Have your passengers ever gotten in your car expecting free water or snacks? While it’s always a nice thing to offer as a driver, buying water and snacks adds up! But what if there was a way to pay nothing, receive a bunch of goodies (including charging cords – no more handing yours over to passengers!), giving them away for free (and getting paid for it) and making a profit on whatever you sell to passengers? Today, senior RSG contributor Will Preston covers what every driver should know about Cargo.
Have you ever watched the food trolley go down the aisle on a plane or train and wondered, “I wish my rideshare car was like that.” Well, a startup called Cargo wants to do just that, offering free and paid snacks to your passengers, while simultaneously making money for both you and Cargo.
How Does Cargo Work?
The idea is relatively simple. Cargo ships you a box and a bunch of snacks (and other consumables) to go in that box. They ship you a lot more than a single Cargo box’s worth of snacks. You then fill the box and put it in your car so that passengers can see it.
Some of the snacks will be free for customers who are willing to download the app and scan the QR code. Passengers can also purchase by going to cargo.menu on their phone, entering your ID number, and selecting and completing the purchase there. Drivers make a flat fee of $1 per transaction, including free items, and 25% of the overall sale. Drivers make money, Cargo makes money, passengers get a snack, everybody is happy.
The purpose of this particular article is not to explain how Cargo works. For that, check out this article by Christian on how it all works. Some of the financials have changed since that article, but he goes into a lot more detail than I have room for here. Instead, I wanted to look into the business aspects of Cargo.
How is Cargo Funded?
Cargo followed the typical startup business route, raising an initial $1.75 million in their first seed round, which allowed them to get started. That funding enabled them to design the boxes themselves, do some test marketing, and start operations in four cities: NYC, Chicago, Boston, and Minneapolis. Their initial run was in about 2500 cars, with another 18,000 or so awaiting the ability to do so in other locales.
One of the VC funds providing the initial funding was Eighteen94 capital, the funding arm of Kellogg. It is no coincidence that Kellogg is also one of the first companies to supply snacks through Cargo (more on that later in the article). Cargo raised another $6 million in a second seed round, but a recent piece of news is what really got the investors interested.
Cargo Partners With Uber
Back in July 2018, Cargo signed a partnership with Uber to become their global partner. Investors saw the possibilities of this partnership and invested an additional $22.5 million into Cargo in September. It is unclear at this point how exclusive this relationship is, as it does seem possible to sign up with Cargo with other rideshare services. But the partnership is quite evident if you go to Cargo.com and click the “sign up for Cargo” button.
Watch: How to Sign Up with Cargo
You are greeted with a page designed to draw your eye immediately to the “Sign up with Uber” button. There is a much smaller section on the bottom that says “Not with Uber? Sign up with email.”
If you do sign up with Uber, the process actually gives Cargo access to your Uber account. It allows them to see what kind of car you are driving to see if it is appropriate for Cargo, and might even allow them to ship you a certain size box for your car. It could also allow them to tell you their system is simply not going to work for your type of car.
Another thing it does is give them access to your rating, as they are only offering the service to drivers with a rating of 4.7 or higher. Although the picture below doesn’t show it, it does disclose all that to you.
With this partnership, Uber gets another area of ubiquity. Once again, they out-marketed their competitor Lyft. I’m betting the Cargo boxes will be Uber branded, allowing Uber to be in the face of any Lyft passengers. I’m also guessing that Uber will take a slice of the pie.
I’m even thinking in the future that you will be able to pay for your Cargo items via you Uber app. That gives Uber more revenue, a little bit more profit, and simplifies things for Cargo and their customers.
What Cargo gets in the partnership is easily understandable. One of the challenges with the original model of Cargo is the costs involved in shipping snacks to drivers that need them. Uber is solving that problem by offering their Greenlight Hub centers as distribution centers for Cargo. Need a snack refill? Just stop by your nearest Greenlight Hub center. This offers a significant logistics and cost savings in the United States, which only grows when you consider the possibilities of global expansion.
Are Drivers Making Money from Cargo?
Cargo says drivers have earned a total of $1 million so far, with the average driver earning about $100 a month. Exceptional drivers are making up to $360 a month, according to Cargo. The difference between $100 and $360 is apparently the quality of the hustle. Are you willing to ask each passenger if they would like a free cookie? If not, you’re likely to be on the low end of the earners.
How Does Cargo Make Money?
While Cargo will most likely make some money by purchasing some products wholesale and selling them at retail, they stand to significantly increase their profit margin by making deals with suppliers. Cargo represents a huge opportunity for suppliers. Take, for example, how airlines make money offering us beverages.
Companies like Coca-Cola and Pepsi negotiate with airline companies, like American and Southwest, because planes are considered ‘wet sample vehicles.’ Basically, passengers have fewer options (Coca-Cola and Pepsi products – you won’t see ‘craft sodas’ on most airlines) because these companies are trying to get you to try, like, and buy their products (and not their competitor’s).
Now consider a passenger who needs something in the Cargo box, which can apparently range from a free cookie to breath mints to a phone charger. Now suppose that the passenger in question has never tried Altoids, the curiously strong mint. Altoids is all that your Cargo box offers, so Altoids it is. The customer likes the Altoids, perhaps even associating them with a positive social interaction, and voilà. Altoids has a new customer.
That’s why suppliers will give Cargo products for much less than they would typically sell to a distributor or other food channel. Cargo turns your car into a wet sample vehicle. It’s not a typical store shelf where the customer can pick anything they want; it is a case of high demand with only a single choice available to the consumer.
If Cargo and Uber can cut more deals with suppliers, cut their distribution costs by supplying snacks via Greenlight Hubs, cut payment costs by tying in with Uber’s app, all while making money advertising products, they stand a significant chance of making money relatively soon. They might even beat Uber to profitability.
Drivers, what do you think of using Cargo to earn extra money? Is this something you’re doing or you would be interested in doing?
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-Will @ RSG