DC Velocity - September 2018

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MO TO R F R E IGH T

Another factor, Wilson said, was a potential conflict
of interest with brokers. “If we remained a broker, our
clients would never fully trust or engage with us for fear
of us taking their carriers,” he said.

A BOON TO THE INDUSTRY?

Abtin Hamidi, a Cargo Chief co-founder and now vice president at Los Angeles-based broker and IT firm Cargomatic Inc., said digital brokers have been a boon to the industry at large because they have introduced tools that help everyone improve their processes and drive out costs. According to Hamidi, the new players have succeeded in identifying the top two or three pain points in moving a load—for example, the human cost of acquiring a customer.

Hamidi estimates that it costs, on average, $4,300 for a broker to acquire one customer that promises one load; he arrives at that data point by dividing salesforce wages and benefits by the number of customers. Digital brokers have said they could reduce that expense by 85 percent on average, he said.

Digital brokers have also been instrumental in align-
ing the best interests of all stakeholders, according to
Hamidi. Large shippers are notorious for “beating up”
their brokers by tendering more loads and expecting
lower rates, a practice that many big brokers have long
resented, he said. A digital broker operating at a lower
cost structure is more willing to take that business at the
rate the shipper wants, he added. The large broker sheds
low-yielding business, and the shipper gets coverage at a
better price, he said.

Hamidi said that digital brokers didn’t set up shop to steal business from legacy brokers, adding that established players have appreciated their contributions. “We’ve had a wonderful reaction” from the legacy players to Cargomatic’s efforts, he maintained.

Barnes of project44, who worked in the brokerage trenches for years, doesn’t buy the kum-baya moment. As he sees it, the startups that focus on digitalization and are also licensed brokers are, in reality, working as brokers that want to capture market share from the established companies. He acknowledged, however, that the new players have served a purpose by calling attention to the industry’s digital shortcomings. “They are pushing everyone to be better,” he said.