Olga Dmitrieva - about how to find reliable suppliers and intermediaries in the Middle Kingdom

IT tools used by Olga Dmitrieva

• WeChat
• Baidu
• Google Translate

Many entrepreneurs would like to buy goods in China at low prices and then sell them in Russia at a favorable margin. But most of them are stopped by difficulties with quality control of goods, the unreliability of Chinese suppliers and the language barrier. Olga Dmitrieva, an expert on wholesale purchasing in China, told the website about how you can profitably purchase goods from Chinese online stores, wholesale markets and factories without leaving your home.

Olga Dmitrieva (Dmi), entrepreneur from Moscow, owner of three wholesale companies, founder of a business school "Chinaberry", organizer of the All-Russian Wholesale Conference. Education: Russian State Social University. In business since 2010, before that she worked as a television journalist.

Connections are everything

There are several main ways to profitably purchase goods in China, but how successful these purchases will be is determined by the main factor - the presence of reliable contacts in China. The good news is that they are not difficult to obtain. At the same time, going to China is not only not necessary, but also, in my opinion, pointless - you will not get any benefit from your personal presence, even if you have an interpreter. Moreover, if you are going to buy goods from a factory, your presence can be harmful - the Chinese by default raise the price when they see a foreigner. What contacts we need and where to get them depends on how we will make purchases.

Domestic Chinese sites

The first thing that comes to mind when it comes to purchasing in China is the well-known site Aliexpress.com and the slightly less well-known Taobao.com. I do not recommend buying there because these sites are aimed at foreigners and their prices for goods are greatly inflated.

Few people know that in China there are a huge number of thematic Internet sites where prices for goods are several times lower. For example, a bag that costs 1000 rubles on Aliexpress.com and 600 rubles on Taobao.com will cost 100 rubles on the internal website.

You can find these internal sites in the following way: use Google Translate to translate the name of the desired product into Chinese and search for it in the Chinese search engine Baidu.com. The search engine will give you many sites where, again using Google Translate, you can make a purchase. Payment is made through the platform. Ordering on internal platforms is optimal for retail or small wholesale.

But in order to receive what we ordered, we will need an intermediary partner, since domestic Chinese sites do not deliver abroad. The same intermediary will be able to check the goods for us before sending them to Russia. For example, a Chinese woman with whom I worked, when I ordered goods on internal sites, photographed all the things, and only after my approval did she buy and send them to Russia. If the item was of poor quality, she returned it to the store.

Where to find an intermediary partner

There are two ways to find an intermediary in China. The easiest way is to contact intermediary companies, which can easily be found on the Internet. It is enough to send a link to the product page on the Chinese website - the company will place and receive the order, check it and send it to Russia. Delivery will take about 10 days, the service fee is usually about 10% of the purchase price.

The second option is to find a person who will become your permanent intermediary. This can be done on the Internet forums “Chinese Compote” and “Eastern Hemisphere”. Russians who have moved to live in China communicate there and are ready to provide intermediary services.

Another advantage of searching for contacts on forums is that the intermediary will be able to not only receive and check the goods in China, but also personally bring it to Russia in luggage, if the volume is not too large. This is a very common practice, and can be convenient if the product is needed urgently. In addition, contacts will be needed if we decide to purchase goods on Chinese wholesale markets.

Chinese wholesale markets

If we need small or medium wholesale, then in China there are markets with a good assortment and prices, for example, Hui Mei and Jun Shan Ba ​​Lu. When you hear the word “market,” many people imagine rows of goods of poor quality, but in reality they also sell good quality goods, which an intermediary can again help select.

A huge number of our former compatriots trade in Chinese markets. In addition to the “points” on the market, they have pages on the Chinese social network messenger WeChat. It's a free app similar to WhatsApp, but with the ability to post photos. It is through the application that suppliers from Chinese markets trade. An intermediary will help you find them; we instruct you to go to the market and collect contacts of sellers of the necessary goods. One contact will cost about $10.

