E-Commerce Market to Grow in Russia

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Nov. 4 – Russians will spend US$19.5 billion online this year, according to research of the market’s value released by Google Russia and Citibank on Tuesday.

Spending by online shoppers will grow to US$26 billion in 2012 from US$20 billion anticipated this year, the study found.

“This still leaves Russia a way to go: spending over the Internet accounts for less than 0.5 percent of the country’s GDP compared with 7 percent in Britain,” Konstantin Kuzmin, marketing director at Google Russia, said to The Moscow Times.

The country has more than 43 million web users, a penetration rate of about 30 percent, and is one of the world’s fastest-growing internet auditoriums, according to comScore, a U.S. web research company.

Andrei Oberemok of Citibank noted that the recent economic meltdown had a stimulating effect on the market.

“The volume of online purchases continued to grow even during the crisis,” he said, adding that many Russian companies moved their businesses online because of significantly lower costs on the Internet.

“The crisis did online retailers a huge favor, increasing the number of value-seekers,” Natasha Zagvozdina, consumer analyst at Renaissance Capital, said to the Financial Times.

Since January 2008, 29 percent of online transactions were mobile services payments, with the average bill around US$19, the Google Russia and Citibank study said. The next highest proportion of buyers, 14 percent, bought train tickets, while 10 percent left their money in music stores.

In terms of money spent, 35 percent of the expenses were represented by plane tickets followed by train tickets at 13 percent and payments for tourist agencies at 7 percent. Mobile services were next.

The study, which the authors said covered the period between January 2008 and September 2010, also suggested that single, young, well-educated and well-to-do men residing in Moscow are the most active Internet buyers. On average, the study said, men frequent Internet stores twice as much as women do.

Anna Lepetukhina, a Troika Dialog analyst, said online spending might be larger than the study found because it didn’t take into account purchases made through electronic payment systems such as Yandex.Dengi.

According to the latest yStats.com report, Russia’s B2C e-commerce is attracting more and more international companies such as eBay. For 2010, a strong growth in revenue of 30 percent is expected for all online retail activities in Russia.

The collective buying revolution hit this year, as online shopping clubs, copying a U.S. model, began providing huge discounts on goods and services once orders build to a critical mass.

Domestic companies have so far been the biggest beneficiaries of growth in the sector, but global brands are making inroads as they start to take non-Latin alphabets more seriously.

Accel Partners, the Silicon Valley-based fund that backed Facebook, has invested US$20 million in Russian kupiVIP.ru, an online shopping specializing in exclusive fashion brands.

E-Bay launched a Cyrillic version this year to compete with Russia’s molotok.ru web auction service and allowing customers to pay with rubles for the first time.

Online purchasing is concentrated in Moscow and St Petersburg, but Bernard Lukey, chief executive of Ozon.ru, Russia’s biggest e-commerce company, says internet shopping will surge as broadband becomes available in more regions.

“Russia will soon have the biggest internet auditorium in Europe,” he says.

Collecting payments is the biggest challenge e-shops face. Delivering goods to meet tight deadlines across a vast land mass is another problem.

The antiquated postal service admits it cannot handle the surging number of parcels dispatched by web retailers. And when shoppers order from abroad, Russian customs often nitpick about price tags causing delays at the border.

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