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An Ikea lawsuit against Convoy reveals surprising contract rates and broker margins, giving a rare glimpse into the freight industry's pricing dynamics.
IKEA's legal battle with Convoy, the now-closed digital freight brokerage, has accidentally shone a spotlight on shipping contracts and broker margins that are typically kept under wraps. Here's a breakdown on what was exposed:
Contract Rates: The lawsuit exposed how much IKEA agreed to pay Convoy for shipping goods. For some routes, IKEA was willing to pay as high as $4/mile in October 2023.
Spot vs. Contract Rates: A peek into the contract showed Convoy's rates often surpassed spot market averages, sometimes by a longshot. For example:
Broker Margins: The agreement hints at the potential margins brokers like Convoy can command. In one instance, Convoy charged nearly 80% more than the average carrier rate.
A Mixed Bag: Some lanes showed Convoy contracting rates below the spot average, raising questions about how much carriers actually earned.
Having some fun with the Ikea Vs. Convoy case here, looking at how much Ikea paid Convoy to run certain lanes.
— Alex Lockie (@alexjlockie) February 27, 2024
Normally the question would be: How much did Convoy actually pay the carrier?
But we know now that Convoy did not pay these carriers. At all. https://t.co/ItrxpavUCb
The attention this information has brought shows how strong the push is for broker transparency. It also may encourage carriers to engage in more direct dealings for better rates.
Source: Overdriveonline
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