokerage firms.”