Pony Express' Russian Relay
How the company delivers rapid service

If Russia were an easy place to prosper, a business such as Pony Express probably wouldn't even exist; some international giant like FedEx would own the market. Instead, most have pulled back, leaving the field wide open for American entrepreneurs Tim Bryant, 33, and Mark Wheeler, 32.

In the past five years, the pair have conquered a mountain of obstacles, including a crashing economy and devalued ruble, while making their Moscow-based delivery service one of the more successful small-business startups in Russia. "We've survived by staying flexible and listening to our customers," Bryant says.

The idea for a Russian rapid delivery company was evolutionary. Bryant, who majored in Russian and business at the University of New Hampshire, came to Russia to work for FDX Corp. in 1989 to help set up an internal, national service -- an effort abandoned in 1992 when FedEx cut back its European network.

800% SOLUTION. Bryant, though, had glimpsed opportunity. Multinational corporations new to Russia -- from oil companies to consumer-products makers -- were hamstrung by poor transport and communications, and Bryant, having studied the logistical hurdles at FedEx, thought he could surmount them. He called his old college buddy Wheeler back in the states. A market researcher, he bankrolled the business with $50,000 he'd saved working at his family's lumberyard.

Offering courier service between Moscow and 185 regional cities, Pony Express now does better than $5 million in annual sales and employs 270. While sales have dipped slightly since Russia's troubles re-erupted last summer, Bryant says, the company is luring a record number of customers by cutting overhead and pricing services 15% to 50% below competitors such as DHL Worldwide Express, the only significant foreign competitor on intercity routes.

Survival strategies developed in previous crises may make it easier to weather this one. When Pony Express started in 1993, inflation was above 800%, so it pegged prices to the dollar. That softened the blow of the recent devaluation. To avoid Russia's inefficient interbank payment system, the company often sent employees with bags of cash to pay bills. Eventually it opted for the government-controlled Sberbank -- one of the few to keep operating after Russia's recent bond default.

Not surprisingly, Pony Express has earned a reputation for finding fast, clever solutions to local problems. After a Russian airline abruptly quadrupled fares on a crucial route, Bryant and Wheeler cut a deal with the pilots' union, paying cockpit crews to deliver their courier pouches. And when computer giant Hewlett-Packard Co. needed help managing its Moscow warehouse, Pony Express took the job. "They are a reliable partner, and very flexible," says Sergei Uspensky, HP's logistics manager in Russia.

Nevertheless, Pony Express has lost some big clients to DHL, which has an extensive internal network in Russia and offers volume discounts. But Craig Curphey, DHL's Russia manager, says Pony Express has proven a worthy adversary on the St. Petersburg route.

To stay competitive, Bryant and Wheeler keep a lid on expenses. Their spartan headquarters are leased from Moscow State University and still decorated with a bust of Lenin. For marketing, they rely on one-to-one sales pitches to multinationals in Russia. Employees have to use their own cars for deliveries outside Moscow. Since devaluation, they have negotiated reductions in rent and shipping costs, trimmed some salaries, and made a few layoffs. "This crisis has been like a spring cleaning for us," Bryant says. "It has made people refocus on controlling costs."

The biggest worry today is that multinationals could curtail or shut their Russian operations. For now, Bryant and Wheeler insist that they're still profitable, and they've just added four vehicles to their fleet. Like the sagebrush heroes it's named for, Pony Express seems determined that the mail will get through.

By Carol Matlack in Moscow

This article was originally published in the Dec. 7, 1998 print edition of Business Week's Enterprise.

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