The rise of the sharing economy Impact on the transportation space In a world of shared assets, changing economics and customer preferences are increasingly driving transportation players not to go it alone. In only a few short years, the sharing economy has become gain a broader user base, pricing may become more a ubiquitous concept. As recently noted in the Wall Street transparent and assets more fungible between traditional Journal, “there’s an Uber for everything now,” ranging from market verticals. This could allow players to expand beyond Shyp, which uses a network of individual providers to pick their traditional lines of business to offer adjacent services, up, pack and ship items using their own cars, to Zeel, which without having to do it the old fashioned way: investing taps a network of independent licensed therapists to offer huge sums of capital to build capabilities and acquire customers same-day, in-home massages.1 While mobile companies. It seems the sharing economy has the power apps have facilitated this type of collaborative consumption, to bring not only customers but also competitors closer changing consumer preferences may be the biggest together. indicator that the sharing economy is here to stay. Younger Indeed, any industry could potentially benefit from, or people in particular embrace the core idea of eschewing be disrupted by, the rise of collaborative consumption and individual ownership, and its accompanying higher costs, in the proliferation of asset-sharing models. However, due favor of on-demand access to a flexible, lower-cost network to its natural fragmentation and asset intensity, the sharing of shared assets or service providers.2 And, these younger economy is especially relevant to core transportation consumers may have more and more networks to choose companies as well as to heavy users of transportation from as pure-play technology companies continue to enter services. the marketplace. This generational shift toward shared models will likely have profound implications for businesses When thinking about the transportation ecosystem, since today’s teens and young adults will soon become there are two broad categories of players: core employees and customers—if they haven’t already. transportation companies and heavy users of transportation services The sharing economy can be Core transportation companies defined as the preference to pay • Core transportation companies are defined as those for assets or services by with transportation services as their main revenue stream consumption or on-demand, rather • They include small parcel carriers, full truckload (FTL) than owning assets permanently or and less-than-full truckload (LTL) carriers, railroad signing long-term contracts for companies and truck leasing firms services. Heavy users of transportation • Heavy users of transportation services are defined as those incurring significant transportation-related While still in its infancy, the sharing economy has disrupted expenses and whose main revenue stream comes a number of industries with lightning speed. Consider, from non-transportation activities for instance, how Uber has up-ended the taxi business and how Airbnb has brought a formidable new tier of • They include retailers, consumer packaged competition to the incumbents in the hospitality sector, goods companies, construction equipment rental both within a few short years. As noted by Salim Ismail, companies, computer hardware providers, auto Founding Executive Director, Singularity University, the manufacturers, heavy equipment manufacturers, internet has created an environment where a “viral loop” process and chemical companies, wholesale can generate demand at near-zero cost, and new entrants distributors, and others can add supply to a platform for far less than traditional players.3 With Airbnb, for example, the cost of adding Disruption has arrived another room is near zero, but traditional players typically In the small parcel space and beyond, disruption in the incur the substantial cost of physically building out the core transportation industry is already taking off. Based on incremental assets.4 And, this type of change is just the its initial success leveraging a driver partner pool and their beginning. New entrants will continue to emerge since assets to enable its ride hailing service, Uber has expanded technology has eroded the traditional barrier to entry: asset its platform to engage drivers in providing delivery services ownership. Particularly within the B2B space, traditional with its UberRUSH offering.5 operating models may be in jeopardy. As shared platforms A scan of the marketplace indicates the transportation ecosystem is evolving and new collaborative opportunities are emerging. Signs of a changing landscape Technology-enabled Application of multi- Real-time marketplace Crowdsourced assets in coordination for regional modal technology to the for long-haul trucking the core supply chain parcel carriers crowd • One regional carrier • A transparent • The reach of • Retailers are could leverage the real-time platform for the crowd could increasingly turning assets of others to long-haul trucking be extended by to the crowd to fulfill deliver outside of its that seamlessly coordinating handoffs deliveries from stores, normal coverage area, interfaces with between carriers at but as they become effectively employing logistics management intermediate way more comfortable a shared model software could be points. This could with the sharing • Regional parcel used to leverage effectively create model, they could carriers already additional truck a multi-regional or leverage it to move coordinate to capacity, especially for national network using goods between stores provide a wider less-than-truckload a point-to-point or from distribution coverage area, but as shipments delivery model centers to store coordination increases • This idea is already • Coordination of through technology- being mobilized by warehouse space enabled capabilities, start-ups such as would be needed this could begin to uShip, and as the to establish the look like a seamless, technology matures waypoints and reduce national, or even it may become a friction in the handoff global network larger part of the process transportation portfolio6 Another tech startup, Sidecar, developed a multimodal and fulfillment, retailers are beginning to explore how version of this concept. It mobilized third-party vehicles, nimble networks of shared assets, inventory, and agile bicycles, and walkers to optimize the delivery route for a services can meet their needs.11 Take Deliv for example. This single package, capturing the value of multimodal transport startup offers a crowd-sourced delivery solution for fulfilling for urban deliveries.7 Using a particular mode and delivery retail orders. When checking out via a participating retailer’s route, costs were reduced and problems were avoided (i.e., web site, customers can select a same-day delivery option. cars needing to find parking to pick-up food). Additionally, The order is then fulfilled from a nearby store by local drivers the platform used real-time data to dynamically slot new in their personal vehicles. Deliv has over 100 participating deliveries into a network that is already in motion. And, retailers, and is not the only player in the space.12 Postmates, if this micro-modal model seems too small to be taken ShopRunner, Shyp, FlexPort, and Shipwise also offer logistics seriously, then think again. In January 2016, General Motors solutions. Although they have yet to be widely disruptive acquired select assets and employees from Sidecar, with the to core transportation companies, these types of services intention of folding them into Maven, its own car-sharing are enabling retailers to re-think their fulfillment models by service.8 offering faster delivery from a local store, in contrast with typical warehouse distribution. Other large players are joining the fray as well. In 2015, UPS acquired Coyote Logistics, a tech-enabled freight broker The freight and logistics space is not immune to disruption and logistics service provider.9 Coyote Logistics’ software either. B2B shippers are starting to move beyond traditional connects shipping customers with contract carriers and freight brokers to fulfill local and regional needs. For offers full tracking and visibility for loads.10 The acquisition example, Seattle-based Convoy connects local truck drivers allows UPS to connect with additional customers to fill to area shippers to fulfill LTL and FTL requests.13 Using a empty space on trucks, potentially increasing revenue. It will proprietary algorithm, a mobile app prices the proposed also allow UPS to tap a large network of contract carriers shipment and offers it to the carriers that are best suited during the peak shipping season, helping it manage peaks to handle the load. Convoy may charge less than a freight in demand using shared assets. broker to facilitate the transaction, and it is designed to offer a more streamlined service than a call-and-quote Retailers and other heavy users of transportation services broker. Tech-enabled players are changing the international have taken note of industry developments. In response to shipment landscape as well. For example, Freightos has rising consumer expectations for omni-channel interaction developed an integrated quoting solution that connects the quote management systems of carriers and like Postmates and Convoy are eroding the forwarders to a search