The just-released 2022 Freight Rate Survey (FRS) by the research arm of the Owner-Operator Independent Drivers Association has a torrent of numbers that reflect a freight market that was tremendously profitable for independents in 2021 but faltered as it moved through 2022.
But among the numbers is one that stands out: four. That is the percentage of respondents to the FRS — conducted by the OOIDA Foundation — who said they utilized the services of digital brokerage services.
That number is down from 7% in the prior year’s survey.
The section in the report on digital load brokerages does not amount to more than a few sentences. But given the amount of investment capital that has flowed into digital brokerages in recent years, if the 4% figure is accurate for the independent community as a whole, it is shockingly low, and it shows the opportunity that digital brokerages have for growth.
Among the digital brokerages that are utilized, the FRS said the most popular are Uber Freight (NYSE: UBER), JB Hunt 360 and Convoy, in that order.
But another finding in the survey suggests that how truckers define digital brokerages may bear significantly on their reported use of them.
In response to the question of what load board respondents used, the top of the survey saw 70% using DAT, 47% using Truckstop, and 8% for 123.
But multiple answers could be submitted to the question, and other companies that would likely consider themselves digital brokers, rather than load boards, got plenty of responses. So for example, J.B. Hunt (NASDAQ: JBHT), TQL, Coyote, Uber Freight, Convoy and C.H. Robinson all received significant mentions, well into the double-digit percentages.
Given that those companies would see themselves as mostly digital brokerages, which only saw the 4% response figure, and the gap between that 4% and some of the load boards mentioned for digital brokerage is huge, the digital brokerage industry may be dealing with an issue of definition: They see themselves as digital brokerages, but some drivers see them as essentially just load boards.
In a statement to FreightWaves, OOIDA said the wording in the questionnaire “definitely could be better and we intend to make changes to next year’s survey.”
Norita Taylor, a spokeswoman for OOIDA, said in past surveys respondents were able to submit names of companies under an “other option” section, and “in those surveys, members frequently noted digital brokerages under the load board section. There probably is a perception problem out there between what is distinctly a load board and what is a digital brokerage.”
“It’s likely that owner-operators believe Uber Freight and Convoy are load boards because they go to them and choose what loads they want to haul, not realizing that they are actually signing a broker carrier agreement with them,” Taylor said in an email to FreightWaves. “This should be a tip off, but again, they are just looking to find the best freight possible. They don’t care what it’s called.”
Digital brokers are set up, according to the report, to bypass “the various brokers who typically post loads on load boards.” And in this report, anything that is negative to brokers is viewed relatively positively or at least benignly.
In a part of the report where respondents are asked about the cause of lower rates, overcapacity was named as the top reason, but brokers took a hit as well. Some of the answers are evidence that even after more than two years of strong rates and good times for independent owner-operators, the “broker wars” that began when rates plummeted in the first days of the pandemic haven’t fully receded.
The report quoted a respondent who said rates were sliding “because brokers are bidding/cutting rates to carriers to obtain higher profits for themselves.” Another respondent described brokers as “a major cancer on the trucking industry.”
The report goes on to say that “brokers make most of their profits during down cycles in the freight market as they are usually able to increase their margins due to carrier desperation.” Given that there are few publicly traded brokerage houses, it isn’t easy to determine the accuracy of that observation. C.H. Robinson (NASDAQ: CHRW) had a fourth quarter that was considered weak (thought it was mostly its global forwarding business that underperformed); newly public brokerage RXO (NYSE: RXO) beat its forecasts in its first fully independent quarter after its spinoff from XPO (NYSE: XPO).
But beyond the broker wars, the report lays the largest blame for the falling market on excess capacity. Quoting respondents, the report said rates were falling because “capacity is greater than available freight.” Another respondent said, “there are too many trucks. When rates were good and freight was plentiful, there were a lot of new companies coming out of the woodwork. Now times are getting leaner and these carriers are hauling for whatever the broker will give them.”
The respondents to the survey were 48% owner-operators under their own authority; 31% independent on a lease to a company; 5% company driver; 12% fleet owner; 1% retired; and 3% other. The percentage of truckload operators was 78%, with power-only the second-largest group at 8%.
The split among the primary types of equipment was 29% van; 26% flatbed; and 20% reefer. The rest was scattered among several types of vehicles.
Ultimately, the report is a survey of rates, and it had numerous data points to show that 2022 overall was better than 2021.
- Compensation per mile among the responses was up 24% to $2.56 from $2.23. Compensation per trip was up 27%, to $2,390 from $1,888.
- Gains were not equally distributed. For example, the report showed that owner-operators under their own authority saw average pay per trip rise 37% to $2,570 from $1,873, whereas fleet owners’ pay went up a whopping 117%, to $3,793 from $1,750.
- Those are full-year figures. But 70% of the respondents said rates declined over the course of the year. In 2021, that figure was 20%. The 70% figure matched what the survey reported in 2019.
- To the question of whether respondents knew their cost of operation, 88% said yes. When further asked what rate per mile they need in order to cover their costs, the mean figure was $2.38, the median was $2.15 and the mode — the number mentioned most frequently — was $3 per mile.
Other noncompensation data in the report indicated that:
- How respondents secured freight differs. For example, 55% of fleet owners used contracts with shippers or receivers. But for the drivers operating under their own authority, 57% used a load board. When all respondents are put together, the answers came in as 43% load board, 36% broker, 30% contact with a shipper/receiver, 27% through the carrier a driver is leased to, and the balance spread over several smaller categories.
- Factoring was utilized by just 26% of the respondents.
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