E-BUSINESS
Online Shipping Auctions Gearing Up for Long Haul

When Matt Chasen's mother called him in tears because she couldn't afford to pay US$800 to ship an heirloom dresser across the country, he set out to solve the problem. His solution was the genesis of an innovative online company called uShip.

The light bulb moment came when Chasen was driving from Seattle to Texas to enter the McCombs MBA program at the University of Texas. The Boeing (NYSE: BA) engineer took note that his rental truck was two-thirds empty and began brainstorming about how he could lower shipping costs by matching excess truck capacity with people's oversized deliveries.

"I didn't need to reinvent the wheel," Chasen, founder, president and chief executive of uShip, in Austin, Texas, told the E-Commerce Times. "Our business model is similar to eBay's (Nasdaq: EBAY). UShip is a peer-to-peer marketplace that connects drivers with shippers."

Emerging Concept

This emerging concept is sort of like a reverse auction for shippers and drivers. Shippers list details of their freight, and feedback-rated movers, freight carriers and independent drivers make bids to deliver those shipments. The bids are often at prices far below retail rates because the drivers are filling unused space in their trucks.

The concept is catching on. UShip has attracted more than 3,000 drivers and brokered more than $1 million in shipments since launching the company in March 2004. Other services, like U-Haul's eMove and a Canadian start-up called Hitchpack are also in the online shipping and hauling business.

UShip's portion of the pie totals just a small fraction of the 43 million tons of cargo shipped in the U.S. daily, according to Applied Data Resource Management (ADRM). ADRM reports trucks are responsible for 64 percent of all shipments. Analysts said there is a vast opportunity to revolutionize shipping logistics, and online auctions like uShip are driving toward it.

Tapping eBay

With what he perceives as a remedy to eBay shippers' pain, Chasen has focused much of his marketing efforts on customers of the leading online auctioneer.

To be sure, eBay sellers are often limited to regional listings of bulky items because, like Chasen's mother, buyers aren't willing to pay megabucks to ship large, albeit sometimes low value, items.

"This is a solution that the eBay community needs badly," says Janelle Elms, lead instructor for eBay University and author of eBay Your Business, told the E-Commerce Times. "Now sellers have the opportunity to sell beyond their 50-mile radius. It opens up their customer base."

"UShip is on the radar screen at eBay," Elms said. "The company's acceptance rate is very high because they are doing the things that the eBay community is asking them to do. UShip has proved itself to the eBay community."

Trust Factor

At this point, the biggest challenge for sites like uShip, Hitchpack and eMove is not competition. No, the biggest challenge is one that eBay also had to break through: the trust factor.

"If the seller has to wait around for the buyer to figure out how they will arrange for delivery, the seller is not going to be happy," Ina Steiner, editor of AuctionBytes, a news and information service for online auction users, told the E-Commerce Times.

"The two parties have to trust each other -- usually complete strangers -- and you want to get the transaction completed as quickly as possible."

UShip is taking a page from payment processor PayPal's playbook to help overcome that hurdle. It allows eBay sellers to copy and paste a click through logo onto their auction pages that says, "I offer uShip." The strategy is paying dividends. UShip typically has about 800 listings on any given day.

Furnishing Feedback

However, that's not Steiner's only concern. "If it's someone I don't know, how do I really know they will deliver the item to me?" she asks. "That's why the professional listings are critical to shipping-service marketplaces."

Online shipping auctioneers have taken these trust issues into consideration and have implemented driver feedback rating ala eBay. Over time, the companies believe this will build credibility.

"The first person that bought Superbowl tickets for $1,000 on eBay was probably a little nervous," Chasen said. "We have to build the feedback of our shippers and drivers to the point where people are comfortable trusting the brand and our members to fulfill the transaction."