Segments of U.S. trucking industry

Trucking is an enormous industry, and as such, it’s pretty hard to segment it. There are many different ways in which you can slice this $700B market: short haul vs. long haul, less-than-truckload vs. full-truckload, by fleet size, and more.

As a consultant at McKinsey, I was taught to break things down using the MECE approach(mutually exclusive, collectively exhaustive), but there seems to be no existing research that does this for the trucking industry. So, essentially, I had to do it myself. Here’s what I found.

The entire U.S. freight transportation industry which includes various modes of transport (air, water, rail, pipeline, trucks) is worth roughly $1 trillion, according to Plunkett Research. Many other sources come to the same conclusion. Trucking makes ~70% of that amount.

U.S. trucking: ~$700B

Let’s break that number down and dive solely into trucking. The most commonly cited source for the size of the trucking industry is American Trucking Associations. According to the their research, the market was $726B in 2015, $676B in 2016. Taking those numbers into account, we can assume the the current market lands somewhere around $700B in size. Furthermore, there are different types of shipments that comprise this market:

  • Courier service & parcel delivery
  • Less-than-truckload shipments
  • Full & partial truckload shipments
U.S. Trucking Segments

Courier service & parcel delivery: ~$60B

The courier and parcel delivery in the US mainly involve the transportation of non-palletized and light goods (<110 pounds).

The U.S. courier and parcel delivery market is around $60 billion USD in size. However, sources for this data are slightly inconsistent. For example, Jake Medwell from 8VC says it’s $50B. Statista ranks it at $70B, but that number encompasses all of North America. So, around $60B is a good estimate for the U.S. alone.

Key players include the U.S. Postal Service, FedEx, UPS. It is a very concentrated sector, with these top 3 companies bringing more than half the revenue for the entire sector. UPS is the leader, with $26B in revenues from ground package delivery.

Largest players in the Courier service & parcel delivery segment

Courier service & parcel delivery market highlights

  • Online retail drives fast growth
  • Amazon has shown multiple signals to be entering the space, and I believe it will move logistics in-house soon. For Amazon, the reliance on third-party logistics providers is costly
  • Some tech startups such as Shyp and Postmates are attempting to disrupt this market, but it’s not easy because of incumbents and operational complexity.

Less-than-truckload: ~$40B

Less-than-truckload, abbreviated as LTL, involves the transportation of shipments larger than parcel, but not large enough to fully occupy the trailer volume of a semi truck. LTL freight generally weighs less than 10,000 pounds. Since a truck can carry multiple less-than-truckload shipments, many LTL carriers utilize a network of terminals to optimize operations.

This market is around $40B in size. According to Plunkett Research, it was presumed around $41B in 2016. According to Journal of Commerce it was $35B. I won’t linger on who’s right here — to me the magnitude is clear: somewhere around $40B.

The largest players in this market include XPO Logistics ($3.4B) — mainly in LTL — and large carriers, part of whose shipments are in LTL: FedEx ($5.9B in LTL revenues), ODFL ($2.9B), YRC freight ($2.9B).

Largest players in the Less-than-truckload segment

Less-than-truckload market highlights:

  • Growth is fueled by online retail
  • This market is very concentrated, simply because it’s complex. The top 25 companies make most of the revenue.
  • Few startups try to tackle this segment because it’s so complicated. For example, Cargomatic managed to attract venture capital, but had to pivot to being a traditional brokerage.

Full truckload segment: ~$600B

Full truckload (FTL) shipping, which also includes partial shipments, is the movement of large amounts of homogeneous cargo — generally the amount necessary to fill an entire semi-trailer or intermodal container. In most cases, heavy trucks can haul up to 50,000 pounds. There are two types of fleets in this group: for-hire and private. For-hire fleets don’t own the freight, they simply offer the transportation service. Private fleets are large shippers like Walmart or PepsiCo who manage their own, in-house fleet of trucks.

For-hire full truckload segment: ~$350B

According to an article in Logistics Management published in July 2015, the market was $340B, presumably in 2014. So, for the 2015–2016 fiscal year, I would round up the number to $350B. Upon cross-checking, this is number is more or less consistent with those from several other sources.

Some of the largest fleets in this sector include Swift Transportation, J.B. Hunt, Schneider, Knight Transport. However, it’s not difficult to lease a truck and start a carrier operation. Therefore, this segment is extremely fragmented, with 90% of fleets having fewer than six trucks.

Some of the largest players in the Full-truckload segment

Full-truckload market highlights:

  • This sector has been attacked by startups the most. This is because it’s less complex than LTL and parcel, and it contains a larger piece of the pie. The most funded startups like Transfix, Convoy, and Uber Freight focus on freight-matching. Essentially, they are replacing traditional brokers by utilizing mobile technology and automating manual operations.
  • Unlike LTL and parcel, FTL is very fragmented. The top 50 fleets comprise roughly 10% in revenues, and 90% of fleets have fewer than six trucks.
  • Self-driving technology is likely to disrupt this segment the first, because FTL is mainly long-haul, and it’s easier to teach a truck to drive on a highway than on busy streets.

Private fleets spend ~$250B

Large shippers like PepsiCo or U.S. Foods don’t want to outsource their logistics for two primary reasons: control and cost. For such companies, it indeed makes sense to have their own fleets because the economies of scale are the same as for large, for-hire fleets, but the control over the operations is in-house, which is crucial for shippers of groceries like Walmart.

There is little readily-available data on the actual trucking spend by each private fleet, but there is a list of the largest fleets here.

Largest Private Fleets

I tried to be accurate and relevant in my classification, but if I missed something or made a mistake, feel free to comment — let’s improve it together.

Disclaimer: there is always room for error when research agencies estimate a market size. Oftentimes data from various sources can be slightly different. Furthermore, information is mainly available for past years, so that leaves another level of uncertainty. Therefore I rounded up numbers for convenience.

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Sam Bokher

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Startups, tech, transportation