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The Russian e-commerce boom shows no signs of slowing

0 16 January 2014

East-West Digital News has published “Internet commerce in Russia: a guide to successful investments” - a 400 page analytical study of Russian e-commerce in 2012-13. Here's a summary. 

The e-commerce market is rapidly becoming one of the most promising for investment and setting up a business in Russia. Fast growing revenue and market potential has increased the attractiveness of the sector for entrepreneurs. The volume of online sales is only 2% of total retail, but has been showing solid growth of 25-30% annually.

Ongoing interest in the sector from outside businesses has brought with it the need for a detailed analytical study. The study includes data of the retail market for e-commerce, growth forecasts and comparisons with online stores internationally.

The review also includes “problem zones” of e-commerce, such as efficient payment methods and optimization of delivery. Drivers of e-commerce are also considered with opinions and forecasts from experts, investors and managers of major online stores. The study was conducted during 2013 with the participation of more than 120 Russian and international companies in the IT industry. 

The growth of Internet commerce in Russia

The development of e-commerce depends on the availability of the Internet to the public. Although Russia has more internet users than any other European country internet penetration is still just 57%, slightly lower than in Italy and Spain. However this figure is growing at a rate of around 10% a year. According to the Russian Academy of Sciences Institute of Sociology, if the increase in the number of users continues at such a pace, within 10 years 75% of Russia’s adult population will be using the web. 

According to InSales, which builds sites for online retail, Russia has around 40,000 online stores, 7,000 more than in 2012. 1 in 5 Russians shop online, equating to around 30 million people.

In 2012, the total volume of online sales from the Internet in Russia totalled almost $13 billion; 27% more than in 2011. This year the market is expected to reach nearly $16 billion, not including online sales in Russia coming from abroad. Added on, this totals another $3 billion.

Segments of E-Commerce

As for market segments, consumer electronics and gadgets, clothing and footwear, as well as car parts are among the categories in the highest demand.

Household appliances (including electronics and computer equipment) $5.65 billion
Clothing and footwear  $1.76 billion
Car parts  $1.39 billion
Home and furniture  $862 million
Products for children  $550 million
Cosmetics and perfumery $484 million
Food  $328 million
Books, CD and DVDs    $244 million
Sporting Goods  $156 million
Luxuries  $144 million

The most popular virtual goods and services include airline and railway tickets, as well as tickets for events.

Niels Tonsen, CEO of online shoe and clothing store Lamoda.ru:

“We firmly believe in the huge potential of e-commerce in Russia. Significant investment is needed to ensure we have the opportunity to serve the whole of Russia and provide a world-class service. By paying special attention to the level of customer services ensures that, in the long run, we reduce marketing costs. The level of service in Moscow is currently higher than in Western countries. Customers have the ability to order without any risk and pay only for the goods they want.”

Market Growth

Data Insight and EWDN, who put together the report, conclude that the majority of future growth will be concentrated in the regions where there is still significant room to improve delivery services. Many online stores already report a higher level of consumer activity in cities with populations of 300,000 to 1 million than in Moscow or St Petersburg. 

The preferred method of payment tends to be cash in hand at the time of delivery. Most online stores are unanimous in saying that this payment method is inhibiting the development of their company. On the other hand, without it they would struggle to make so many sales due to Russians’ persistent mistrust of online transactions, and it means that fewer items are returned.

You can read a full summary of the 400 page report on the Ewdn website: Part 1 and Part 2

Top image via Shutterstock 

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