How to enter the Russian e-Commerce market
Almost one third of the total volume of e-commerce in Russia is accounted for by cross-border selling. In addition, goods are ordered in foreign online-stores and supplied to the end-user directly from abroad.
For deliveries with a value of less than €1000, a distributor overseas doesn’t pay customs duties on the goods and doesn’t have to obtain certificates of conformity for the products. However, there are some exceptions, e.g. for alcoholic beverages and bicycles. A significant reduction of this relatively high allowance to € 150 or even € 22 is currently under discussion.
At the same time there are definite disadvantages connected with cross-border selling. Delivery time can take up to two months depending on the destination and logistics provider of the company.
Many courier companies don’t provide delivery services to end consumers in Russia. This may not be known by the employees of the foreign courier service, and after picking up the goods in Western
Europe, the goods can be returned to the consignor sometime later for unclear reasons. Often a product is “stuck” at customs and additional documents in Russian are required, for example a technical description of the product. Another drawback of cross-border selling is the limited possibilities of payment for end-customers. A client can just choose credit card payments, and the return (for example of defected goods) is rarely possible under certain conditions and a direct contact address or hotline number in the country of the end-customer is not specified. In connection to these shortcomings, the number of potential clients of foreign online-stores in Russia is noticeably decreasing.
On September 1 2015, amendments to the law № 152- FZ entered into force, under which state and municipal authorities, as well as individual and legal entities, are obliged to store the personal data of Russian nationals only on local servers in Russia. The scope of actions related to data processing applies to all persons present on the territory of Russia and persons acting as a subject of relations that are covered by this legal act. Therefore, online-shops have to take into account the target audience of their product (especially if they are aimed at Russian customers). This regulation also covers foreign enterprises (including online-shops) if they process the personal data of Russian consumers.
There is another method – the sale of goods to Russian distributors. One of the largest platforms in Russia is OZON.ru. As a rule, when you use this method of sale, there is no need to worry about logistics or customs clearance, which is a great advantage. These processes are carried out by the distributor on terms of EXW delivery (EXW or Ex Works means that a buyer/distributor takes the goods directly from the warehouse of the manufacturer or dealer overseas). Concerns about obtaining certificates of conformity and further coordination are also taken over by the distributor. Most often, distributors offer products of all counterparties on the same online-platform, which is a drawback for foreign producers and distributors as their goods are sold along with competitor products. Moreover, beneficial conditions may be provided to certain competing companies, for example via priority in the promotion of certain goods while consulting via the distributor’s hotline. “Gray import” (improper and doubtful customs clearance) is also very popular with Russian distributors. In such an import process, the documents (for example, invoices) for the goods (which will be imported to Russia) are replaced on intermediate warehouses in Russian neighboring countries to lower the customs value in order to reduce the customs duties and save costs. Thus, for foreign producers there is a risk of failure to prove the actual export of goods in case of inspection and a risk of being accused of tax evasion.
Q&A Section: What you need to know for your e-Commerce Strategy in Russia
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