Trading through WeChat is so mature that most sellers on the market have cards from Russian banks, so paying for goods is very easy. If the desired seller does not have such a card, through the same forums you can find a person who will accept payment in rubles on his card and make a transfer to the seller in yuan.

Chinese factories

The best prices for goods from China are always at the factory. But there is a limitation - the factory sells only large wholesale, usually at least 1000 units of goods or 100 kg of weight. To purchase from a factory, a representative is required to conduct negotiations, who must be Chinese. It is difficult for a small business to work independently with a factory - starting from the fact that in order to conclude a contract it is necessary to draw up documents of a participant in foreign trade activities, and ending with the fact that in order to work effectively with a factory, you need to have your own employee in China as a representative.

It is believed that representatives of factories are on Alibaba.com, but in most cases this is not the case. Mostly resellers sell there, there are frequent cases of fraud, I do not recommend buying there.

To work with a factory, I would definitely recommend using the services of intermediary companies that will select reliable suppliers, undertake the conclusion of the contract and transfer of funds. Their services will cost about 4% of the cost of goods, but they will negotiate the best price and take on many risks.

How to reduce risks

Taking into account the human factor when working with China, it is impossible to completely eliminate risks; there is no need to harbor any illusions. If you are looking for contacts of intermediaries and suppliers on your own, then you should always start working with a new person carefully, increasing the volume of orders gradually. It is much better to buy contacts of already verified suppliers (they are sold by intermediary companies), in this case the risk is much lower. Three contacts with trusted suppliers of the required product will cost about $50, but will help you save much more.

When working with the Chinese, I would recommend not sharply increasing the volume of orders from one supplier or through one intermediary. That is, if you order a product for a thousand dollars, and now you want to place an order for five thousand, it is better to find another trusted supplier who works with that volume.

The only way to protect yourself as much as possible when working with China is to work through a Russian intermediary company under an agreement that states that if the goods do not arrive or are of poor quality, the intermediary will reimburse its cost in full. When working with factories, when the price and volume of purchases are large, I would advise working only this way.

In any case, given that the markup on goods from China can be hundreds of percent, working through intermediaries will be profitable.

The world is so filled with Chinese-made goods that it can be difficult to find anything on the shelves made in Europe or the USA. Products from China are delivered mainly in bulk, and this reduces the cost even more. How to organize deliveries.

Until relatively recently, the quality of Chinese goods was so low that trading them was considered unprofitable. Over the course of ten years, China's industry has developed in such a way that today it would no longer occur to anyone to say that Chinese goods are not trustworthy.

Chinese industriousness has become synonymous with ability to work, and goods from China surround us. It is likely that even now you are sitting at a Chinese table, drinking tea from a Chinese cup, and have a Chinese computer mouse at hand. Manufacturers are doing their best to locate their factories in China.

Sometimes it begins to seem that there are almost no goods left in the world that are not made in China. Inexpensive goods - from kitchen utensils to sophisticated equipment - have filled half the world and continue to spread non-stop, involving entrepreneurs in the sphere of cooperation.

Chinese goods are delivered mainly in bulk, which significantly reduces their cost. With well-coordinated work between the customer and the manufacturer, goods are delivered quickly. If you decide to import goods from China, first of all, determine how exactly it is convenient for you to organize the delivery. There are three possible operation options.

Option one. Directly

You will work directly with the manufacturer. Potentially, this option may be the most profitable if you meet the following conditions:

• You have extensive positive experience in purchasing Chinese products, and you are excellent at drawing up contracts on foreign economic activity and all the necessary accompanying documents, you can organize quality control, transportation and correctly clear goods at customs.
• You speak English well, or better yet, Chinese, the business language.
• You are no stranger to the process of trading with Chinese producers regarding the terms and prices of supplies.
• If necessary, you can organize an urgent trip to China.
• If you realize that you are unable to provide these conditions, you face serious problems and losses.

Option two. Cooperation with trading companies

A trading company, unlike a manufacturer, does not own production, but buys goods from the manufacturer and adds its own margin to the price.

