Local online transport services on right path


Local online transport services on right path

Aug 28, 2000; 02:36PM ET

By Rod Perlmutter, dbusiness.com


KANSAS CITY, Mo., Aug. 28, 2000  (dbusiness.com) –Too many freight businesses are moving online to survive in the long term, but three Kansas City businesses are positioned to survive the coming shake-out, according to a trucking industry analyst.

Peter Coleman, senior equity analyst for Bane of America Securities LLC in New York, says freightquote.com, freightPro.com and Transporation.com seem to be pursuing strategies that will help them survive in a national market worth more than $500 billion in annual revenues.

Coleman believes many of the 100-plus companies that offer online freight services are likely to fail or be bought out in the next 12 months. The local online sites, on the other hand, can rely on Kansas City’s strength as the nation’s second largest freight hub, after Chicago.

Coleman said Transportation.com of Overland Park, Kan., should do well because of its high visibility. The company went online on June 30. It is a joint venture between Overland Park-based Yellow Corp. (Nasdaq: YELL), one of the nation’s largest trucking companies, and the venture capital firms TL Ventures of Philadelphia and EnerTech Capital Partners of Wayne, Pa. Together, they have pumped around $30 million into Transportation.com.

Transportation.com offers services to shippers, carriers, brokers and private fleet operators. Its shipment management services allow shippers to request a quote, select a carrier and create a bill of lading. A load matching system allows a shipper to link shipment postings with the available equipment postings of carriers. Since the company launched, more than 1,000 companies have registered for its services.

Unlike Transportation.com, most start-ups are what Coleman calls procurement exchanges, which are similar to online auctions. The exchanges make money on each transaction, but the margins are so smaller that a company can only survive if it maintains a high volume of transactions. However, buyer and sellers have been slow to use these exchanges and many are struggling, Coleman said.

A better strategy, Coleman said, are Internet services that are more than just auctions of freight services. He says two other local online services are doing just that.

Both freightquote.com and freightPro.com help the small truck fleets compete with the national carriers. The U.S. Transportation Department lists 194,500 freight fleets, of which 95 percent have fewer than 24 trucks. By themselves, there is no way they can compete with Yellow, which has more than 500 terminals, 12,000 tractors and 46,000 trailers.

Freightquote.com, based in Lenexa, Kan., was founded in 1998 and went online in May 1999. In November, it received $10 million in funding from Morgan Stanley Dean Witter Private Equity and Menlo Ventures, as well as a $2 million investment from its owner, entrepreneur Tim Barton.

“We were one of the first to come out with a real-time marketplace mechanism,” said Julie Cirlincuina, freightquote.com marketing manager. “There is no posting a request and waiting a long time for a bid. We negotiate rates with about 70 carriers, and the shipper goes online, enters data on the product and where it has to go, and we return instantly with several bids.”

Freightquote.com frequently relies on the trucking firm Roadway, but it also works with Emery, Overnight and other big carriers. Freightquote.corn’s Website has enrolled more than 15,000 commercial customers. It says it has established relationships with national and regional carriers representing 225,000 tractors and trailers serving North America.

If freightquote.com is a “virtual carrier”, then freightPro.com is “more of a virtual forwarder,” Coleman said, because it is establishing relationships with both carriers and warehouses.

FreightPro.com, based in Overland Park, is developing a network of warehouses and both small and large haulers. It is backed by funding from Kansas City Equity Partners and MidStates Capital. CEO Jim Bramlett says he expects the firm to post $5 million in revenue this year. The company is projected to move into the black in July 2001, Bramlett added, and should double its payroll, to some 100 employees, by December.

“The freightquotes and freightPros of the world, the procurement companies that are not dependent on skimming pennies on each individual transaction, are providing a different type of service, and they are likely to do better,” Coleman said.

Rod Perlmutter covers the Kansas City region for dbusiness.com. E-mail him with story ideas or comments.

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(LocalBusiness.com was an Internet news service based in Ft. Lauderdale, Fl. that covered small business and venture capital in about 20 metropolitan areas throughout the United States. The news service closed in 2001. LocalBusiness.com was named “dbusiness.com” until September 2000. )

© 2000 LocalBusiness.com. LocalBusiness.com is a trademark of LocalBusiness.com, Inc. All Rights Reserved. LocalBusiness.com granted permission to repost this article.


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