As the Russian e-commerce market a promising development cycle, with many domestic and foreign players reporting record sales growth, market research agency Data Insight recently released a study on the local fulfilment service market.
Here are the key findings of this report (the full version is available only in Russian language):
- The Russian fulfilment service market in 2018 is estimated at 13 billion rubles ($207 million at the average exchange rate) and 41 million of parcels.
- The average parcel value is 317 rubles (about $5), including the additional services but excluding the delivery fee.
- More than 70 companies provide fulfilment services in Russia. The landscape has not evolved significantly over the past few years; however some changes are expected this year with a few big players entering the market.
- The number of companies using fulfilment services has increased significantly over the past few years. Thus, large operators have increased their client portfolio by more than a half on average since 2016.
- Not only do fulfilment operators compete with each other and 3PL companies; even more challenging is the development of in-house fulfilment capacities by online stores and marketplaces.
- The absence of standards in service implementation and pricing still appears as still a major characteristic of this market.
- Almost all the service providers surveyed say they charge their customers by each operation performed.
Commenting on these trends, Nataliya Przystaw, Commercial Director of fulfilment center Arvato Bertelsman, said: “Due to increase demand, the fulfilment sector is becoming more and more attractive for new players, but they don’t all acknowledge the complexity behind. As a result, some of these new players shut down their business after one or two years.”
“There is also a discrepancy between more and more sophisticated requirements and online retailers’ ability or willingness to cover the relevant costs. This creates a challenging situation for fulfilment providers willing to maintain or develop quality service,” Przystaw added.
Another important point is the fulfilment provider’s compliance: “More and more international e-commerce players want to be sure about the transparency of their entire supply chain and check all their suppliers for compliance. In this context, not all providers will survive,” she concluded.
In-house development strategies
While many online and multichannel retailers outsource their logistic operations, some major players tend develop their own capacities. This is the case of Ozon, Russia’s leading multi-category e-commerce company, which plans to increase its capacities tenfold by 2025. The company has just secured a $150 million convertible loan, a part of which will be used to these ends.
In the field of multichannel retail, other notable examples include Leroy-Merlin and Ikea, which have developed huge logistics facilities in the past few years.
Yandex.Market, the e-commerce joint venture launched last year by Yandex and Sberbank, is relying on both in-house and third-party capacities: “We have our own warehouses (in Riga and Rostov), call centers, software infrastructure, couriers… Even though parts of them do not belong to us, we manage them directly to keep control of the whole system,” Evgeniy Schepelin, Business Development Director, told East-West Digital News.
“We invest considerable amounts in it,” he added, referring to the considerable capital injection brought by Sberbank into the JV.
- East-West Digital News is conducting an international study on Russian e-commerce in partnership with Data Insight, ECommerce Foundation and InternetRetailer.com. Foreign brands and online retailers selling to Russia or considering to do so are invited to participate in an online survey; they will receive the research report free of charge upon release.
