How cross-border e-commerce is shaping Russian logistics

Once digital retailing hits a country, it naturally shapes how its citizens shop. E-commerce has changed shopping habits across the globe – and Russia is quickly becoming enthralled with online retail. 

The ability to buy products anywhere in the world, and get them shipped directly to your door, is one of the modern world’s biggest retail revolutions – and it pays big. Amazon, the world’s biggest online retailer, hit $35.7 billion in sales during 2016, for example.
 
Russia is diving headfast into cross-border e-commerce. Spending is up and deliveries are increasing with more Russian shoppers buying from overseas companies – and this is leading to some interesting, potentially game-changing, trends in the nation’s transport and logistics sector.

E-commerce: the next Russian revolution?

Russia and the internet had a slow start compared with other European states. But, like many things in Russia once they get going, the internet’s momentum is growing fast – and this growth shows little signs of slowing any time soon. Internet penetration, formerly 37% of Russia’s 144 million population, has exceeded 70% - 4 million additional browsers logged on in 2016 than 2015 too.

Sales keep on rising too. Russia’s e-commerce market reached record highs in 2016, topping out at $26 billion, including $16 billion spent on physical goods. In fact, online sales of physical products have come a long way in Russia since the start of the decade when they totalled $7.9 billion.

Smartphones and tablets, seemingly now ubiquitous browsing devices around the globe, are gaining more market share too. 37.2% of Russian internet users browse via their phones alongside 19.2% who prefer to use tablets - up from the 1.9% and 3.5% respectively seen in 2013.

Cross-border is Russia’s fastest growing e-commerce segment

Foreign retailers have spotted Russia’s deeper digital pockets, and are stepping up cross-border sales considerably. 2016 saw 245 million parcels and small packages delivered to Russia from outside the country with a value of $5.2 billion – or roughly a third of the entire e-com market.

Indeed, Russians increasingly prefer foreign retailers to domestic players. Growth in the international segment exceeded 37% across the last 12 months. Domestic e-commerce’s growth rate was six times lower at 6%.

Once more, Russia impresses with its stats. Just three years ago, cross-border e-com was worth around $1.3 billion, so this particular market segment has nearly quadrupled in recent years.

Growth in Russian cross-border trade is down to a couple of factors. Firstly, there is e-commerce’s stellar growth as a whole. Then there is the fact that that many foreign firms’ goods come at a lower price point. International companies do not have to pay taxes or fees as they are exempt from customs duties (depending on the size and nature of cargoes, of course). 

Russian retailers that import their own goods must, on the other hand, must pay various tariffs.

China holds the key for Russia’s cross-border growth 

Deliveries from China covered more than 80% of total fulfilled cross-border sales in 2016. Solid relations between Russia and its neighbour, playing into improved transport links between the two states, are paying dividends for online retailers.

Demand is such that Russian Railways and Russian Post inked an agreement in October 2016 to carry small packages and items via rail from China to Europe. Dmitry Strashnow, CEO of Russian Post, claims this new route will compete favourably against air mail, in terms of delivery times, service quality, and cost.

Russian Post said, in the first half of 2016, it handled around 98.7 million international shipments. This was twice the level carried during the same period in 2015.

China’s Alibaba became Russian’s most popular online store in 2016, accruing 22 million unique viewers a month. Ozon.ru, Russia’s first domestically-owned online retailer, lagged behind with just 9 million unique monthly views. 

International e-commerce deliveries handled by postal services

The main bulk of international shipments entering Russia are handled by postal operators. Around 95% of total number of parcels and small packages from abroad are shipped by these companies. Private operators essentially focus on parcels weighing 2kg or more. While these account for less than 15% of total products sold, they offer higher margins. 

International companies are now expanding their presence to capture this burgeoning market. Some 10% of postal flows to and from Russia, for example, are handled by Finnish and Estonian service providers. Posti/Itella, the Finnish national post service, and Estionia’s Omniva/Post11 brands are enjoying big successes in Russia – and are looking to position themselves as international logistics hubs throughout the region.

While some companies are handling transportation services themselves, or have entered Russia’s postal sector, many foreign firms prefer to tie in with Russian 3PLs for logistics and fulfilment services. 

Take Spain’s El Corte Ingles. The fashion giant is eyeing up Russian expansion in 2017, as well as looking to sell its goods online throughout the CIS. To handle distribution, it has teamed up Russia’s Shiptor, who will be covering fulfilment operations in El Corte Ingles’ Berlin warehouse.

Other companies provide platforms for international businesses to enter the Russian market. eSolutions, a subsidiary of Germany’s Otto Group, offers an integrated service, combining logistics, I.T, and marketing services, giving foreign firms all they need to expand into Russia’s online retail sector.

Connect with Russia’s transport and logistics sector at TransRussia

Cross-border e-commerce will continue to drive shakeups in Russia’s transport and logistics industry well into the next decade. To get the scope of the market, connect with transportation providers, or meet those on the hunt for online-related logistics services, you need to be at TransRussia.

TransRussia is the largest business event for transport and logistics services and technologies in Russia. Each year, it brings together thousands of industry professionals from across the world in one place at one time – all when they are looking to expand their business leads or find new partners.

To get more information on the TransRussia, make sure you contact our team today.


 

Related Article