When working with a trading company, you will face the same conditions and problems as when working directly with the manufacturer. However, there are some features, including pleasant ones:

• The product range is much wider.
• Employees of trading companies have a much better command of English, which makes communication easier.
• The company better understands the complexities of the export procedure.
• Order quantities may not be very large.

And not very pleasant ones:

• A higher price for the product than with direct cooperation.
• Quality problems may occur.
• Difficulties with intellectual property rights.
• You will not be able to control the manufacturer.

Option three. Working with professionals

Companies organizing supplies from China do not provide services such as registering companies or purchasing real estate in China. For them, supplies are the main and only activity. Consulting companies, which often declare themselves as supply companies, usually are not. Professional advice from experienced companies is helpful, but it is not enough to make importing from China successful.

A distinctive feature of professional companies organizing deliveries is the presence of offices in Hong Kong and (or) China. Such companies have at their disposal an extensive database of reliable manufacturers; their employees are well aware of the Chinese mentality, use well-established supply organization schemes, minimize risks and help increase the profitability of supplies.

The company, ideally, should become your representative office in China and take on the functions of:

• Selection of manufacturers.
• Receiving samples and delivering them to you.
• Agreements on favorable prices and conditions with manufacturers.
• Drawing up and signing foreign trade contracts.
• Organization of production with your brand.
• Control over the fulfillment of orders and constant communication with manufacturers.
• Checking the quantity and quality of products before shipment.
• Checking the proper execution of all documents.
• Organization of delivery and customs clearance of goods.

When choosing a company, make sure that its work is absolutely transparent and that it is interested in long-term business relationships. If you choose the right company involved in organizing the supply of goods, this option will become the most profitable of the three presented, and will allow you to import Chinese goods at the lowest cost.

Regardless of what kind of goods you ship from China, remember the rules that every importer must follow:

When selecting suppliers in China, use online resources (GlobalSources.com, Alibaba.com, Made-in-China.com, etc.) and attend trade shows where Chinese manufacturers are represented.

Before making your final choice, audit your potential partner to ensure its production capabilities. Be sure to ask manufacturers for samples of their products and prices. Samples are usually provided free of charge; you will have to pay for shipping the samples from China.

Make sure the supplier understands your requirements and understands the specifications. If you do not speak Chinese, please ensure that the specifications are accompanied by explanations, drawings and pictures. Specifications must be detailed. Set product quality levels to avoid delivering defective products.

Systematically check the quality of products before shipment. It's good if you can monitor the quality of the product early in the production process to prevent defects from being discovered at the last moment. A product manufactured in China must not contradict the standards of the country of origin. Encourage the supplier to obtain certification and testing from a laboratory that has the appropriate credentials.

Make a clear delivery plan, allowing for a “spare” week before the goods arrive. Try to meet with the supplier in China to establish a business relationship in person. Don't accept explanations like "It's impossible" from suppliers...

Many people who already have their own stable business, as well as those who are just starting their own business, already know that purchasing goods directly from China is one of the most interesting and very profitable ways to make money today. Mainly because the cost of goods produced in China is quite low, which means that a businessman can safely inflate the trade margin and, accordingly, his profit and earn much more money.

As for the quality of products manufactured in China, it is only growing every year, since today China is the largest industrial country in the world, and it is difficult to argue with that. Industrial production of Chinese goods in terms of quality indicators is in no way inferior to analogues from other countries.

Until recently, few businessmen could boast of organizing direct deliveries of goods from China; it seemed that it was very difficult and accessible only to a few, so there was practically no competition. But today the situation has changed radically, Russian-Chinese economic cooperation has acquired a new status, has significantly strengthened and is constantly developing. In this regard, more and more Russian companies have the opportunity to work with Chinese suppliers directly, bypassing all kinds of intermediaries, and every day there is an inevitable increase in competition.

Businessmen understand that if they do not make any attempts to establish direct cooperation with China now, then they can irrevocably lose time, the opportunity to make quick money, and their market share. But despite this understanding, many still have questions, and establishing contacts with Chinese partners is accompanied by difficulties at almost every stage. The purpose of this article is to help businessmen understand how to properly organize work with China and answer their most pressing questions.

How to find the right manufacturer?

