Sector focus: Freight forwarding & third-party logistics in Russia

Third party logistics (3pl), while heavily popular in well-established Western markets, remains comparatively underdeveloped in Russia. So, what are the market prospects like, and what opportunities does the freight forwarding sector hold? Let’s find out

Russia’s underdeveloped 3pl & freight forwarding market

Revenues generated by the sector totalled around $16.9 billion in 2015, according to logistics research company Armstrong & Associates. Russia’s third-party market is by far the largest in the CIS, which is collectively valued at around $23.4 billion.

Outsourcing of transportation services takes a 22% market share in Russia, or roughly of a fifth of the entire transport and logistics industry. Comparatively, 3pl service providers cover 65% of the European market and 48% of China’s.

There are roughly 4000-6000 logistics companies in Russia. Out of these, only 100 can really be true logistics service providers. Some of the big names include Eurosib, Nienshants Logistics, STS Logistics and a subsidiary of Russia’s railway behemoth RZD, RZD Logistics.

Crucially, the unsaturated nature of the market means international firms are well positioned to advance into Russia. Why? Well, there are a few factors.

Firstly, 3pl as an industry is a fairly new phenomenon in post-Soviet Russia. Misapprehensions regarding the type of services on offer, and the fact many Russian companies handle transportation in-house, hampers industry development too.

While domestic firms might be struggling to meet international service standards, foreign firms are making headway into Russia’s outsourced logistics industry. The big players are true global giants, such as DHL and Kuehne Nagel.

The fact that the Russian outsourced transport sector is relatively unorganised creates space for international companies to expand. There certainly is plenty of potential for the future — especially with trends such as exploding cross border e-commerce activity suggesting a shake up in the 3pl market is coming soon.

E-commerce increases Russian demand for outsourced logistics

Digital retail sales topped out at $4.2 billion in Q1 2017, up 14% year-on-year, with goods coming from Europe, China and even further afield. E-commerce is growing every year in Russia, suggesting a greater need for 3pl services will emerge going forward.

Itella, a Russia-centric postal and logistics service from Finland’s Posti Group, now offers dedicated e-commerce delivery and fulfilment options for its Russian customers as a result of the growth in online shopping across the country.

As well as cargo carrying, there is also warehousing, fulfilment, and logistics centre construction to consider too. All of these form part of third party services. While the big contemporary trend in Russia’s warehousing sector is built-to-suit facilities, more commercial properties are being built by outside developers.

In Moscow, in Q4 2016, 471,000 square metres of warehousing space was sold or built throughout the city. As of 2017, vacancy rates in Russia’s capital stood at around 12%, which highlights the strained nature of storage in Russia’s largest city.

So, third party logistics in Russia: underdeveloped, ready to expand, and fertile ground for international companies to grow their Russian operations.

TransRussia: Russia’s key source of freight forwarding contracts

TransRussia is the only dedicated transport and logistics event of its kind in Russia.

For exhibitors, It’s the place to meet nearly 17,000 cargo owners, freight forwarders, retailers and others in need of transportation services and technologies on the Russian market.

79% of visitors purchase as a result of the exhibition and a further 71% of visitors only attend TransRussia amongst industry events. If it’s exclusively you’re after, you’ll find it at TransRussia.

Book your stand today and get ahead of your competition.

Alternatively, contact our team for more information on this industry-defining B2B exhibition.