Is 2017 the year of cargo tech?

Is 2017 the year of cargo tech?

After FinTech, AdTech, HealthTech and FashionTech, a new Tech-Trend takes place among Europe’s Start-ups – CargoTech.

Three approaches to CargoTech, Software-as-a-Service, marketplace and One-Stop Shop

The majority of the logistics sector is working with outdated technological resources. Many processes are still carried out analogue and offline. Starting with orders that are placed by fax, to the transmission of documents by post.

Supply chains continuously change, due to new rules, technologies, resources and developments in the market where start-ups are able to account for numerous digital opportunities in the logistics sector.

Let’s look at the most promising approache of start-ups in the European logistics sector:

  • Software-as-a-Service (SaaS) models focus on an innovative and compelling IT solution to be integrated into the daily operational areas. Start-ups in this field usually have a standardised but specific IT-solution, which is based on a (monthly) pricing model.
  • Marketplaces focus on consolidating supply and demand by an integrated IT solution. Start-ups typically bring a shipper and receiver in the contact with each other but do not coordinate between the parties. Also, this model often follows a (monthly) pricing model or a responsible-for-success fee model.
  • One-Stop-Shop (OSS) models provide a point of contact for shippers and coordinate at the same time, operational tasks through multiple logistic subcontractors. OSS Start-ups focus often on customer acquisition through strong sales and marketing models with a digital communication and a digital data flow. The OSS models follow a traditional pricing model and generate revenue by the price difference between the contractors and the shippers.

Along the three models, the OSS model is attributed with the highest attractiveness, due to the high level of service and high customer loyalty rate. Therefore, we will examine in the following, the most attractive of OSS start-ups.

On the water, the road or in the air?

Three segments within the logistics industry have recently experienced a real boom, which covers each of the different areas of the value chain.

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Land freight

The largest and most fragmented of the three areas is land freight. Innovative concepts have already emerged in three of the four sub-segments:

  • Within the CEP (courier express parcel) sub-segment (33% of land freight) players such as Liefery (Germany), Stuart (France) and Tiramizoo (Germany) have shortened the package delivery times to under 12 hours, due to the elimination of so-called “hub-and-spoke” systems.
  • Within the Groupage and LTL (less than truckload) sub-segment (16% of land freight) players simplify and digitize, such as, for example, OnTruck (Spain), Frachtraum (Germany) and InstaFreight (Germany) “On-Spot” deliveries (of e.g. pallets) by means of intelligent price algorithms.
  • Within the FTL (full truckload) sub-segment (25% of land freight) sennder (Germany) mixes the market up and shows how complete truckloads are booked, managed, and executed. In this process, the company has a technology focus, which bypasses intermediaries and the entire communication and the flow of information between the sender and the receiver run digitally.
  • Within the Special Transportation sub-segment (26% of land freight) (so far) no disruptive business models have occurred.

 

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Sea freight:

This area is significantly more solidified than those previously described. Leading European Start-ups are FreightHub (Germany) and Xeneta (Norway), who define the customer experience from the sender’s perspective in a new way. Through the immediate preparations of offers and online bookings, customers can save a significant amount of time to determine the optimal shipping by ship.

Air freight

Within this range, having the most well-established supply side, start-ups such as 12send (Netherlands) air freight to ship freight within Europe at distances over 650 km. This same-day air cargo shipping links existing air cargo capacities with the latest technology. With this, specifically, the e-commerce market and the spare parts market are addressed.

CargoTech in Europe

The European CargoTech market is without a doubt attractive and serves various points along the value chain. Many people ask themselves the question if the market was overcrowded. We say that the height of the CargoTech Start-ups is yet to be reached and will consolidate in the coming years.

In order to assess the attractiveness of the CargoTech market, one is forced to keep the size of the market in mind. With a total European turnover of EUR 430 billion the logistics market in Europe (land freight, sea freight and air freight), this is 20 times larger than the European food delivery market and 15 times larger than the European online advertising market.

We speculate that CargoTech start-ups will re-define the logistics market in the coming years – in this respect, exciting times lie ahead of us.