China is the second largest country in the world, but judging by the number of industrial enterprises and factories located on its territory, China can safely be called the leading industrial country in the world. The Chinese economy is unique and today is beyond competition. Everyone knows that almost everything is produced in China, from complex, high-tech production equipment to clothing and souvenirs.

Russian companies have room to roam, because in China you can buy absolutely any product at a profit. But how can you choose a truly reliable supplier among this variety of enterprises, successful cooperation with which will form the basis of your future business?

• Alibaba.com
• Madeinchina.com
• Taobao.com

Here you can find detailed information about Chinese manufacturers, as well as view their current offers with prices and a description of all necessary delivery conditions. In addition, you can communicate with each of the manufacturers online right there on the website by sending messages in English. This will allow us to more quickly discuss further cooperation and come to an agreement.

Of course, you can personally go to China in search of a reliable business partner, and this will be the surest way to establish truly worthwhile and profitable cooperation. But before that, you should carefully study the information about what specialized exhibitions are planned in China in the near future, and also find a good translator. Many Chinese companies are happy to invite foreign partners to their offices, stores and production facilities so that they can personally see the quality of the goods offered.

Those who want to save time, as a rule, involve a specialized intermediary organization in the search for a supplier, which already has the necessary supplier base, and for a certain fee will quickly and gladly help in choosing a Chinese business partner, negotiate with him and draw up all the necessary documents according to the deal. At the first stage of cooperation with China, the assistance of an intermediary in choosing a future supplier is the most optimal solution.

How to become a participant in foreign economic activity?

All goods that are imported into Russia from abroad undergo a very thorough check at customs. If supplies from China are constant, then the businessman will first need to register with the customs service as a participant in foreign economic activity. To do this, you need to prepare a special package of documents (including constituent, banking and other documents, as well as an application in the prescribed form) and receive a foreign economic activity participant card. The card will significantly simplify all customs procedures regarding a businessman and his goods.

All monetary payments will be made in foreign currency, therefore, to make payments with a Chinese company for goods, you should open a special foreign currency account at your bank. It will be used to pay for the purchase of goods in China, and rubles will be converted into foreign currency at the current rate.

However, it should be remembered that the bank will transfer money only if the contract with the foreign company is properly executed and the amount to be paid for the goods is clearly specified in this contract. In addition, for each transaction the bank will issue a special document - a transaction passport, which will then be required at customs.

How to bring goods and speed up the customs inspection process?

Fortunately, today, both in Russia and China, there are quite a lot of transport companies ready to transport a wide variety of cargo. A businessman can only choose the company that offers the best price and delivery time. It is important to find the optimal balance between price and delivery time, since very often a too low price is a guarantee of missed deadlines.

Choosing a transport company for transporting goods from China

The standard package of documents for releasing goods from customs includes:

• Invoice (a document indicating the quantity of imported goods, its characteristics and price, it is made and provided by the Chinese selling company);
• Transaction passport;
• Certificate for imported goods (issued by a specialized Russian organization for most consumer goods imported into Russia from other countries).

Depending on the selected product, this list may be supplemented.

Today, there are professional intermediaries who know all the nuances of customs clearance of certain goods, advise and help businessmen correctly prepare all the documents, significantly speeding up the release of goods from the customs regime. When importing goods from China for the first time, in order to save time and money, it is strongly recommended to use the services of such intermediaries.

For the product you selected. Now the best thing is to find out what are the schemes for working with the suppliers you have chosen? In fact, there are many of these schemes and it all depends very much on the product you are working with.

Today we will look at the most common schemes for how an online store works with suppliers. We will find out how to sell without a warehouse and whether it is worth working only with foreign suppliers.

Scheme No. 1. Work only with your own warehouse.

This scheme involves purchases only to your warehouse without single purchases “to order”. This scheme is most common in retail trade, since in this case the buyer comes purposefully to the store and wants to leave with the goods.

You place all orders from suppliers in advance, initially knowing what your customers require. You maintain the required quantity of all goods based on demand so that you can always quickly sell it. I warn you against one of them at the start - don’t buy everything at once.

