Russian eCommerce demonstrated astonishing growth in 2011 increasing its turnover by 29% ending up at 310 billion Russian rubles (around 10 billion US dollars), according to Data Insight latest report. While it is a well-known fact that Moscow region has the best buying ability in the country, most of the growth in 2011 came from other regions in Russia.
In the regions supply is not catching up with fast growing demand: a lot of products are impossible to buy there, or are imported by small local businesses and therefore cost more that in large chain stores in Moscow. In search for better assortment and better deals the population starts moving online. Interestingly, the most active online shoppers (outside Moscow) live in the most remote places like Sakhalin, Magadan, Kamchatka and Yakutia (see map below for reference):
Moscow region is responsible for 45% of all online sales in Russia, followed by Saint Petersburg (11%) and Ekaterinburg (4%). All in all, 45% on all eCommerce sales in 2011 came from regions outside Moscow.
Top eCommerce categories in Russian regions
According to Data Insight, the most popular items purchased by non-Moscow residents via Internet are airplane and train tickets, apparel, computers and electronics, as well as books and products for children:
The largest online retailer Ozon.ru reports a different breakdown though: 30% – Books, 30% – Electronics, the rest is divided among multiple categories, where some of the popular ones are household appliances, products for children and products for pets (source: interview with Maelle Gavet, CEO of Ozon.ru; in Russian). This could be, however, because Ozon.ru, just like its American “big brother” Amazon, was initially a book store.
Hurdles and opportunities in Russian eCommerce
Russia has a reputation of a difficult place for doing business, due to bureaucracy and corruption among other things. However, a lot of online businesses run by Russians and by foreigners succeed and prosper. A lot of business owners, in fact, say that Internet is one of the “cleanest” areas of business in the country, one of the being Oskar Hartmann, German entrepreneur and CEO and founder of KupiVIP.ru in his interview to Forbes (in Russian).
The most difficult part of running an eCommerce store in Russia is logistics. The country is huge: some places don’t have paved road connections, some places are isolated by ice and snow for months. Russian Post, although able to deliver packages to any village or town in the country, is slow and not always reliable (from my personal experience at least). Ozon.ru has created its own delivery network with couriers driving around with packages in larger cities. It works perfectly for Ozon, but how many businesses can afford creating one?
Another problem, as I see it, is processing payments. Apart from limited usage of credit cards and unusual online payment options, Russians prefer to pay in cash. For Ozon.ru ‘cash on delivery’ stands for 80% of all received payments, followed by credit card payments (10%) and 18 different electronic payment solutions, such as Yandex.Money and WebMoney (10%). The situation is different only in travel industry, where 60% of customers choose credit card payments. Obviously, handling cash on delivery is not as easy as processing credit cards and PayPal directly on a website.
The prospects of the Russian market, however, I believe are great. While being the largest online market in Europe, only 7% of Internet users shop online, and eCommerce today makes up for only 1% of Russian retail market. Data Insight predict another 25% jump in Russian eCommerce turnover in 2012.