Can Freight Get Uber-ed in Russia?

By Roma Nazarov

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18th July 2019

The online cargo shipping market in Russia is roughly twice as big as that of online taxi booking.

So, it’s no wonder that many are attempting to transfer the ride-hailing scheme to it but it’s not an easy industry to Uber-ize. Superficial similarities between two industries are far outweighed by very deep distinctions. The variety of commercial vehicles, from tow trucks to concrete mixers, is wider than that of passenger cars. A typical LCV fleet has smaller manifest than that of most passenger vehicle fleets, meaning that pooling a sufficient number of vehicles to cover a certain area might be challenging. Taxing and other regulations for commercial vehicles vary by regions and zones. This sector is comprised mostly of corporate clients who tend to order a complete service including packaging, loading, and insurance. Pricing is highly flexible.

Thus, many schemes were offered but none have managed to cracked the nut on an industrial scale. A different strategy applies to Russian retail group X5. It offers independent truck drivers a bit-part role in delivering goods to the company’s stores through its GoCargo service, helping X5’s regular fleet. “We’re seeing 20 start-ups at least but there’s no clear leader,” says Karen Gomktsyan, CEO at carrier Livecargo.

Now with Yandex, the new cargo tariff allows to order a 200+ cubic feet van and one or two porters through the same app as is used for taxi booking. No dull paperwork. Price is set upfront and calculated per minute, not per hour as established in the freight industry. Each item of load must not exceed a 50kg weight limit.

Millions of people already have Yandex’s taxi app on their smartphones and Yandex browser on their computer. Now they’re given a choice: make a search, wreck the brain to choose a most convenient one among dozens of logistic vendors, undertake a registration procedure and figure out how to use their online ordering form… or, order a van with one click on simplest terms.

So the idea might work but it might not if simplicity is not what clients want. Corporate customers are at the core of the cargo business, says Zoya Avstriyskaya, head of PR department at ride-hailing company Vezёt, and they understand simplicity in a different way – like flawless data exchange between enterprise management systems of a vendor and a customer or the whole before-mentioned bunch of services.

That is why Vezёt had chosen a more conservative approach for its cargo business back in 2015. The operator pooled a wide spectrum of different type of LCVs and developed a flexible digital platform. Also it would not integrate trucks into its taxi app – not yet, at least. The new scheme, more convenient and fast than the traditional one, was positively accepted by both businesses and individuals, orders doubled in the last two years.

Ride-hailing had brought fare war to the taxi market and the same trend will inevitably happen in the cargo business too. “We have already cracked the market in several towns, dropping an average check below 1,000 rubles ($15),” says Avstriyskaya.

Meanwhile, Yandex is testing its idea in the Moscow market. The company’s press secretary Darya Trosnikova wrote in an e-mail: “At current we’re completely satisfying demand from customers in Moscow and its outskirts.” She also stated that thousands of drivers applied to join the service.

Livecargo was among the first logistic operators to claim that proposed terms were lucrative for both logistic businesses and drivers and to connect its 600 vans to the service. Based upon experience of work with several ride-hailing projects, Gomktsyan says that Yandex was the first and only one to offer convenient terms for the smallest clients and sustain a sufficient flow of van orders, creating a new niche.

One fly in the ointment, though, is in the cabs market where ride-hailing caused mid-term safety problems related to low-skilled drivers, warns Olga Iakimenko, coordinator of Green Mobility Initiative at ICSER Leontief Center: “Sometimes you even see a person in the driver’s seat different from that in the app.” In Yandex’s scheme, there is no clear responsibility for safety of the load as well as barriers to prevent entrance of unprofessional drivers.

Gomktsyan argues that the scheme has built-in self-regulation based on a system of ratings and minimum requirements for vehicles: “Uber-ization makes work more transparent. It’s a new way to compete with the logistic giants. It opens new opportunities for responsible drivers and imposes serious threats to dishonest ones.”