Online freight platforms may enable small trucking players to punch above their weight by fitting them with technology equivalent to that of the industry's giants, helping them reap the benefits of the rapidly growing e-commerce industry.
Until recently the Thai trucking market was highly fragmented, dominated by small players operating 3-10 trucks, plus a slew of global delivery operators like DHL, which controls less than 5% of the market in Southeast Asia.
"The barriers to entry are low," said Raymond Gillon, co-founder and chief executive of online freight platform Ezyhaul. "It's easy to buy a few trucks and start your business."
Unlike other modes of ground freight transport like rail, which requires companies to put down capital for infrastructure, there are few benefits to scale in trucking.
In the US, the top 10 players control 12% of the market. The country has more than 275,000 for-hire trucking companies, and close to 90% have 10 or fewer trucks.
In Mexico, a country where industry is at a similar maturity level as in Thailand, the top 10 players control just 3% of the market, according to global consultancy McKinsey.
Consolidation, however, has been occurring the last few years, mainly driven by technology. Tech has allowed large companies to set themselves apart by providing clients with accurate delivery predictions and tracking services, as well as security systems on trucks -- investments that can run into the millions of dollars.
Online freight platforms, for better or worse, may reverse this ongoing consolidation of the market by fitting smaller truck companies with some of the same technologies used by delivery giants.
Technology will become increasingly important for shippers, as the bulk of the growth in the market comes from e-commerce operators that expect high levels of technical sophistication, as well as consumers who are accustomed to one- or two-day delivery.
Like Uber or Airbnb, online freight platforms work by matching supply (which otherwise would have very little exposure) and demand.
"Trucking is a very traditional industry," said Mr Gillon, who is based in Bangkok. "Most clients still reach suppliers by picking up the phone."
Unlike traditional trucking companies, which usually match entire trucks to orders, online platforms can match up small sellers with buyers.
The Thai trucking market has been growing at 6.5% on average in the last few years, largely propelled by a stratospheric rise in e-commerce sales. E-commerce, which usually involved companies sending smaller batches and consumers returning single items, resulted in radical truckload decreases for all but the most tech-savvy players.
"The equation is simple: trucks rarely travel full, especially when they are coming back from their destination," he said.
McKinsey said truckloads for even large companies have decreased by 25% in the US since 2009. The average load factor of trucks in Southeast Asia last year was close to 40%, and close to 65% of trucks return empty to their points, according to Ezyhaul data.
While larger players have the resources to implement more sophisticated planning mechanisms to handle small loads, smaller players may have to rely on online freight platforms to make full use of their space and remain competitive.
Shipments that use these platforms can be anywhere from 5-40% cheaper, taking into account the 10-20% fee charged by the platforms.
The platforms can also serve as "gateways" to the mass of drivers now distributed throughout hundreds of trucking companies.
"These 5,000 drivers and trucks are consumers of fuel, food, water, coffee, maintenance and so on," Mr Gillon said. "We can also consolidate the purchasing power of these companies, which might find it hard to get good deals on insurance or loans by themselves, for example."
In Southeast Asia, companies like iKargo and TheLorry compete in this space. Unlike its competitors, Ezyhaul focuses on companies rather than consumers, working with small and medium-sized enterprises and "the likes of Coca-Cola and Unilever", he said.
Most competitors operate on dynamic pricing models, just like Uber. Some, like EzyHaul, work with algorithms that take into account supply and demand, while others use auctions or reverse auctions. At Ezyhaul, large corporate clients receive flat rates in advance, similar to the approach taken by traditional trucking companies.
"We started out with dynamic pricing for all of our clients, but quickly realised it would not work for people shipping 20 or more packages a day," Mr Gillon said. "If you are a larger company, you don't want to be in a perpetual auction ping-pong or have to deal with different prices."
In Thailand, the company aims to have more than 1,000 trucks on its platform by the end of the year and close to 5,000 by the end of 2019, extrapolating from its growth curve in Malaysia. The company works with delivery giants like Ninja Van, as well as smaller players.
The company received S$1.2 million (29 million baht) in its seed round in 2017 and will soon move forward with its A round, which will fuel expansion in Thailand and India.
"I don't expect to be profitable in the next five years, since we are funding our expansion," Mr Gillon said.
Ezyhaul has been growing at a double-digit rate every month, a pace he expects to replicate in Thailand. The technology is still in the early stages of adoption.
Mr Gillion estimates 1% of overall deliveries in Southeast Asia use an online freight platform. The market for trucking services in Thailand is close to 8 billion baht.
