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10.10.11
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E-Shop ‘Til You Drop
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By Svetlana Kononova
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One in five Russian Internet users shops online, a recent poll conducted by the Public Opinion Research Foundation (VTsIOM) found. Most online shoppers are well-educated, well-paid and live in one of Russia’s two largest cities – Moscow or St. Petersburg. While the average Russian internet user spends 7,500 rubles ($ 235) over a three-month period, this figure is on the rise, a trend which experts say indicates that Russia has great potential for online shopping.
E-trade in Russia was worth about 250 to 260 billion rubles ($7.8 to $8.1 billion) last year, according to Tatiana Zemtzova, an analyst at Finam. Zemtzova added that although the online retail market has existed in Russia for some time, it remains in the initial stages of development and has huge potential for growth. “According to our estimations, it will rise by thirty percent annually,” Zemtzova said, “We expect the total volume of e-trade to be 330 to 340 billion rubles ($10 billion) by the end of 2011.” Data Insight, the first Russian research agency to focus on e-commerce also estimates that the volume of Russian e-trade in 2011 will hit $10 billion.
One key element in the development of online shopping in Russia is access to broadband Internet throughout the country. “Currently about 60 million people in Russia use the Internet. This is still less than in Germany, Brazil and India, but more than in the UK and France,” Zemtzova said. Finam estimated that the number of Internet users is increasing by twenty percent each year. If this trend continues, 90 million people in Russia will have access to the Internet by 2014, making it the largest market in Europe.
This means that regional growth is set to play a significant role in the market’s development in the next few years. According to Tim Gorshkov, general director of InSales – a Russian Internet company which develops software for e-commerce and monitors the e-commerce market, regional markets are already starting to pick up pace. “The growth of e-commerce in Russia’s regions may be explained by several factors. Many users have broadband access and have had a positive experience of using the Internet, primarily social networks and search engines. The ‘Incubation period’ (of one to three years) has finished, and people are now starting to understand and trust e-commerce,” Gorshkov said.
He added that Yekaterinburg and Nizhny Novgorod are leading regional market development, with Novosibirsk, Kazan, Tver, Yaroslavl, Perm and Rostov-on-Don also showing strong growth trends. But this growth is largely confined to deliveries from national retailers according to InSales. “Yekaterinburg is one of the few areas where strong local retailers are capitalizing on demand for home delivery,” Gorshkov said.
InSales data shows that in terms of products, the largest segments of e-trade in Russia are electrical appliances and car accessories – worth approximately $100 million each month – followed by sales of clothes, toys, mobile phones, books, tickets and food.
Elena Smirnova, a development director at Profi Online Research, said “E-commerce is developing in Russia faster than the Internet itself,” adding that Web sites offering discount coupons, such as Groupon, KupiKupon and Biglion, are also becoming more popular in Russia. Profi Online Research surveys also revealed that online shoppers tend to be young and well-paid.
There are a number of negative factors which are hindering development of e-trade in Russia, however, starting with perceptions among potential customers. Some are wary of paying for a product they have not seen, others struggle to use online shops, and many more are still afraid of fraud.
The infrastructure in place to handle deliveries and payment is also hampering sales growth. “Logistics infrastructure is very weak,” said Gorshkov, “Mainly because of geographical factors. Quick and effective outsourced delivery only works in big cities and delivery often fails to meet quality and reliability criteria.” In terms of payment, many Russians prefer to pay a courier in cash upon delivery. “The main problem of the payment system is a low level of consumer trust. Buyers hardly ever venture to pay for goods in advance,” Gorshkov added.
Payments made via bank cards are indeed relatively unusual in Russian e-commerce. Even Utkonos, the largest online hypermarket, only started to accept payments made by card this autumn – after ten years of activity.
“While Europeans are relaxed about prepaying for goods and less concerned about rights’ violations committed by online retailers, most Russians are still not familiar with online shopping. We take this into account and let our customers order goods without paying in advance,” said General Director of Utkonos Vladimir Ryumin. Payment can be transferred from the customer’s bank account upon delivery and if the customer wants to return some goods, those costs are deducted from the total calculation before the bank transaction has been processed.
Most experts agree that these problems will not hold back market growth for long, however.
“Online shopping will continue to win a share of the market from traditional formats, as logistics and payment systems improve,” said Zemtzova. In turn Ryumin made some predictions about the nature of this growth: “Competition in e-commerce will gradually progress from focusing on prices to high-quality service, which takes into account the priorities of residents of big cities: free time and everyday psychological comfort.” |
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