Cross Border Shipment in Russia

Responsible for the international activities and business development of Russian delivery service company SPSR, 32-year-old Alex Vasiliev personifies Russia’s new generation of internationally-oriented retail and logistics professionals. Before joining SPSR in 2011, he served Turkish companies operating in Russia in the bank card and logistics industries.

In this interview with East-West Digital News, Vasiliev describes SPSR’s thriving e-commerce shipment business and shares his views on market prospects in the field of cross-border sales.

To begin with, please briefly introduce SPSR

SPSR Express is the leading privately-owned Russian express delivery company, with more than 13 years of experience in the Russian market. It is second only to the Russian Post in terms of coverage, delivering to more than 6,000 cities, towns and villages across the country.

We are the only express delivery company in Russia operating exclusively through its own network – which ensures better security and control over delivery routes. With more than 3,900 employees, there are no third parties involved in our operations.

What about your e-commerce cross-border shipment business?

When we launched this activity in 2012, practically all cross-border shipments were handled by the Russian Post and its subsidiary EMS, leaving alternative providers – at the time mostly international companies – a negligible share of this market. However, there was growing demand for services superior to that of the Post. [Editor’s note: Mr Vasiliev is hinting at the slow and unreliable service of the national postal operator when it deals with e-commerce parcels.]

On our side, we had strong assets – including customs expertise and a customs broker’s license – to launch such a business. This is how we became the first Russian alternative provider serving large foreign online retailers

We are still a pioneer on the market. We were the first to introduce an electronic customs declaration system two years ago. Today, Russian customs officials have introduced such forms largely inspired by us. It even became a template for some of our partners, like WN Direct, who used it as a model for other countries.

Our international operations are managed and developed by a dedicated team of 30 professionals. The company’s couriers, meanwhile, operate with no distinction between domestic and international shipments.

SPSR air fleet

Do you offer any services besides shipment itself?

Sure. We have introduced a cash-on-delivery service for foreign retailers – once again pioneering the market. Returns may jump from less than 1% to 7-8% – but sales can double.

We also position ourselves as a solution provider with a consulting offer for payment or marketing issues. Thus we have introduced some of our clients to Qiwi Wallet, and to banks for joint marketing actions, etc.

How does the cross-border shipment business look in terms of volume?

The Russian Post still accounts for more than 90% of e-commerce shipments to Russia. For the remaining fraction, SPSR has established itself as a key alternative provider and the clear leader among Russian companies.

In 2013, we handled about one million parcels, and expect that figure to double this year. Existing clients account for one half of this growth, while new clients account for the other. To date we serve more than 200 foreign online retailers – compared with 300 Russian e-merchants for domestic operations.

We’re especially strong in the UK market with a near monopoly there. It was the first market where we landed important companies like ASOS and Next as our key clients.

Now the UK accounts for approximately 40% of our activity. Another 40% is generated by US clients and 20% by other countries. We’re developing actively in Germany, France and Italy. We are more cautious about the Chinese market, where dubious practices with customs declarations are still widespread, not to mention the potential quality and legal issues with some of the products coming from there.

If we take the market in general – putting aside SPSR’s activity – the split is a bit different. We estimate that US e-merchants account for about 40% of cross-border sales to Russia, with Chinese companies representing another 40%. At most 8% comes from the UK.

To what extent could the more restrictive customs rules – with the threshold of tax-free shipments lowered – affect cross-border e-commerce?

It is hard to predict, as the new rules have not yet been adopted. However, since 76% of our parcels have a value of less than 150 euros, it seems that a significant portion of cross-border shipments will remain unaffected.

Even a sharp increase in taxes would not be a problem if at the same time processes and procedures are being simplified. This is why we support and trust the state’s efforts to make cross-border sales transparent and simple. The introduction of electronic forms was an important step, and we believe the general trend is positive.

One of the remaining difficulties lies in the fact that national postal services and alternative operators are subject to different customs rules and processes – and it is not always easy for online retailers to navigate between them. For example when we started working with ASOS they had to introduce specific standards for Russia, which was rather unusual for them.

How does your offer compete with the Russian Post, on the one hand, and with an international shipment company like DHL, for example, on the other?

Our standard delivery time for shipments from the UK ranges from five to seven days, versus about 2-3 weeks via the postal service. In terms of tariffs, we are about twice as expensive as the Post for parcels larger than 2kg– with an even bigger premium for small packages. However, we are going to launch a budget offer called “Deferred Solution”, which will be much closer to the Post’s rates.

In terms of delivery time, our offer for cross-border B2C shipments is more or less comparable to what DHL Express offers to global Internet stores selling on the Russian market. Regarding rates, we are significantly more affordable.

Some international shipment providers are very selective when delivering to Russia and certain other countries. Does SPSR have any selection criteria when working with online retailers?

We prefer to work on an exclusive basis via partners like WN Direct in the UK or Borderfree in the US, who handle the first-mile operations, even though we still maintain direct contracts with online retailers as well.

We welcome collaboration with everyone under two conditions: transparent processes and a rigorous approach to business.

Do you believe that cross-border e-commerce could suffer from the current international turmoil?

I don’t think there’s any direct impact. Over the last few months people have actually bought more than we forecast. A potential concern, however, is the ruble’s fall [editor’s note: by up to 25% in one year]. This could affect demand, though we haven’t noticed any consequences yet.

This article first appeared in East-West Digital News, the international online resource on Russian digital industries.