Earlier this month in its seventh edition, the Gaidar Forum, a yearly conference and elite gathering sometimes dubbed “the Russian Davos,” held a round table about Russian e-commerce in a global perspective. This topic was featured at the forum for the very first time.
The discussion was live streamed online as well with some 300 Chinese Alibaba-affiliated merchants following the discussion via the Internet.
The Russian directors of Alibaba, JD.COM and eBay took part in the meeting, along with representatives of Russian online retailer Ozon.ru, B2B marketplace B2B-center.ru, shipping service provider SPSR Express, the Russian Post and industry association NAMO. The discussion was moderated by Adrien Henni, chief editor at East-West Digital News, and Jasmine Wang, CEO at Worldview Global Consulting.
Henni presented the general trends of the Russian Internet and e-commerce markets. In 2015, domestic online retail grew by 16% in rubles, while the market showed decline in US dollars. However, the market keeps a considerable potential, as the share of online sales in Russia’s total retail market currently reaches some 2%, compared with up to 15% in the most advanced countries.
In 2015, cross-border sales from Europe and the USA sharply decreased, while the volumes from China reached new heights. They accounted for more than 80% of total cross-border orders from Russian consumers — who started buying cheaper goods and enjoyed faster deliveries.
However, the Chinese merchants who attended the meeting online expressed skepticism about the improvement of the delivery conditions from China to Russia.
Also explaining the growth of the e-commerce flows between the two countries is Russian consumers’ growing trust in Chinese e-commerce sites. This is reflected in the rapidly-growing share (24%) of electronics goods in these flows, noted Alex Vassiliev of SPSR Express, who sees in 2015 a “revolutionary year” marking the upsurge of China-to-Russia cross-border e-commerce.
Estimated share of fulfilled orders from China in total cross-border flows to Russia
Source: EWDN based on NAMO and other data
Mark Zavadskiy, CEO at Alibaba Russia, and Viktor Xu, Vice President at JD.COM, confirmed the rapid expansion of their activity in Russia. Thus, AliExpress has tightened quality control, launched a pioneering crowdsourcing project for the translation of product information, and introduced cash pre-payment procedures.
JD.COM, which launched its Russian site in June 2015, has already 2 million registered users in Russia, who generate 300,000 orders per day. The company intends to develop a fast delivery service from China, organize the return and repair of goods locally, and allow its customers to make online purchases on credit.
Asked whether he sees his business threatened by the rise of Chinese e-commerce players, Vladimir Samarov, head of Ozon’s international marketing department, said that his company, too, is developing a cross-border business to compete with the Chinese in the same field.
Russian export: wishful thinking or reality?
Regarding the development of outbound e-commerce flows — which have been actively discussed in Russia’s political and business circles all along 2015 — the actual numbers have been very modest, if not symbolic so far. In 2015, just 1.9 million parcels and small packages were sent abroad by Russian e-merchants, compared to some 135 million international deliveries to Russian online consumers.
“The future will tell whether this export idea can become a reality or remain wishful thinking,” said Henni, reminding the traditionally limited range of Russian export products.
However, cross-border e-commerce is a massive global phenomenon, Henni conceded, and any Russian manufacturer, brand or e-merchant may seize this opportunity to develop their sales in just the same way as US, French or Chinese companies. The question is which types of products Russians could sell, and which markets they should target. For instance, online consumers from emerging countries may appreciate certain Russian products that would be less in demand in western countries.
Estimated volumes of outbound and inbound e-commerce flows
Source: NAMO
“We do have things to export,” said NAMO president Alexander Ivanov. Export trade will strongly influence online market structure, since it will benefit to manufacturers rather than to retailers. New suppliers will thus emerge, reaching consumers directly via the Internet, believes Ivanov.
During the discussion, several types of Russian products were mentioned as potentially exportable — from honey and other organic foods, to certain clothing brands and perfumery products, to medicines, to books. Hats, furs, food products and craft goods are among the goods that could attract the 70 million-audience of China online consumers, Xu added.
Sergey Malyshev, Deputy Director-General of Russian Post, announced that 500 parcel collecting points will open in 200 Russian cities by the end of the year. Russian e-commerce operators will thus be able to serve clients worldwide based on agreements with other postal services.
Both AliExpress and JD.COM are developing platforms to allow Russian merchants to sell abroad, according to their representatives. eBay has been offering a similar mechanism for a long time already.
The B2B dimension
On the B2B scene, too, China is becoming one of Russia’s most important trading partners, with marketplace offering simplified procurement procedures. “However, Chinese suppliers tend to register local Russian branches in order to participate in Russian companies’ procurement, while Russian corporate customers have to establish foreign legal bodies in order to procure the necessary equipment,” noted B2B-Center CEO Alexey Degtyarev.
Among the main obstacle to developing these exchanges are language barriers, the lack of communicability of information systems, the lack of trust in international suppliers and their sustainability, as well as logistics and customs issues. “Our partnerships with international B2B players, such as XBNiao in China, will help us address these issues,” Degtyarev added.
Yana Grigoryan of Shopolog.ru and EWDN’s chief editor Adrien Henni contributed to this report.
- Please click here to download EWDN’s presentation about the China-to-Russia e-commerce market.
