Equal Ventures Focus Area: Logistics

This is one of our current interest areas for investment at Equal Ventures. Our other areas of interest can be found in our overview post.

This is one of our current interest areas for investment at Equal Ventures. Our other areas of interest can be found in our overview post.

Market Overview & Shifts

It’s impossible to understate the transformative impact Amazon has had on the modern supply chain landscape. As Amazon increasingly takes ownership over its logistics stack, players across the industry have been forced to modernize their systems to meet customer parity. By mid 2019, Amazon was managing over 45% of its own shipments, up from 15% at the start of 2017, spending over $25 billion on fulfillment in the first 6 months of 2020. It has additionally launched its own digital freight brokerage with rates significantly lower than those in the broader market.

This has come at a time when eCommerce logistics as a segment has been growing 20% YoY and alongside it, return rates and reverse logistics needs are also quickly rising. This has created tremendous stress on legacy, linear supply chains, requiring real-time digital infrastructure across the value chain for everything from maritime shipping to last-mile delivery.

These stresses have led to unprecedented challenges in the trucking industry with nearly 800 bankruptcies and 24,000 drivers losing their jobs in the first 3 quarters of 2019. COVID-19 further accelerated this, as over 88,300 truck drivers lost their jobs in April 2020 — the worst month in recorded history.

These challenges require new solutions and business models capable of enabling the existing supply chain and helping it transition to a more digital future, otherwise risking utter dominance (and reliance) by Amazon.

What We’re Interested In

Our overarching area of interest in this sector is around solutions that enable existing market players to leverage digital infrastructure to operate more effectively in the hopes of rivaling the efficiency of Amazon. This requires a significant shift from EDI to API across all segments of the value chain and new analytics solutions capable of better real-time decision making. Above all else, it requires new business models that can better align existing stakeholders in defense against their common enemy. The name of the game in logistics has always been density and we see tremendous opportunity for new business models in both trucking and distribution/warehousing to establish better density, capacity utilization and efficiency through digital platforms.

While Amazon remains the largest threat to virtually everyone in the industry, we’d be remiss to not follow their lead to identify other opportunities. Amazon’s dominance in consumer eCommerce has not carried over fully to large-scale B2B commerce, enabling opportunities to modernize procurement in the supply chain. We find models that increase access, accountability and affordability of vendors to be particularly interesting if they’re able to present opportunities for captive communities (even if only in a single vertical).

Lastly, the flow of goods across the supply chain always corresponds with a flow of dollars. Given the long-tail, fragmented nature of many of the supply chain’s stakeholders, this has resulted in fairly underwhelming financial solutions to address working capital, leasing and insurance needs. We believe new providers will emerge that can capitalize on supply chain’s digital transformation to access customers in new ways with more personalized underwriting, enabling a lower total cost to the customer. We’ve already seen numerous companies bundling financial services with digital solutions as a means to gain proprietary distribution and underwriting data and see tremendous opportunity for those who do so.