Let's look at what this diagram looks like:

We see that the time from the buyer placing an order to receiving the money is almost minimal, since we already have the goods in stock. That is, the main advantage: the availability of goods at any time. Subject to competent procurement, of course.

Using this method, we increase the turnover of goods and...

pros this way of working:

Delivery in the shortest possible time. And this is not bad for your customers;

You get money much faster;

Customer loyalty increases as they are satisfied with fast delivery;

Ability to operate as a retail store or as such if the necessary space is available.

Minuses this method

Impressive warehouse space is required to store goods;

This scheme is extremely undesirable for starting, since you cannot know with a 100% guarantee what will be popular and what will not;

Much more working capital is required and;

High risks in case of seasonality of goods, as well as in case of fluctuations in demand

Summary: this method is most suitable for retail stores with the ability to order goods via the Internet. Or when you need to order everything for yourself first.

And in this video I tell you when it makes sense to purchase goods if you work with your own warehouse:

Scheme No. 2. Work only to order.

My new article has been published, entirely devoted to dropshipping for an online store -

This scheme is perhaps the dream of all entrepreneurs, since no need to keep a large warehouse and risk large inventory balances in the event of sharp fluctuations in demand or other force majeure situations.

And here is my video in which I talk about the main pros and cons of dropshipping:

The essence of this scheme is simple to the point of disgrace, but at the same time it is also difficult to implement.
When receiving a new order, the online store generates an application to purchase goods from the supplier. If, according to the agreement with the supplier, an advance payment is required, the online store makes it along with the submission of the application, having previously checked the availability of the goods with the supplier.
The application reaches the supplier and he begins to prepare the goods for shipment. Next, there are two options:
1. The supplier ships the goods to the online store, which, in turn, ships them to the customer.

2. The supplier ships the goods directly to the customer on its own without the additional involvement of an online store. This method of work is also called “dropshipping” or “Direct delivery”.

Both methods are good. Using such a scheme has both positive aspects and great risks. Let's take a closer look at them.

Advantages of working under the “no warehouse” scheme

The most convenient scheme of work in the absence of initial capital, since no investment in the product is required;

Lack of storage facilities. Or their minimum size for receiving/sending orders;

When collaborating with several suppliers, it is possible to quickly expand your range without additional purchases;

When using “drop shipping,” the supplier can ship goods on behalf of the online store.

The disadvantages of such a scheme are also obvious:

The supplier may not have the goods that the final buyer has already paid for;

Delivery times increase significantly due to the length of time it takes to place an order and deliver it. This is especially true for large cities;

In the case of “Direct Delivery”, the online store cannot competently control the quality of the goods provided to the buyer;

Supplier errors (availability of goods, delivery times, quality of goods) are entirely reflected in the reputation of the online store on whose behalf the sale is made.

Summary: this scheme is most suitable for starting an online store, since there is practically no investment in the product. Certain risks can be compensated by using the third scheme of working with suppliers for an online store.

Scheme No. 3. Your own warehouse plus work to order.

This is the most popular and reliable scheme for the operation of an online store and suppliers, since in this case the online store has the most popular goods in its warehouse, and less popular goods are ordered from the supplier.

This scheme contains both previous schemes with their pros and cons. Some of the goods that are in demand are in stock, less popular goods are ordered as needed.

There are three possible scenarios depending on the goods that were placed in the shopping cart by the buyer.

1. The buyer placed an order containing only a popular product. In this case, the process of order processing and delivery is reduced to packaging the order and sending it. You get money quickly. In the picture above, this is path #1.

2. The buyer placed an order containing only unpopular products. In this case, the order is first sent to the supplier, and from there, depending on the conditions of working with the supplier, it is sent to the online store or directly to the buyer. In the picture above, this is path number 2.

3. The buyer has placed an order with goods that are in stock and must be additionally ordered from the supplier. Next, the buyer either waits until the online store receives the missing goods from the supplier, or the goods are first sent to him from the warehouse, and then the back-ordered goods are sent. In the picture above, these are paths No. 1 and No. 2.

pros:

Very large warehouse spaces are not required to store the entire range of goods;

The ability to quickly send popular products;

Minimal risks in case of changes in demand or indirect factors. You can always make a sale on stale goods;

Customer loyalty is increased through fast and prompt delivery.

