Addressing the lack of internationally-available information on this topic, East-West Digital News recently released an in-depth report on Russian e-commerce. Each week we publish here its best excerpts, including interviews with major domestic and international players, trend analysis from top market experts, and practical recommandations for companies to succeed in this market.
This series continues today with an exchange with Evgeny Yakushkin, Directorof Operations and Strategy at AliExpress Russia. Discussing the company’s activity, he provides insights about Tmall, the “small brother” of the cross-border marketplace AliExpress, which focuses on domestic transactions. This publication is coming just days after French retailer Auchan, which runs more than 300 stores in Russia, announced it started to sell non perishable goods via the Tmall platform.
AliExpress has conquered and maintained a predominant position in the cross-border segment. Why is the other Alibaba property in Russia, the domestic platform Tmall, less developed?
True, Tmall isn’t yet the market leader like AliExpress is, but its traction is often underestimated. In 2018, the platform more than doubled its GMV thanks to the two business models it operates in Russia – 1P [‘first-party’] and local marketplace. In the latter model, we help other sellers (like Procter and Gamble, Crocs, Bosch and others) sell using the Tmall / AliExpress platform in Russia. This year, we expect to at least double the local business, just like the previous year, leveraging the power of the marketplace platform.
Whom do you see as your main competitors on the domestic scene?
The local e-commerce market is still underdeveloped compared with other countries. Its penetration in total retail is still below 5%. We are bullish on the market growth. This growth will be partly delivered by consolidation of the largest players as this business has huge economies of scale in terms of traffic and operations costs. The current top 10 e-commerce players are positioned to benefit the most from this growth. These are Wildberries, the big electronics sellers (M.Video, DNS-Shop, Citilink), Ozon. Also Beru, which is likely to rise, and specialized mother and kids sellers like Detsky Mir.
It is worth mentioning is that Tmall is open to any seller. Running offline and/or online sales successfully is not a blocker to selling via Tmall: on the contrary, Tmall offers brands, including B2C retailers, visibility on the platform (each seller has its own virtual store. Thus, sellers with a strong reputation and service levels will benefit from additional traffic when they develop their presence on Tmall Russia.
Consider Tmall as a large shopping mall – all sellers benefit if the mall is doing great, and the mall is interested in the success of its sellers.
How do you intend to make a difference?
Tmall has two main distinctive advantages. Being part of AliExpress, it can benefit from this platform’s huge traction in Russia: these are more than 20 million active clients on a yearly basis! The other very strong points are in customer service, in particular delivery services (such as same/next to door delivery in Moscow) and the client guarantees (similar to AliExpress, Tmall customers enjoy quick resolution of their incidents and can get a partial or full refund if the item is not up to their expectations).
In terms of marketing, we’re oriented towards big sales events – “3/28”, Outlet promo, “8/28”, “1111” and alike. We’ll develop even more such events: some sellers generate tens of thousands of orders per day during such events.
We’re also actively developing the Tmall catalogue – in particular through marketplace sellers – across such categories as clothes, items for the home, children’s goods, accessories and others. Local merchants are willing to become part of the platform as many of them see in it an opportunity to develop an online sales channel leveraging AliExpress Russia’s promo capacities and traffic – without significant investments. This may apply to both large multinational companies and small local businesses.
This type of business is Alibaba’s core competence in China (Taobao, Tmall) and abroad (Lazada in SEA, Plaza in Spain, etc.).
Tmall does not offer a payment-on-delivery option while this is still the predominant practice in domestic e-commerce. Don’t you feel you’ll repel a significant fraction of Russian online consumers?
Indeed, Tmall customers pre-pay all their orders (unless they purchase on credit or by installment) – and we consider continuing to do so in the future. The customer guarantees are our secret weapon here: these guarantees are so strong that most clients don’t hesitate to pre-pay.
Generally speaking, cash-on-delivery is on the decline in Russia – slowly but surely. The share of pre-payments increases by around five percentage points in the market every year, and some sites witness an even stronger shift in their customers’ payment behavior.
Generally speaking, cash-on-delivery is on the decline in Russia – slowly but surely. The share of pre-payments increases by around five percentage points in the market every year, and some sites witness an even stronger shift in their customers’ payment behavior.
How do you organize logistics?
Since 2017, Alibaba has developed its Cainiao logistics system in Russia. This is an aggregator of existing warehousing and last-mile services, including pick-up point services. Among our partners are DPD, CSE, Russian Post, PickPoint, to name a few.
This 4PL system allow us to cover the entire territory of Russia in the best possible conditions. AliExpress has significantly reduced delivery time (on average it takes 10-15 days to deliver goods from China to Moscow for AliExpress Standard shipping; same- or next-day ‘flash delivery’ is common for most Tmall’s items in Moscow). Our local Tmall marketplace sellers can benefit from Cainiao’s solutions as an alternative to their own logistics and delivery solution.
Is relying on third parties always efficient?
Many big market players believe it’s necessary to develop in-house capacities for at least part of the operations. True, the capacities available on the market were insufficient in the past. But these services have developed considerably for the past years, so 3PL or 4PL strategies have become possible.
