Uber’s Re-Evaluation of Freight Follows Steep Losses

Article written by Jennifer Smith

The digital freight brokerage unit has won business at a high cost while pushing competitors to invest in technology

Uber Technologies Inc.’s truck-brokerage business has helped reshape freight brokerage, but it might not be doing enough to shore up the finances at its parent company.
The ride-hailing giant, reeling from the impact of the coronavirus pandemic, is re-evaluating its Uber Freight operation as it slashes jobs and cuts costs, in an effort that includes a new look at its costly bets on noncore business lines. Uber didn’t say what actions it is considering as it evaluates the business.
The freight operation, like the main passenger business of its parent, has had a significant impact on its market but has been hard-pressed to turn its gains into profits. Uber Freight lost $64 million in the first quarter despite a 57% jump in revenue, to $199 million, from the same period in 2019.
The freight unit, which uses technology to match truckers with shippers who need to move cargo, accounted for about 5.7% of Uber’s $3.5 billion in quarterly revenue.
An Uber spokesman said in an email that the company remains “committed to growing the Uber Freight business, innovating in the Freight industry, and supporting our partners—carriers and shippers alike. Today’s news does not impact our product road map, or our ability to provide best-in-class service to our customers.”
Uber Freight had until recently been in expansion mode. In September Uber unveiled plans for a Chicago hub that would serve as its Freight headquarters, saying it planned to hire thousands of employees.
Uber Freight also rolled out new logistics services as it pushed to gain market share from big competitors such as C.H. Robinson Worldwide Inc., by far the biggest freight broker in the U.S., and from digital rivals including Convoy and Transfix.
However, some brokers say that Uber Freight’s high growth and deep losses are a sign that the company has simply been buying market share by selling its services below its own costs. A Morgan Stanley analysis last year suggested the business wouldn’t generate profits for years.
Uber’s digital load-matching “is fairly vanilla, and only the tip of the service iceberg [that] brokers provide,” said Jeff Tucker, chief executive of Haddonfield, N.J.-based freight broker Tucker Company Worldwide Inc. “With a plethora of digital freight matching technologies being employed by incumbent brokers, it’s tough for startups to make a meaningful dent.”
Uber Freight and its digital rivals are still small players compared with the sector’s biggest operators. In 2019, digital freight brokers accounted for about 2% of the $83 billion domestic transportation market, which includes brokerage and other logistics services, according to research firm Armstrong & Associates.
But their push to use technology to make booking freight transportation more efficient has pushed competitors to step up their digital investments.
Big transportation companies are spending billions on automation that can both improve service and help brokers add revenue without hiring more people.
But coronavirus lockdowns have crippled demand in the sector, sending freight volumes spiraling downward.
“It doesn’t matter if you’re a digital freight broker like Transfix or Convoy or Uber, or somebody like C.H. Robinson or XPO Logistics, ” said Evan Armstrong, president of Armstrong & Associates. “Everybody feels the pain.”
Original Source: https://www.wsj.com/articles/ubers-re-evaluation-of-freight-follows-steep-losses-11589836255

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