STORES Magazine - May/June 2017 - LP82
Cross-border Trade Will Drive Growth in
by HOWARD LAKE
Howard Lake is senior editor for Planet Retail.
Russian e-commerce has been off the radar for most Western retailers and brands in
recent years. Some operators are turning this to their advantage, positioning themselves
for greater gains.
Akita estimates that Russian
e-commerce grew by 21
percent in 2016 to a total of
$14.84 billion from a user base
of 84 million, despite Internet
penetration in the market being
at a relatively low level
DIRECTION OF TRAVEL
Cross-border trade is
exhibiting major growth levels,
with a 37 percent uptick in
volumes compared with 2015,
amounting to $5.4 billion, or
33 percent of the total channel
market share in 2016. Akita predicts that cross-border trade will reach
$6.5 billion in 2017. Online-specific orders shipped into Russia soared
102 percent last year, massively outstripping the 6 percent rise in
domestic online-specific shipments.
This has been extremely good news for AliExpress, Alibaba's thirdparty marketplace. AliExpress recorded over 22 billion unique visits in
January, significantly more than second-placed local platform Ozon.
ru, which attracted around 9 billion unique visitors.
Key to this has been currency fluctuation. The depreciation of
the ruble from mid-2014 onwards made Western goods far less
competitive compared with those originating in China; 90 percent of
all cross-border shipments into Russia originate in China, compared
with 4 percent from the European Union and a mere 2 percent from
OUT IN THE COLD
Reviewing the Top 30 leading Russian online players in terms of
traffic puts into stark relief how e-commerce in Russia remains the
domain of Chinese and domestic operators. In January, the only
Western business to make the Top 10 was eBay, with 5.1 billion visits.
E-commerce has yet to gain real meaningful traction in Russia.
The channel's share of the total retail market remains low, around
4 percent, and will require a significant drive around infrastructure
upgrades to push that share any higher.
Geography is one obvious factor hindering growth, with vast
distances between urban centers meaning speed of delivery and
STORES May/June 2017
convenience are largely negated
beyond Russia's major cities.
This has not deterred local
players like Magnit or X5 Retail
Group from testing services like
e-grocery, although predictably
this is limited to the Moscow
area at present.
Western retailers and
brands could find their way
to Russian consumers if the
motivation existed. Those 84
million Internet users mean the
market now boasts the highest
number of users within any
CAN BRANDS STILL WIN IN RUSSIA?
Internet penetration in Russia is rising fast and is expected to
reach Western European levels within the next decade, driven by
an uptick in smartphone usage. Currently, a mere 42 percent of
Russians access the Internet via smartphone.
As might be expected, online usage is highest among
younger consumers, with 97 percent of the 16- to 29-year-old
demographic regularly online. This trails off dramatically with
age, with only 28 percent of the population aged 55+ going
online, most likely correlating to the stagnation of Internet
penetration; Russia's more youthful demographics are more
likely to gravitate toward larger urban centers with better digital
Another uniquely Russian factor is the huge influence of social
networks, with over 90 percent of users active on platforms
like Vkontakte and Yandex. These native networks are often
impenetrable to non-Russophiles, but this is where brands
need to conduct conversations with consumers. AliExpress has
been doing precisely this, and is now reaping the rewards of its
carefully targeted strategies.
Recent research by Planet Retail has identified Moscow as the
world's most attractive emerging megacity for the distribution
of fast-moving consumer goods, thanks to comparatively high
incomes alongside an extraordinary population density, fairly
decent infrastructure and efficient access to a consumer market
that features outstanding levels of sales densities.