Minuses:

If the order contains goods that are not in stock, additional time is required to order them from the supplier;

Partial dependence on suppliers, since part of the assortment is still in their warehouses;

It is often not always possible to have prompt access to information about the availability of goods in suppliers' warehouses. This may lead to problems with placing orders that require additional orders from suppliers. Evaluate your suppliers and understand who is best to work with;

Summary: this scheme is the most effective from a sales point of view. Even at the start of an online store, if you can predict the demand for certain product items in advance, you can have a small amount of goods on order.

As a conclusion, we note that most preferred both for the start and for the long-term operation of an online store. Ideal situation: you keep sufficient inventory of popular items and 1-2 items for unpopular items. This way you can service most orders without wasting time with suppliers.

We will tell you in the future how to properly maintain inventory based on statistics, as well as how to automate the process of calculating the purchase of the required number of goods from suppliers. We will also tell you about how to better structure work with foreign suppliers.

In today's market, producing the cheapest product is no longer enough. It still needs to be delivered to the buyer. How do companies manage to transport cargo across Russia cheaper than their competitors?

Business expansion requires considerable expenses. Domestic and transnational companies are trying to “fill up” the entire country with their goods. And in order to get ahead of competitors, it is necessary not only to deliver cargo quickly, but also to do it as cheaply as possible. It doesn't always work out. A traditional Russian problem - weak transport infrastructure - makes supplies expensive. The level of costs that entrepreneurs are forced to bear is not comparable with similar costs in Europe or the USA. The share of all logistics costs when organizing deliveries can reach 80–90%. This also includes costs associated with warehousing, customs clearance, personnel, and damaged stocks. Direct transportation may account for about 60% of costs. In Europe they usually do not exceed 35 - 40%. Naturally, this also affects the subsequent cost of production. According to official statistics alone, transport costs in Russia reach 20% versus 7–8% in countries with developed market economies. Independent experts even believe that their share reaches 30%. Each company is trying to find its most effective way to organize its supply chain. No one has yet succeeded in identifying a universal method. There are too many pitfalls in the domestic market for logistics services.

Fancy roads

Developing the optimal route for transporting your goods across Russia is not an easy task. Often, knowledge of general facts about the organization of transportation is not enough. Even a simple delivery from one city to another can be too expensive if you make a mistake with the transshipment point or method of transportation.

Of course, there are standard rules. Thus, the most expensive is traditionally air transport, which is mainly used in cases where the maximum urgency of cargo delivery is important, or when transporting expensive goods. The cheapest transportation is by water, but within Russia it is often preferable to use the services of railway workers. In fact, this is the only way to deliver goods from continental Asian countries. Transporting by rail is cheaper than by truck, but it takes longer. Road transport is more expensive than rail transport over long hauls, but is best suited for transporting goods over a relatively short distance (200 - 500 km), as well as in those regions where the road network is well developed, say, from the EU and CIS countries to the European part of Russia. Everyone chooses a transportation method according to their needs and income. For example, door-to-door auto delivery in the direction Moscow - Krasnoyarsk in 7 days will cost 70% less than urgent air delivery within 2 - 3 days.

Choosing the optimal route based on price-quality ratio is sometimes difficult. You have to make a choice in favor of a seemingly more expensive service. On the most popular routes, the railway's capacity is often no longer sufficient for everyone. Thus, some suppliers have already been forced to switch to delivering goods from Kaliningrad to Moscow by road. In some cases, it makes sense to make creative decisions to save time and money on product reloading and streamline the process. “We can deliver goods to the cities of Siberia by road, which allows us to guarantee delivery times and reduce the total number of transshipments,” agrees Leonid Zondberg, director of sales and marketing for the Armadillo group of companies.

