As is evident this time of the year, e-commerce continues to transform the retail industry, and many manufacturers are also increasing their e-commerce activities. Will e-commerce also transform the logistics industry? C.H. Robinson’s acquisition of Freightquote this week (for $365 million in cash) suggests that it will, at least more so moving forward than in the past.
As John Wiehoff, C.H. Robinson’s chairman and chief executive officer, commented in the press release, “Freightquote is a high quality, innovative, growth company that brings a proven model serving smaller businesses. Its proprietary e-commerce technology allows shippers to easily access competitive rates and automated load acceptance and payment functionality. E-commerce is going to be a bigger part of future supply chain services and Freightquote brings us a leading solution in our industry,”
There are several paths to growth in the 3PL industry: introduce new services, expand into new vertical industries, expand geographically, mergers and acquisitions, upsell existing clients, and penetrate the small and midsize business (SMB) market. Of all those options, penetrating the SMB market has been the road less traveled, primarily because the traditional 3PL sales and deployment model makes it cost prohibitive and non-scalable — a problem traditional software vendors have also experienced in penetrating this market segment.
Simply put, when it comes to profitably serving the SMB market, 3PLs need a new sales and deployment model — similar to what’s happening in the software industry with cloud and software-as-a-service — and that’s what Freightquote brings to C.H. Robinson.
This acquisition is also another example of the convergence of business models I’ve been talking about this year. Freightquote’s DNA has more strands of eBay and Amazon in it than those found in a traditional freight broker. And it’s that DNA, comprised of e-commerce technology, talent, and business model, that C.H. Robinson is betting will help it further penetrate the SMB market and accelerate its growth.