The deal for SPSR Express continues a trend toward consolidation of delivery services in Russia.

Earlier this month GeoPost, a leading player in the European courier, express and parcel market, announced a plan to merge its fully owned Russian subsidiary DPD Russia with another local service provider, SPSR Express.

The French group simultaneously announced a partnership with Italy’s BRT and an acquisition in Brazil.

GeoPost expects the Russia deal, which is subject to approval by the Federal Antimonopoly Service, to be completed in the first quarter of 2017.

The financial terms have not been disclosed, but the DPD Russia press service told East-West Digital News that GeoPost will own 70% of the new entity. The remaining 30% will be held by Elbrus Capital — which invested in SPSR in 2012 — and company management.

Aiming at market leadership

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“This merger will create a universal service provider operating in all segments of the logistics market. The company’s development will be focused on the evolution of new technology solutions that will revolutionize the concept of logistics,” said Vladimir Solodkin, who will chair the merged company’s Board of Directors and its Strategic Committee.

“Both companies have unique competencies in the B2B and B2C segments, which will allow us to offer the best services in terms of content, quality and cost. We aspire to create a company that will become the market leader not only in shipment volume, but also sets the market standard for customer service and reliability,” stated Nikolay Voinov, a former Itella executive and appointed-CEO of the new company.

The merged entity is set to become the leader among private operators in Russia, the press service added, refering to “independent experts.”

DPD, which entered the Russian market 25 years ago, claimed in 2015 a 17% share of Russia’s B2B shipping market and 11.6% of the B2C segment, putting aside the national operator Russian Post. Currently, the company has over 125 depots, nearly 1000 pick-up points and its own divisions in the Customs Union countries — which include Armenia, Belarus, Kazakhstan and Kyrgyzstan in addition to Russia.

SPSR’s market shares amounted to 10.8% (B2B) and 8.4% (B2C) in 2015. The operator claims to have the largest network in Russia with 9 distribution and 15 sorting centers, 200 offices and representatives throughout the country.

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In the short term, DPD and SPSR Express will continue operating under separate brands, but another strategy could be adopted in the course of the integration process.

“This process will take two years, during which all matters pertaining to the new entity will be decided,” the DPD press service said.

If the merger succeeds, the new entity will be so powerful that it could measure itself with the postal operator, believes Konstantin Yakunin, founder of cross-border shipment operator Express RMS.

Serving global giants

The transaction is the latest of a series of recent mergers or acquisitions on the Russian shipment scene. In the course of last year, Boxberry acquired a majority stake in Axiomus and Express RMS bought 50% of Novye Partnery, while Itella acquired Maxipost and Top Delivery bought Maxima Express.

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Meanwhile, some service providers shut down amid the economic crisis which affected a fraction of Russia’s offline and online retail markets.

“The market is entering a more mature phase,” commented Yakunin. “This may allow service providers to serve even larger players — such as Alibaba today and potentially Amazon tomorrow — while improving service quality and offering more stable pricing.”

Last year the Russian B2C e-commerce market reached approximately $16.3 billion (physical goods only), including an estimated $4.3 billion for cross-border sales, mainly from China, according to EWDN’s latest industry report.

The market is growing at a relatively fast pace in spite of the crisis. Thus last year DPD saw its B2C deliveries increase by 59% in number of parcels in 2016.

Russian Post still controls more than 90% of the cross-border B2C shipping market, but has a much smaller share in domestic operations.

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

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