Until recently, a number of Western online retailers of all sizes enjoyed growing popularity among Russian customers, who appreciated their diversified assortment and virtually tax-free purchases. Among the most popular product categories were clothing, consumer electronics and gadgets as well as automobile parts.
According to EWDN’s latest report, by the market reached some $5 billion in 2014, up from $3 billion in 2013. However, Chinese players captured almost all this growth.
While Alibaba’s subsidiary AliExpress became Russia’s most visited e-commerce site in 2014, the overall sales volume from the West has stagnated or begun decreasing – with a variety of situations, from continued growth to bankruptcy, depending on market segments and individual players’ strategies.
There are several reasons behind this unexpected market shift:
- Recessionary tendencies in Russia were propelled from early 2014 by the consequences of the political confrontation with Western countries and the fall of oil prices. GDP, which stagnated in 2014, could fall by 5% in 2015, hampering purchasing power.
- The ruble lost around one half of its value between late 2013 and late 2014, making foreign purchases even less affordable.
- Market competition grew strongly over the 2012-2014 period, which has limited the sales potential for each player taken individually.
- A rise in patriotic shopping habits among Russian consumers has been noticed by some industry insiders, with some consumer groups snubbing Western retailers as a result of the tensions with the West.
While mail forwarder Dostami.ru (formerly BayRu) went bankrupt in late 2014, not all Western players have seen a slowdown in trade. iHerb, a leading US online store for health and beauty products, launched rather successfully on the Russian market in spring 2014. UK fashion online retailer Boohoo started shipping to Russia in early 2015.
Fashion site iMall.eu, which targeted wealthy Russian women, did so well since launch in 2012 that it was acquired by Farfetch in 2014. Sales are still growing fast in 2015.
At KupiVip.ru, a leading fashion flash-sales site where cross-border amounts to 25% of total sales, this year will see continued growth “even in the most pessimistic scenario,” the site’s general manager Vladimir Kholyaznikov told us a few weeks ago.
Thus, even though market prospects are uncertain, given the macroeconomic instability, it would be premature to consider Russia a lost market. In the short term, the ruble’s fall is affecting domestic retailers no less than cross-border sellers. And obviously, consumption will not completely stop in either case.
Russian cross-border online shoppers continue enjoying tax-free purchases under a limit of 1,000 euros per person and per month. The authorities have temporarily dropped their idea of lowering this threshold – which in any case would not have affected individual cross-border purchases seriously.
What’s more, customs procedures are being simplified progressively, while new offers from Russian and Western shipment and payment operators have made cross-border e-commerce operations easier than in the past. Even in these troubled times, the Russian market is worth a try.
This contribution was first published in ThePaypers as part of a series on Russian e-commerce in partnership with East-West Digital News.