Naturally, when transporting to the regions or organizing transit through Russia, it is rarely possible to limit oneself to only railway or barge. It is necessary to use multimodal transportation (combining two or more modes of transport). However, in Russia quite a lot of time is still lost connecting routes. Reloading and delivering cargo to warehouses are expensive. Containers are often used around the world to save money. In this case, the goods are loaded once - at the supplier - and unloaded at the warehouse. Then you can use your choice of sea, rail or road transport. That is, the container is simply overloaded at the docking points. But so far the share of such cargo in the total volume of transportation on Russian railways is very small - about 30%. One of the reasons is the lack of special terminals.

Almost Euroservice

An additional task when organizing delivery is to establish information interaction between the railway, road transport enterprises, shipping lines, port terminals and customs authorities. We need common information systems, which are lacking. It is still problematic to obtain, for example, information about the approach of ships for loading and unloading, about vehicle accidents during a voyage, about customs violations in the preparation of transportation documents in one point or another of the country. As a result, problems arise with monitoring the implementation of contracts. In this situation, companies involved in organizing transportation, including communication between different modes of transport, cannot provide their customers with reliable service. It is not surprising that with so many problems, even some of the large transnational logistics companies were unable to gain a foothold in the Russian market and, sacrificing potential profits, were forced to leave it. For example, one of them under-shipped up to 10% of client cargo on time.

At the same time, it is necessary to solve the problem of what to transport cargo in. Many offer their own packaging: container, wagon or truck. This often turns out to be cheaper than ordering containers for transportation directly from transport companies. Well, the main related problem is the organization of warehouse storage. The most developed in this regard is the Moscow region; few of the necessary modern warehouse spaces exist in the North-Western region, which can also be called Yekaterinburg, Novosibirsk, Krasnodar and the Volga region. In other Russian regions, modern warehouses are appearing, but the system as a whole is in its infancy. Even in Moscow, taking into account the growth in retail chain turnover, demand is at least 5 million sq. m. m, and the real supply is not much more than one million. Leonid Zondberg adds: “In the most economically developed regions of the country, there is a significant shortage of modern Class A and B warehouses. The demand for high-quality storage is high, but the supply does not yet meet the required volumes. Such areas account for less than 40% of warehouse real estate, of which 60% are concentrated in Moscow, the Moscow region and St. Petersburg. If we talk about cost, then for high-quality warehouses, say in St. Petersburg, the average rental rate per 1 sq. m per year is $120. In the regions this figure is less – $60.” In Moscow, for example, prices are almost twice as high as in Eastern Europe.

Are we better off on our own?

The first choice that a company must make is whether to carry out the transportation itself or outsource this work to a specialized company. The decision is not easy: the temptation to save is great. Firstly, intermediaries are cut off. Secondly, you can make a profit from additional transportation into your own budget. From the outside, this option really seems attractive. Logistics companies unofficially talk about the profitability of their business at 16–18%. The highest incomes are for firms that provide integrated logistics solutions, including, in addition to transportation, services for responsible storage and even distribution of goods. Such profits can only be dreamed of in countries with an efficient transport system. Meanwhile, the service that companies purchase often does not live up to expectations. According to experts, even Western logistics providers providing services in Russia often lower the general level of requirements for employees to the market average. Moreover, there is currently no company capable of fulfilling a customer’s order throughout the country without the involvement of third-party partners.

As a result, large companies that are constantly involved in the transportation of their goods, such as metallurgists or oil workers, create their own transport divisions or companies. The pleasure of transporting your goods yourself, however, is not cheap and has an impact on the entire business model of the company. The total cost of a project to organize a supply chain in one or several regions can cost from $100,000 to several million. Deloitte CIS senior manager Alexey Martkovich says: “There have been situations when a private company calculated that it would be more efficient to transport goods on its own, and created special transport units for this purpose. For example, such decisions were made during distribution across a metropolis. Sometimes such projects ended in failure - the staff simply could not cope with the tasks that were assigned to them. This was especially true for supply planning.”

