Page 8 - bne_Tech_10_2018

Leaders
October 2018 www.intellinews.com I Page 8
Russia's Yandex.Market and Sberbank online marketplace to focus on non-Chinese suppliers
The joint venture between Yandex.Market and Sberbank chose a commercial strategy for its online marketplace, and will focus on develop- ing a cross-border trade platform that uses non- Chinese suppliers of good quality, mass produced items, the companies said on September 17.
Russia's digital economy is booming, and several major marketplaces are being developed in parallel to Sberbank.Yandex. Most recently Mail.ru, its share- holder mobile operator MegaFon, and the sovereign Russian Direct Investment Fund (RDIF) announced a strategic partnership with Chinese e-commerce ma- jor Alibaba and its AliExpress and Tmall platforms.
For Yandex.Market the product mix is to start with the apparel and footwear categories, as well as electronic items.
"The logistics platform is to mimic the original prototype, Amazon, which bears responsibility
for the goods as of their delivery to its warehouse (foreign, in the case of Yandex and Sberbank), and conducts sales and marketing," VTB Capital com- mented on September 17.
The strategy for quality goods from India, the EU, Japan, Korea, Turkey, Israel, the UK and the US, from suppliers with turnover in excess of $1bn, lowers the future competition with AliExpress Russia joint venture with Mail.ru, MegaFon and RDIF, VTB Capital argues.
Yandex.Market will offer smooth access to the Rus- sian market and charge a commission of 5-10%, while providing a competitive speed of delivery of 2 days versus 15 for cross-border trade currently, due to the established logistics network.Currently Chinese goods dominate Russian cross-border online trade
with 90% of transactions and 53% in value terms. In 2017, cross-border trade reached RUB375bn, or 24% of e-commerce, on VTB numbers.
The management of Yandex-Sberbank joint ven- ture estimates that its marketplace could see an average check of $30 for apparel and footwear, and $100 for electronics, while the average ticket for Chinese goods is $3.
VTB warns that "household budgets in Russia re- main stretched, with fragile trading-up patterns, largely from a low base," noting that that "could make more expensive items less attractive than Chinese substitutes. And in this niche, the newly formed JV could also see competition from EBay and Amazon itself, pressuring returns."
Currently in the Russian market there is a number of large-scale e-commerce platforms that have extensive experience in retail and have raised sup- port of by established financial institutions, such as Magnit-VTB Bank-Russia Post, Yandex-Sberbank, Alibaba-Mail.ru-MegaFon-RDIF, Wildberries-Ozon, and X5 Retail Group-Pick up Points operators.
"The rapidly changing retail landscape is acceler- ating the transition to omni-channel shopping," VTB argues, seeing "the bulk and non-food goods switching to online sales while offline outlets are to focus on fresh categories and items that bring positive emotions, as well as becoming pick-up points for e-commerce."
Similar to the recent report by bne IntelliNews highlighting approaching structural limits for retail growth, VTB warns that "this transition rep- resents a strategic threat to traditional retailers which they have not yet addressed."