Russia’s e-commerce market continued to grow at double-digit rates last year even as offline retail was severely affected by the economic crisis.
According to the new edition of EWDN’s Russian E-Commerce Report, which cites data from Russian agency Data Insight, online sales in 2016 exceeded $26 billion, growing more than 20% year-on-year. Included in this figure are some $16 billion for physical goods and $10 billon for online travel.
The cross-border segment is the fastest growing, up 26% by value and 80% by number of parcels and small packages, and exceeded $4 billion for physical goods alone, according to Russian Post and industry association NAMO.
The growth of this segment has been driven in large part by Chinese companies – most notably Alibaba’s B2C marketplace Aliexpress.ru – but key western players including Amazon, Asos, Next and Yoox are also in the game.
The Russian domestic online retail market
Physical goods 2011-2016, in billion rubles
These numbers concern only physical goods. They do not include cross-border orders, deliveries of ready meals as well as corporate, C2C, MLM and group purchases – Source: Data Insight via EWDN report
“Russia remains a land of opportunity for e-retailers, despite the economic headwinds that have faced the country in recent years”, said Adrien Henni, Editor-in-Chief of EWDN.
“Challenging market conditions have shaken up the e-commerce sector, and the companies that emerge leaner and stronger are well placed to dominate the industry for years to come. In the medium-to-long term, Russia is set to become one of the largest online retail markets in Europe,” the expert adds.
Real-estate opportunities
A separate report on e-commerce warehousing and fulfilment, with participation from EY experts, provides a full set of market data, interviews and case studies with key Russian and international retail companies. Both reports are available as free downloads.
Due to the crisis, the real-estate infrastructure that companies need to serve Russian consumers has become dramatically cheaper and more accessible. International and local retailers are taking advantage of these opportunities to launch huge projects to build, expand or upgrade warehousing and fulfilment facilities across the country.
“There is a dramatic shift in a region with a structural shortage of industrial space. USD-denominated rents have fallen by nearly 60% in late 2016 – even below levels recorded during the 2008 financial crisis,” says Chris Van Riet, a businessman from Texas who heads Radius, a major warehousing solution provider in Russia.
In October 2016, illustrating the way international corporations are seizing such opportunities, Leroy Merlin Vostok launched a brand new 100,000 sq.m. warehouse on the outskirts of Moscow.
“We are still investing more than €440 million in Russia each year. We need to develop further logistic and support capacities to support 20 new stores every year,” the report quotes Eric Poulet, the company’s Director of Supply Chain, as saying.
Leroy Merlin has just launched a giant warehouse on the outskirts of Moscow to support its multichannel business in Russia (Photo credit: Leroy Merlin)
E-commerce fulfilment survey
On the fulfilment service market, demand still exceeds offer, although half of e-commerce companies have their own infrastructure.
As revealed by a survey by Arvato Russia, a growing number of online stores and distance selling companies are moving to outsourcing. However, the fulfilment service market still remains far from maturity, with a lack of capacities for large-scale operations and service quality issues with many providers.
Delivery conditions across this huge country have improved considerably over the past years. The delivery service industry is entering a phase of consolidation with a series of mergers and acqusitions over the past months. The most recent one, in January, was the acquisiting of SPSR Express by DPD, a property of France’s GeoPost.
The EWDN reports have been researched and written in collaboration with experts from EY, international e-commerce companies and their service providers.