However, it's not just the quality of the staff. General Director of the YUKOS-Transservice company Igor Asaturov states: “Savings are achieved, for example, by accelerating turnover and reducing downtime during loading. The second way to increase profits is to enlarge the cargo due to the greater load on the transport unit, say, using larger-volume wagons instead of 60-ton tanks.” “The payback of a transport project depends on creating an optimal transportation plan. It is quite difficult for large industrial holdings to connect incoming and outgoing transport flows, minimizing the costs of empty carriages. A logistics company solves the problem by using a large number of customers. In one direction it carries the cargo of some clients, and back – of others. In addition, prices for wagons are rising, and the need for capital investment is increasing,” says Yuri Gaichenya, financial director of the New Transportation Company.

Looking for a logistician

Previously, many large companies tried to minimize their work in the Russian transport system. They simply transported the goods to a general warehouse within the country. Further delivery of cargo to regions or to the final consumer was already a problem for the dealer. But now the situation is changing. “Most companies operating in the country are gradually abandoning self-pickup. This is the market trend, and distributors increasingly prefer a service that includes delivery to the warehouse. At the same time, this practice helps to comply with the uniform pricing system in Russia and avoid cases where goods were purchased in Moscow, supposedly for remote regions at a discount, and then resold immediately outside the Moscow Ring Road. There is no clear answer as to which option is better; it largely depends on the sales strategy and distribution channels used, which may differ for different product categories. For example, with “pickup”, the price list is cheaper, since the price does not include transportation within Russia. So switching to a direct supply system could lead to higher costs, which competitors could theoretically take advantage of. One company recalculated its cost levels after changing its delivery method. As a result, the average increase in cost was 8%. On the other hand, in this case the company can control the price, and the difference in costs incurred by dealers is leveled out. As for additional costs, you can try to divide the costs by region where the company operates, or simply set the average selling price throughout Russia,” says Andrey Martkovich.

As a result, companies are increasingly entering into negotiations with logisticians. There is no single recipe yet for how best to streamline delivery while relying on new partners. Some people prefer to entrust transportation to a large company. But usually no one can do it alone - you have to cooperate with 3 - 4 large or medium-sized operators. This makes it more efficient to transport cargo, thereby insuring the supplier’s risks. After all, bankruptcy of any carrier or its overload during the peak season cannot be ruled out. The logistics market leaders also have limited capacity. Some manufacturers, on the contrary, prefer to work with a large number of small players (with a fleet of up to 10 trucks). In this way, you can get more favorable price conditions, and the logisticians themselves are more interested in a large client. Considering that there are now several thousand independent carriers in the country, they have a choice.

Meanwhile, most logisticians themselves predict the upcoming consolidation of players in their market. It is becoming increasingly difficult for small companies to operate under modern infrastructure. If so, then transport costs may jump for some time. After all, suppliers will have less room for maneuver, and large logisticians may raise prices. But if there are more guarantees of timely delivery of goods, then large companies will be ready to put up with it.

GROWTH CRISIS

IN 2004 – 2006, THE RUSSIAN MARKET FOR LOGISTICS SERVICES INCREASED BY 35.5% – FROM $24.5 BILLION TO $33.2 BILLION. However, the country's transport infrastructure, according to official statistics, meets the requirements of carriers less and less every year. THERE IS NO DEVELOPED ACCESS INFRASTRUCTURE ON THE APPROACHES TO TRADE SEA PORTS (none of the 16 largest Russian ports has a direct connection to the federal highway network). Railway access roads can no longer cope with the sharply increased flow of goods. Eight out of ten hub airports do not have passenger rail service. In addition, now ABOUT 25% OF FEDERAL HIGHWAYS ARE OPERATING IN OVERLOAD MODE, especially on the approaches to large cities. “Bottlenecks” are also considered to be bridge crossings over large natural barriers (rivers and mountain ranges), sections along city streets, city bypasses and approaches to sea trade ports. ONLY 59% OF AERODROMES HAVE A RUNWAY WITH ARTIFICIAL SURFACES; the remaining airfields have unpaved runways. About 70% of runways with artificial surfaces were built MORE than 20 YEARS AGO. Of these, over the past ten years, RECONSTRUCTION HAS BEEN CARRIED OUT ONLY 24%