The number of on-line transportation firms jumping into the marketplace in recent years had to taper off sometime, and it did. The shakeout in the industry that started last year hasn't subsided, and along the way the dot-com transportation firms themselves look different now from when they first arrived on the scene.

The Glory Days of Financing Are Over

The turn of events has been partly inspired by the economy and tightened money sources. According to John Norris, senior vice president, marketing and communications, for Transportation.com (www.transportation.com), "The shakeout among the dot-coms in the transportation industry is not much different from what is going on in other industries, and it's not over yet. More than 200 on-line firms targeting transportation were launched in 2000. Venture-capital firms put a lot of money into on-line business models. Now the market is different and these same firms are taking a serious look at their portfolios." Indeed, "financing is still hard" to come by, says Julie Cirlincuina, marketing manager for freightquote.com (www.freightquote.com).

Although the present situation is partly the result of external economic influences, some of the responsibility lies with the dot-coms themselves, explains Robert Jackson, COO of Digital Freight, Inc. (www.digitalfreight.com) "Poor business models and misguided strategies" prompted some of the companies to close their doors, he explains. In addition, there seemed to be a perception that "the internet could fix everybody's problems." Jackson says that more attention should have been given to the "proven brick-and-mortar strategies." In other words, "people like to do business with people. Just bringing buyers and sellers together in an auction site, for instance, wasn't enough. What was lacking was rich content."

A Leaner, Meaner Transportation Dot-Com

Although many of the early dot-com transportation firms initially operated as auction sites, "There has been an evolution from auction sites, to exchanges, to marketplaces," says Tami Tamasi, director of marketing for Digital Freight, Inc. The transformation to a marketplace arena has resulted in "more services and improved quality," she adds.

According to Transportation.com's Norris, "The typical auction format consists of one seller and many buyers. Carriers post available freight capacity and shippers bid on it. There is a reverse auction format where there is one buyer and many sellers. In this format, shippers post loads to be moved and carriers bid on them. Exchanges, on the other hand, generally feature tools for managing the relationship between the shipper and the carrier. Exchanges may include auction functionality and generally include the capability to preselect and rate carriers. With exchanges, price is not necessarily the primary consideration; the focus is on facilitating transactions." Some of the companies that started as auction sites have changed their format. "The downside to freight auctions-and this may be a reason for their lack of traction in the market-is that the transportation service becomes a commodity and the carriers lose their appeal as a service provider. Auctions, unlike exchanges, don't fully facilitate information sharing," remarks Norris.

Transportation.com's website offers a menu of services such as shipment management, which allows shippers to obtain instant quotes, request pickups, and track shipments. The load-matching feature allows shippers to post shipments and carriers to post equipment, then Transportation.com matches them up. The feature is described as "more than a load board" because the shipper can choose the most suitable matches and negotiate a price online. Shippers also have access to on-line shipment-activity reports. Other features of the site include global services, a "ship anything, anywhere" service, as well as financial management and compliance services. These cover customized bookkeeping services, tax preparation, fuel-tax reporting, and regulatory compliance.

At the same time, many of these dot-coms now offer their services as an application service provider (ASP) model, which means applications are hosted over the internet so clients can avoid installation and maintenance costs.

What Does the Future Hold?

Not only have the number of on-line transportation companies dwindled, their business strategies have changed, too. In December, freightquote.com and RetailExchange.com, an online B2B exchange for excess consumer products, announced they had formed a strategic alliance. "We will provide RetailExchange.com with a state-of-the-art e-shipping solution offering more convenience than traditional freight forwarding methods," stated Timothy Barton, freightquote.com chairman and CEO. Kenneth S. Frieze, CEO and president of RetailExchange.com, said "Adding freightquote.com is an important step in our plan to provide comprehensive transaction support services to our exchange members. The addition of transport services is especially beneficial for retailers and manufacturers who may not have established logistics networks." In fact, freightquote.com has integrated its freight tools into more than 100 B2B marketplaces.

Digital Freight's Tamasi says that while some competitors are "trying to be a one-stop shop, you cannot be all things to all people." She says her company is focusing on the digital RFQ. Conducting requests for quotes electronically means the shipper can get true marketplace pricing because contracts area awarded based on bids received a few days ago instead of months ago. It also means one can conduct bids seasonally for specific requirements, and conduct more frequent RFQs with less effort.

The consolidation in the industry is likely to continue, says Norris of Transportation.com. "We believe you will continue to see further consolidation of internet-based transportation companies. We also believe that since many shippers place high value on logistics services that deliver operational improvements and save hard dollars, you will see internet companies revamp their business models to include more traditional contract logistics. This is an area of growth for Transportation.com in 2001, although we will always have an internet focus as an enabler of our solutions," he says.

Norris also believes that "over the next year you will see further consolidation or an outright reduction in the number of internet-based transportation companies. The outcome is undetermined. I think what you will see eventually is four to five clear winners that are able to drive real tangible value to shippers and carriers." wt