RUSSIAN TRANSPORT & LOGISTICS IN 2020: 5 HOT TRENDS
A new decade dawns for Russia’s transport & logistics sector
Join us as we countdown five top trends influencing the way freight moves around the world’s largest country in the coming ten years.
The top trends to watch in Russia's transport & logsitcs sector
Growing influence of the Far East
China is nothing short of ambitious when it comes to developing an entirely new global logistics route. The One Belt One Road project is the world’s most momentous logistics development; one that may have significant impact for Russia.
President Putin certainly wants Russia involved.
“We find it a useful, important and promising initiative,” the Russian president said in an interview with China Media Group ahead of a 2018 state visit. “This is initiative is developing both with our efforts on building the Eurasian Economic Union... We have good plans for industrial cooperation... railroad construction.”
Bilateral trade expanded by an impressive 30% in 2018, according to the latest statistics released by China’s General Administration of Customs (GAC).
GAC’s report states that Russia imported 12% more goods from China in 2018, totalling $47.98bn. Concurrently, Chinese imports of Russian products grew by 42.7%. These shipments held a total value of $59.08bn.
RZD Russian Railways has moved to capture more Chinese cargoes and so is piloting new rail connections.
“We expanded the geography, taking into consideration the interests of consignors, and created new business connections, which are beneficial for all participants,” explained RZD Logistics Chairman Viachslev Valentik. “In Eastern China, clients often prefer rail as a mode of transports for their goods, with delivery time and cargo safety of the utmost importance.”
Trucking continues exciting ongoing development
Russia’s road transport network is responsible by carrying the largest freight volume per sector in the whole Federation.
However, it has been in a precarious position recently, with costs getting higher, and a new tax system affecting many small to medium sized operations.
That said, if we look at the experience of trucking firms in Moscow, we can see the market strengthening.
Research from online logistics platform ATI.SU reveals that, at the end of 2019, the volume of freight transported by lorry in Russia’s capital region has grown by 21%. Additionally, truck loads coming into Moscow are growing to.
Road transportation continues to grow in Russia. The top three fastest growing routes for road cargo, in terms of tonnage growth, are:
- Novosibirsk-Omsk - +46%
- Chelyabinsk-Yekaterinburg - +26%
- Rostov-Krasnodar - +23%
We mentioned higher costs earlier. Thanks to the effects of inflation, road transportation is actually becoming more cost-effective. Any existing price hikes are lower than the current rate of inflation, ensuring that trucking rates, while growing, remain competitive.
Ecommerce to drive 3pl, 4pl and Intralogistics
Online shopping has established a toehold in Russia’s retail sector and is poised to turn its small market share into a considerable salient as we head into the new decade.
BNE Intelligence forecasts that ecommerce will represent 8% of total Russian retail sales by 2021 - a trend predicted to continue its upward trajectory as the decade progresses. Ecommerce purchases have been doubling in value in Russia year-on-year since the start of the 2010s.
Based on the above, there’s space for 3pl, 4pl, and intralogistics to really grow throughout the 2020s. Currently, outsourcing logistics services for retail companies covers 32% of this particular segment, when considering courier and delivery services.
In-house postal services represent 29% of the market, delivering 100m parcels. However, this tends to cost retailers a large chunk of their annual revenues to accommodate.
Companies are always looking to streamline procedures in order to improve their bottom line. Russian retailers are no different. Significant savings are to be had for those companies that do outsource.
Of course, this will also present intralogistics opportunities too, such as pitching and selling warehouse and inventory management equipment to Russian retailers.
With more than 350m parcels being delivered to Russian ecommerce shoppers, 3pl, 4pl, and intralogistics solutions providers are within striking distance of making real in roads in Russia.
Exports of food & drink to rise
It is likely the focus of Russia’s transportation sector will continue to shift towards exports throughout 2020. Agricultural goods are rapidly becoming a contender for arms and mineral products when it comes to Russia’s outbound trade activity.
It’s mostly grain, as well as livestock, finished meat products, and seafood that form the bulk of Russia’s food and drink exports. Together, they collectively amount to roughly $25bn. By 2025, its expected that these will reach $40bn.
As such, there will be significant opportunities in supplying the Russian agricultural sector with transport services. These vary from everything from intralogistics equipment for warehousing complexes and distribution centres, to cold chain transportation, and dedicated end-to-end agricultural logistics operations.
Continued development of outsourced logistics
3pl and outsourced logistics is one of the key sectors to watch in Russia right now.
The market remains small, but its potential is huge. As mentioned earlier, aspects of domestic consumerism, such as ecommerce, are proving key drivers of outsourced logistics.
Presently, outsourced logistics is worth roughly 7.8% of Russia’s total transport & logistics market. According to some reports, national rail carrier RZD holds 20% of this particular sector.
There is a strong presence of international firms too, with market leaders like Eurosib, Nienshants, and STS Logistics all owning significant market shares.
Substantial benefits exist for those companies who outsource their transportation and logistics operations. A reduction in spending is the biggest, as some Russian firms currently spend up to 20% of their annual revenue on logistics.
Russian companies, who are coming out a period of economic uncertainty, are more cost conscious then ever. Therefore, outsourcing their logistics is one of the smartest moves these firms can make in the long run.
We expect 3pl to become a significant factor in Russia’s transport sector in 2020 and across the next decade.
Be at the heart of Russian logistics at TransRussia
As Russia’s only international transport and logistics exhibition, this is an event you want to mark in your calendar for 2020. For exhibitors, you can meet nearly 17,000 cargo owners freight forwarders, retailers and others in need of transportation services and technologies on the Russian market.
Visitors are primed for purchasing, and more than two thirds will only attend TransRussia amongst industry events.
Book your stand today and get ahead of your competitors in the market.
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