@jasoncrawford @AustenAllred @bgurley Hey Jason, been meaning to circle back with you on this because I took note of it a couple weeks back. Here's a mondo thread where I explore these 10 concepts in relation to Flexport. These is my outside perspective and nothing more. Happy for people to challenge me here.../1
@jasoncrawford @AustenAllred @bgurley 1. Sustainable competitive advantage (“moat”): In a world with literally thousands of North American competitors and tens of thousands global competitors, it’s hard for me to think of Flexport having a sustainable moat unless it revolves around some key aspect of its tech. /2
@jasoncrawford @AustenAllred @bgurley Anything else is eminently replicable by a well-capitalized and organized competitor. And even the tech seems hard to defend, given how much investment there has been in logistics technology writ large. Flexport is not a monolith, they are the tip of the iceberg. /3
@jasoncrawford @AustenAllred @bgurley 2. Network effects: I’d argue that a SaaS provider has a much, much greater chance of leveraging the network effects of technology than a freight forwarder. No matter how amazing Flexport’s front and back ends are, nor how great its customer service might be.../4
@jasoncrawford @AustenAllred @bgurley ...some (if not most) shippers of any size will have an aversion to working solely with one logistics provider. That goes with using that LSP purely as a source of services or as a source of services and technology. That’s too many eggs in one basket for large global shippers. /5
@jasoncrawford @AustenAllred @bgurley This doesn’t preclude Flexport from becoming a major player in freight forwarding, it just strikes at the heart of the idea that they are fundamentally changing global trade and goods movement, which insinuates.../6
@jasoncrawford @AustenAllred @bgurley ...they would start to capture a significant proportion of volume from a significant number of large volume global shippers over a relatively short period of time. /7
@jasoncrawford @AustenAllred @bgurley 3. Visibility/predictability: These are undeniably key to the future of the logistics industry, and if Flexport does indeed have some transformative technology or predictive visibility strategy in the works, that could be a differentiator. /8
@jasoncrawford @AustenAllred @bgurley But as of now, I have not heard them nor anyone else claim they have that yet. /9
@jasoncrawford @AustenAllred @bgurley 4. Customer lock-in: See #2. Customers are as locked-in in logistics as price and service dictates. While it is true that shippers using a 3PL’s system can get locked-in (whether they like it or not), there is also generally a drive by shippers to move away from that.../10
@jasoncrawford @AustenAllred @bgurley dependence on a single platform. Or at least to disentangle their use of a 3PL’s platform from their reliance on that 3PL’s logistics services - again, too many eggs in one basket. If Flexport has the magic combination of incredibly sticky platform on the user end.../11
@jasoncrawford @AustenAllred @bgurley ...efficiency-driving back end for internal use, and knockout customer service, that could, in theory, change the equation. But I’m not sure the industry’s behavioral habits are there yet. There’s also the small matter that Flexport is still a FF and not a 3PL. /12
@jasoncrawford @AustenAllred @bgurley 5. Gross margin: Someone in finance correct me if I’m wrong here, but Flexport’s gross margin is nil since they’re unprofitable at present. (reiterate, I'm not a finance guy so please correct me I've got this wrong!). /13
@jasoncrawford @AustenAllred @bgurley 6. Marginal profitability: This gets at scale, and my take is that a SaaS product is probably more scalable than a services product where each client is unique and has to be served as such. /14
@jasoncrawford @AustenAllred @bgurley 7. (Lack of) Customer concentration: Flexport is probably already in a good space WRT this, because the nature of their approach (SEO/NPS-heavy supplemented w/ “traditional” sales efforts) means they are targeting a wide range of shippers via easy-to-use engagement tools. /15
@jasoncrawford @AustenAllred @bgurley They didn’t start out with too heavy a dependence on one customer or vertical (perhaps outside of internet focused retailers and FBA sellers) and so won’t be overly reliant as their customer base further diversifies. /16
@jasoncrawford @AustenAllred @bgurley 8. (Lack of) Major partner dependencies: You could argue that a forwarder is incredibly exposed to its partnerships with assets providers, particularly on the ocean side. Carriers are the asset providers and set the terms of the rate environment, leaving forwarders to win.../17
@jasoncrawford @AustenAllred @bgurley ...margin based on rates that are largely out of their control. You can see Flexport trying to take that asset-vulnerability out of play with investments in chartered planes and warehouses (maybe trucks down the line??), but it’s hard to see them chartering their own vessels. /18
@jasoncrawford @AustenAllred @bgurley You could also make the case that Flexport is dependent on partners from a tech standpoint. Contrary to the perception in some circles that Flexport is a pure technology provider masquerading as a FF, I’d make the case that they are indeed a FF with heavy investment in tech. /19
@jasoncrawford @AustenAllred @bgurley But not all of their tech is home-grown. They have relationships with 3rd party software providers to fill gaps in their basket of solutions. Trade and logistics is hard (as Ryan has noted publicly on many an occasion) - Rome wasn’t built in a day. /20
@jasoncrawford @AustenAllred @bgurley 9. Organic demand: Global trade is going through a period of relatively slow growth, as least compared to the halcyon days of the mid-2000s. That said, e-commerce is like a rocket ship and Flexport has clearly tried to ride that, since many sellers are looking for.../21
@jasoncrawford @AustenAllred @bgurley ...like-minded logistics providers and solutions, and enterprise shippers looking to expand their e-commerce sales appear more open to trying new approaches. That all works in Flexport's favor. /22
@jasoncrawford @AustenAllred @bgurley 10. Growth: I’d refer readers of this thread to our article (joc.com/technology/fle…), which brings up questions about Flexport’s actual growth in terms of what the company has publicly stated and what shows up in trade statistics. /23
@jasoncrawford @AustenAllred @bgurley If Flexport is indeed growing as they say they are, they are on a rapid growth path relative to other logistics providers (but maybe not compared to other “new” categories of technology). If the trade data is accurate, Flexport’s growth is not nearly as eye-catching. /end
