Page 23 - bne_October 2021_20211004

bne October 2021 Companies & Markets I 23
5% – it’s a small market, but it will increase to almost a quarter (23.3%) by 2025,” says Burmistrov citing INFOLine’s forecasts.
Another obstacle to overcome is the lack of a common logistics infrastructure. In the US e-commerce can chose to rely on companies like FedEx and even the US postal service. While Russia also has a national postal service, Pochta Rossii, which has been making rapid improvements and investing heavily into its own logistics and distribution system, it is still not
an option for the e-commerce companies, as it remains too slow. The upshot is that each company is building its own distribution network and needs hundreds of partners to effect the last-mile delivery.
“If you look at fulfilment centres, there are no ready-made facilities suitable for the operations of such companies as Wildberries and Ozon. That’s why building such facilities from scratch is not a whim but a necessity for this market,” says Burmistrov.
Russia’s biggest cities are the most advanced and obvious markets. With an official population of 12mn (and unofficially of some 15mn), The city of Moscow has a larger population than both Czechia and Hungary condensed into one giant urban sprawl, making it an online marketer’s dream. St Petersburg also has a population of several million and altogether there are 11 so called millionki, or cities with more than a million residents.
Russian firms have been a global leader in rolling out the so-called dark stores in these cities to provide ultra-fast delivery, which can get goods to customers in under 10mins in some cases.
“Samokat, one of the leading players in this market, has more dark stores than Germany’s Delivery Hero based in Berlin, and it’s second only to Asian players in terms of the number of dark stores,” says Burmistrov. “Dark stores are located within the city and often in the centre – and this means high rents. This segment of the market is now very investment- intensive, including due to the low average ticket, which forces e-commerce market players to subsidise delivery to customers, but it’s enjoying triple-digit growth, which is
why there’s a lot of interest in it, including from traditional offline retailers.”
Russian companies are pioneering this ultra-fast service and have recently started to launch operations overseas in New York and Paris amongst other destinations.
“Russians generally like faster delivery and have gotten more used to it than perhaps people in many other countries. In Russia’s larger cities, 24-hour delivery is already considered the norm. If an online platform doesn’t offer it, that’s a reason to switch to a competitor, and for food products, same-day delivery is already a market norm,” says Burmistrov.
And e-commerce is being helped along by the fact that Russia leads the world in many fintech applications and services. It was the Russian banks that pioneered the idea of sending an SMS message to your phone every time you make a withdrawal from an ATM, and the banks have continued to innovate to the point where Russian fintech provides a better and wider range of services than are available in the US or UK, says Burmistrov.
Russian tech exports up threefold since 2018
East West Digital News in Moscow
Russia’s earnings from tech exports have jumped more than threefold over the last two years, according to a new report from Moscow’s Higher School of Economics (HSE), reports East-West Digital News (EWDN).
The export sales of scientific and technology services and IP-protected products reached $4.5bn in 2020 – up 30% from 2019, three times more than in 2018, and fifteen to twenty times more than in the early 2000s.
Stucture of Russian technology imports and exports by contract categories (in %, 2020)
Despite the jump in exports, the global competitiveness of Russian-made technology is difficult to assess. The largest market for Russia’s technology exports in 2020, accounting for almost $1bn or a quarter of all sales, was the Netherlands – a low-tax jurisdiction where a number of Russia’s top digital companies, including Yandex and X5 Retail Group, are registered.
The US, Germany, Switzerland, China and Belarus also accounted for more than $250mn of Russian exports each.
Imports of foreign-made technology were stagnant in 2020 at $4.6bn, bringing the technology trade deficit – the difference between Russian exports and imports of tech goods and services – to its lowest level since 2001.
Russia fears its reliance on Western technology – ranging from payment cards to computer operating systems – is a potential vulnerability should the West decide to levy more penalties on the country. It is also concerned foreign intelligence services could gain access to crucial Russian systems running on foreign software.
The Russian government on Wednesday introduced new rules banning the purchase of foreign-made laptops, tablets, servers and circuit boards in government contracts.
www.bne.eu