Page 23 - bne_Magazine_February_2019

bne February 2019 Cover story I 23
The clothes are brand new and remain trendy (especially in emerging markets) if a little bit out of date.
Since then the business has exploded as the seven years Hartmann predicted was needed comes due in 2020 and today more people are online in Russia than
in all of Germany.
Online sales volumes have gone from around $500mn in 2011 to just under $19bn in 2018 and are expected to grow by half again to $31bn by 2020 according to Morgan Stanley before reaching a whopping $52bn by 2023. That is a ten-fold increase in a little over a decade.
Russians buy half of all their consumer goods online, RIA Novosti reported
in December citing a study by Romir holding. The share of the online purchases jumped by 32% y/y in 2018, with the frequency up by 21%. And nine out of ten Russians have bought at least one item online in the last decade.
The “nervous” phase is nearly over, but still has a little way more to run. Only 38% of a recent survey agreed with the statement “I am certain that information on online sellers’ websites is protected and secure” versus 54% of respondents to the same survey in the EU.
With such riches on offer now the
big boys are starting to weigh in. the early days of Russia’s online retail was dominated by companies like KupiVIP, Ozon (that started out as a copy of amazon.com selling books), Ulmart (consumer electronics), Utkanoz (groceries) and current market leader Wildberries (apparel), which earned RUB120bn ($1.8bn) in 2018 by itself, a year-on-year surge of 74%.
But now seriously big platforms are being built several of which will come online in 2019. There are too many projects to name, but the largest is Yandex.Market, a joint venture between Russia’s largest search engine Yandex and the country’s biggest bank Sberbank that promises to be a game changer.
e-commerce easier. One of the biggest problems the early movers faced was get- ting products to punters, which is why most companies started in Moscow as it was possible to use your own couriers. As the business spread these companies built up their own logistics services which has already driven up the price
of warehouses in Russia while the rest of the real estate sector was stagnant.
However, Russia’s post office, Pochta Rossii, has also been flourishing on
the back of the booming e-commerce business. Indeed a few years ago the system collapsed under the weight of the number of packages being posted during the January sales, as Russians began ordering goods from European online stores in massive amounts during the annual sales.
A one time state dependent, Pochta is now making hansom profits and in September announced a massive investment programme opening
38 logistics centres worth RUB24bn ($1.7bn), the head of the company Nikolay Podguzov announced at the Eastern Economic Forum.
The infrastructure will be introduced in 34 Russian cities, which could enable deliveries of orders within two days for 80% of Russian population spread out over half the planet. A functioning Pochta will also lower the bar for
new entries that no longer have to invest into expensive bespoke logistics infrastructure. Pochta also plans to open express delivery channels from China, speeding up deliveries from two- three weeks to one week, and in 18-24 months to up to three days, as Russians have already swapped from European online stores to Chinese that have the same quality and delivery times, but are significantly cheaper.
Russian e-commerce is dominated by cross-border trade, which beat the 13% market growth and expanded by 24% in 2017, while domestic online shopping lagged behind with 8% growth. In monetary terms Russians e-shopped
the most in China (53%), the EU (22%), and US (12%).
COUNTRY REPORTS
Check out IntelliNews
Pro’s Country Reports covering the 30 countries in Central & Eastern Europe/Commonwealth of Independent States.
A monthly round up of the most important economic, finance, business and political events, the reports are aimed at busy professional investors and companies that need to keep on top of the story.
To subscribe to the reports delivered by email get in touch with our sales staff for a trial.
T. +44 203 633 2008
E. sales@intellinews.com
Or go to bne.eu/welcome to see samples of this and other products.
The market is also developing making
www.bne.eu