Amid the economic turmoil of this and last year, the Russian online retail market is still appealing in many respects. This consensus emerged from the eDays e-commerce conference, an internationally-oriented event which was held for the second time in Moscow on June 4 and 5.
In 2014, the domestic market grew by 35% in nominal terms, or some 15% in real terms, to 560 billion rubles ($14.5 billon at the average exchange rate) for physical goods only, said Fedor Virin of research agency Data Insight. This growth rate was lower than that of the preceding years – but still impressive if taking into account the stagnation of the offline retail market.
Virin envisions a much more modest growth – if any – this year. While small and medium-sized e-commerce companies have been particularly exposed to the crisis, such big fish as Enter, Sotmarket, Vasko, Utinet also experienced serious difficulties, or even went bankrupt, in the past few months.
In this context, the brilliant shape of the major online retailers who spoke at the conference came as a paradox. The CEOs or top executives of Groupon Russia, KupiVip, Lamoda, Ozon and Ulmart all claimed strong growth rates over the past year with continued growth in early 2015.
For example, Ozon.ru reported a 40% year-on-year growth in value in Q1 2015, with some product categories nearing or exceeding 100%.
Ulmart, the market leader with revenues exceeding $1 billion in 2013 and 2014, is still witnessing significant growth, partly due to its recent diversification beyond consumer electronics – a segment which has been severely affected by the crisis since early 2015.
Business is not going bad either for the two leaders of the fashion segment – which reached 130 billion rubles, approx. $3.4 billion in 2014 (including footwear and accessories, but not children’s clothing), according to Data Insight. KupiVIP, whose flash-sales model is well adapted to crisis conditions, claims to be close to profitability. Lamoda did not disclose its latest financial figures, but this Rocket Internet creature is said to be on the same path. These two e-commerce startups had made huge losses in their first years of existence with massive investment in marketing and logistics infrastructure.
Beyond the current ups and downs, it is clear that the full potential of Russian e-commerce market is far from being tapped, underlined Adrien Henni, chief editor at East-West Digital News. Important growth is likely to resume after the current crisis, fuelled by the growing Internet and e-commerce penetration in Russia’s regions, the increasing use of online payments, and the development of fulfilment infrastructure. The domestic Russian e-commerce could thus reach or exceed the $100 billion mark in 10 to 15 years.
Hot cross-border trends
Cross-border e-commerce flows grew approximately 75% last year to some $4 billion for physical goods, said Henni – with big differences, however, depending on geographic areas. On the one hand, Chinese players are witnessing strong growth, first and foremost AliExpress which sends several hundreds of thousands parcels or packages to Russian consumers every day, according to the EWDN expert pool.
China thus accounted for at least two third of the market in number of fulfilled orders and 50% in value last year, noted Henni. This proportion is even more considerable this year, said Alexander Ivanov, President of the NAMO industry association.
Meanwhile, following the ruble’s depreciation and other factors, most western players have seen their sales stagnate or even decrease since 2014, following years of strong growth. Some even stopped serving Russian customers, as illustrated by the bankruptcy of US-Russia platform Dostami (formerly BayRu) in late 2014. This unhappy end came just one year after the company raised several millions of dollars to fuel its growth.
However, some western players are still growing in Russia, Henni underlined, citing the examples of Farfetch (formerly iMall.eu) or Shoes of Prey, while some others entered the Russian market (e.g. iHerb, Shopalike) or intend to do so in the near future. These sites usually enjoy a favorable positioning on niche markets where consumer behavior is less sensitive to the economic ups and downs.
Most customers shop abroad for better prices (83%), for wider choice (64%), for new brands (41%), for something unusual (19%), said Darya Yadernaya of Y Consulting.
The speakers’ presentations are available on the event’s website. eDays is a joint project of East-West Digital News, the Franco-Russian Chamber of Commerce (CCIFR), and marketing agency Buzzfactory.
