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Today, Goldwerger has the answer: He has persuaded 2,000 container shippers and 10,000 of their customers to use GoCargo, his Web-based exchange, by offering faster bookings at cheaper prices. At gocargo.com, shipping companies and the companies that rely on them to move everything from bananas to televisions around the globe meet to arrange orders. It's literally a sea change for a $50 billion industry that has traditionally closed big deals with a handshake. From its headquarters near the Customs House in Manhattan's historic shipping district, GoCargo conducts reverse auctions online. Say agribusiness giant Cargill Corp. has to ship 10 tons of flour to France. The company posts its shipment on GoCargo's Web site, and shipping lines bid to win the business. "We replace haggling," says Marc Rappaport, a former Prudential Securities trader who is now GoCargo's vice-president for marketing making. Companies looking for space have found it to be relatively smooth sailing. The Web site slashes the time it takes to book space on a container ship from the typical four to five days to as little as 24 hours. Better yet, the competitive-bidding process has cut rates by up to 30%, with average savings in the 15%-20% range. GoCargo makes money by charging the seller an undisclosed percentage fee for every deal closed on the site. In the past 18 months, it has hosted 4,000 auctions for corporate giants like General Electric, Heineken, and Cargill, a GoCargo investor. WAVE OF THE FUTURE. The savings in time and money have won over Ken Fahl, Fisher Scientific International Inc.'s director of international logistics. His company saved 30% on a recent shipment of laboratory equipment to Turkey by using GoCargo to find a new, lower-priced container company called Admiral Lines. "There's a good possibility that GoCargo could transform this industry," says Fahl. If that happens, it will be at the expense of the already highly competitive shipping companies. "Exchanges are good for everyone in an industry, except for those selling services," says Jack Staff, chief economist at Zona Research Inc., a California-based Internet research firm. All the same, big players like Maersk Sealand have become members of GoCargo, which screens buyers and sellers to be certain they're legitimate businesses. The online exchange threatens not only the old salts' wallets, but their way of doing business: deals traditionally have been struck informally, and many company shipping departments still aren't connected to the Web. "The industry still has not embraced auctions," says Stephen Ochs, national sales manager for freight mover Knight International. "I still hear lots of people [complaining] about GoCargo." Goldwerger can't control the prices, but he has tried to make his system easy for tech novices. His site uses only a pair of easy-to-understand screen displays. What buyers see, for example, is a simple list of bids, each with a ranking number based on price, speed of its vessels, and quality of service. Though it appears simple to users, the system represents more than a year of hard work by Goldwerger, who knew little about the industry when he started. Before launching the site, he visited more than 50 manufacturers and shipping companies to quiz them about their priorities and learn how they did business. FLOATING PRICES. Goldwerger says it has been worth it -- though he declined to release revenue figures or profit projections for his privately held company. At 30, he's where he has wanted to be since childhood: running his own business. After five years in the Israeli Air Force and 12 months earning an MBA at INSEAD in France, he was convinced the Internet would eventually revolutionize the back-office functions of most businesses. He decided an electronic exchange would be the best way to cash in on the trend and chose the shipping industry because it wasn't dominated by a single player. Rather, with thousands of container shippers serving tens of thousands of companies that are always looking to cut costs, the industry seemed ready for a centralized exchange. Launched in November of 1999, GoCargo now has 60 employees occupying a cramped office at the tip of Manhattan with a view of the Hudson River. There's not a tie in the place, with Goldwerger sporting a faded copper polo shirt that matches the color of his close-cropped hair. GoCargo's account managers sit hunched in metallic cubicles studying crisp, flat-panel computer screens that display lists of incoming bids for cargo shipments. The company isn't the only one trying to make electronic waves. A few others -- LevelSeas.com and IATN among them -- are tackling other niches in the ocean-shipping business, such as load management. But no other company offers reverse auctions. And potential rivals remain in GoCargo's wake, says Greg Burns, a logistics analyst with Lazard Frères & Co. "Everyone is trying to be the next big exchange, but market penetration for these companies is extremely low so far," says Burns. Still, he believes a handful of startups will prosper. Burns estimates that GoCargo has the momentum to eventually handle $1 billion annually in container contracts. That, says Burns, "is more than enough to make GoCargo a significant public entity." The company recently raised $16 million from investors that include Goldman, Sachs & Co. and Cargill, but Goldwerger says he has no plans to take the company public at this time. For now, he prefers to gather steam gradually until most of the container-shipping industry comes aboard. Haddad is a correspondent in Business Week's Atlanta bureau |
