Last week JD.com, China’s largest online retailer, launched a Russian version of its platform with the stated goal of conquering a 20% share of the Russian e-commerce market.
JD.com’s English version had already been accessible to Russian customers for two years, but with no marketing effort or adapted logistics to serve them.
Just a fraction of JD’s 50 million SKUs are now accessible to Russian consumers, with a focus on consumer electronics and home appliances.
Among the first Chinese companies seeking to grow sales in Russia through JD’s Russian language site is smartphone maker ZTE, notes Forbes.com. The company plans to sell more than 2 million smartphones in Russia this year out of 100 million units globally. ZTE’s marketing investment in the country will be increased by 350% in 2015, according to Jacky Zhang, chief executive of Asia Pacific and CIS, ZTE mobile device.
JD’s Russian customers can pay using bank cards and via PayPal. In addition, the site will soon introduce the Visa Qiwi and Yandex.Money e-wallets. These two Russian electronic currencies serve dozens of million users, far ahead of PayPal.
To address Russia’s logistics challenges, JD may invest “several dozens and up to one hundred million dollars,” Russian business daily Vedomosti quoted Victor Xu, President of JD.com’s international business group, as saying.
Moreover, the Chinese online retailer has inked deals with several powerful local players. In May, JD signed a cooperation agreement with SPSR-Express, a major e-commerce shipment operator which also started, earlier this year, to serve AliExpress.
JD is also in discussions with the Russian Post, which controls more than 90% of the cross-border e-commerce shipment market.
Another major distribution channel is being created in partnership with Ulmart, Russia’s leading domestic e-commerce company. JD’s products will be promote and sold via the Ulmart website, using its fulfillment centers and pick-up points accross the European part of the country.
The cooperation will help expand Ulmart’s assortment up to one million items, the company announced.
A global strategy
JD made it clear that Russia is only the first step in a larger strategy. “The company embarks on global expansion today,” Xu told reporters. “At the first stage, we position ourselves as a platform with emphasis on Chinese goods. (…) Later, it will be a platform for global trade.”
Xu thus considers selling Russian goods to Chinese online shoppers. Currently in the air in Russian business and government circles, this idea was voiced by Alibaba President Jack Ma on June 19 at the St. Petersburg International Economic Forum.
With an estimated 49% share of the Chinese online retail market, JD generated $14.2 billion in sales volume and $5.9 billion in net revenues in Q1 2015. The company – which until 2013 was known as 360buy – went public in May 2014, attracting $1.78 billion from NASDAQ investors.
Among JD’s shareholders are Russian billionnaire Alisher Usmanov, who also owns a significant stake in the Mail.ru Group, and DST, a leading global investment fund founded by Yuri Milner.
Last year, Russia’s domestic e-commerce market neared $15 billion for physical goods only, not including up to $4 billion for the cross-border segment. The latter is dominated by Chinese players, which accounted for around 50% of the market in value and at least two thirds in number of fulfilled orders.
AliExpress alone sends hundreds of thousand parcels to Russian consumers daily, according to a recent report by East-West Digital News.
On their side, western online retailers have seen their sales to Russia stagnate or fall since early 2014 due to the ruble’s depreciation and other factors. However, several niche players have witnessed continued growth.
Russia’s online retail market is expected to reach the $50 billion mark in less than 10 years, according to East-West Digital News.
Sources: Forbes.com, Rambler Novosti, Reuters, RBTH, Ulmart press service, Vedomosti.
