Competition in Russian e-commerce market growing
The spring lockdown pushed millions of Russians to do their shopping online. Meanwhile, the local e-commerce market is still young and fractured and lacks a clear leader. At least four large retailers may compete for this title.
The race to become Russia’s Amazon is heating up, as COVID-19 has driven around 10 million more Russian consumers online, says Bloomberg. At the moment, the largest national online retailer is Wildberries, but even given a twofold increase in sales in January-September, it accounts for only 13% of the Russian market. By comparison, Amazon is controlling about half of the US market.
Although Russia has more internet users than Amazon’s second-largest market Germany, e-commerce here has always lagged behind due to entrenched consumer habits and logistical challenges. One of the main difficulties is making deliveries in such a large country. Another problem is a widespread reluctance to pay for goods before they are received.
However, a two-month lockdown during the first wave of COVID-19 in the spring left consumers with little choice but to give e-commerce a try. Data Insight research agency expects internet sales to surge by 44% in 2020 to 2,5 trillion rubles ($32 billion). Nonetheless, online purchases will total just about 10% of Russian retail sales in 2020, according to AKIT industry lobby group. Last year, internet sales accounted for 6% of the total volume in Russia, 16% in the US and 37% in China.
Russia’s e-commerce market remains fractured and flooded with thousands of internet shops including offerings from traditional retailers, but there is also a trend towards big Amazon-style marketplaces. The largest is Wildberries, which sells items ranging from food to electronic goods. The company has a network of 26,000 pickup points around Russia allowing customers to try on goods before taking them home.
AliExpress, Ozon and Yandex are other contenders to become Russia’s answer to Amazon. AliExpress, which is a joint venture between China’s Alibaba Group and Russia’s Mail.ru Group Ltd, has lost market share because of the long delivery time for orders from China. To increase competitiveness, it has begun working with local suppliers. Now the company is providing same-day service on some goods through a partnership with the state postal service.
Ozon also offers next-day delivery to 40% of the population, while deliveries to Siberia can take up to five days. It is delivering via a network of drop boxes near customers’ flats but also offering direct shipping through partners. In October, the retailer announced that it applied to sell shares in the US to fund further growth.
The smallest competitor, Yandex, accounts for 2% of the online retail market. The company also runs Russia’s leading search engine and taxi service. Yandex’s partnership with Sberbank to create an online marketplace ended earlier this year, but the company intends to develop its e-commerce service.