Russian e-commerce: domestic sales slump in 2015, while Chinese imports soar
February 8, 2016 04:02 PM
East-West Digital News reviews the most important developments on the Russian high-tech scene in 2015. Today’s article covers the evolution of the e-commerce market in both its domestic and cross-border dimensions.
The domestic scene
With 160 million small packages and parcels sent to online consumers in 2015, up 10% from the previous year, Russia’s domestic online retail market grew in real terms. It also grew in rubles, reaching some 650 billion (+16%), with an average order value amounting to some 4,050 rubles (up from 3,750 rubles in 2014), according to Data Insight.
Given the ruble’s sharp depreciation (from 38.5 rubles in 2014 to 62 rubles per dollar in 2015 on average), the picture looks darker in dollars: market size fell to $10.5 billion for physical goods, down 28% from 2014. These numbers do not include cross-border orders, deliveries of ready meals as well as corporate, C2C [consumer to consumer], MLM [multi-level marketing] and group purchases.
A considerable growth potential is still ahead, however, since online retail accounts for just 2% of Russia’s total retail market.
The fastest-growing categories were sporting goods and leisure items, pet goods, children’s goods, clothing and footwear, as well as groceries. Meanwhile, electronic devices, home appliances, cosmetics and perfumes were less in demand than during the previous year.
In 2015, demand developed faster in small cities and villages—where e-commerce penetration is still lower than the Russian average—as well as in Russia’s Far East (Primorie, Sakhalin and Khabarovsk region). Growth rates were lower in Moscow, Saint Petersburg and most large cities, with the exception of Voronezh and Novosibirsk, notes Data Insight.
Aggravating their chronic financial issues, the economic crisis led a range of Russian e-commerce sites to suspend their activities. Among them were online auction and marketplace Molotok.ru, one of the country’s most established e-commerce sites, and Mamagazin.ru, a kids goods online store launched in 2014 under a $30 million investment plan.
Of the three entities of the IQ One holding—Utinet.ru, Sotmarket.ru and e96.ru—only the latter survived, following a failed merger attempt. The two former fell victim to internal weaknesses and the impact of the economic crisis.
However, several major players continued to grow throughout the year. Ozon told East-West Digital News that its sales grew 30% year-on-year, with no less five million orders (20 million items) delivered by its main site Ozon.ru.
KupiVip, Russia’s leading fashion flash-sale site, has reported a 40% growth rate in 2015.
In February 2015 KupiVip analyzed the new online consumer behavior that emerged as the economic crisis unfolded. The vast majority (83%) of clothing and footwear buyers were looking primarily for discounted products—a proportion 1.5 times higher than one year earlier, in 2014. The survey also found that 58% online customers had more than half of their clothes bought at discounted prices. On the other hand, Russian online consumers also tended to be more restrictive than previously when spending on gifts.
“Last year, consumers actively switched to sales sites or outlets, and we believe that this trend will continue in 2016,” the KupiVip press service stated in an exchange with EWDN.
Two other major sites, Lamoda.ru and Ulmart.ru, also reported high growth rates in the beginning of 2015, but did not provide EWDN with their latest figures.
Last year also saw many online retailers develop mobile sales (which accounted for 30% of Ozon.ru’s total sales), while traditional retailers continued to develop online sales channels, as exemplified by the new sites of H&M and Vans.
While the domestic market slowed down, cross-border purchases continued to grow rapidly in 2015. Their value amounted to some $3.4 billion, up from $2.2 billion in 2014, which corresponded to 135 and 75 million parcels and small packages, respectively, according to the conservative estimates of industry association NAMO.
However, only Chinese players, which saw their share of the cross-border flows jump to some 80%, benefited from this growth. AliExpress, which had become in 2014 the number one e-commerce platform in Russia, multiplied initiatives to strengthen its leadership. The Chinese company signed a partnership with SPSR Express to enhance its delivery capacities across Russia; teamed up with MasterCard and Russian online bank Tinkoff Bank to launch a co-branded loyalty program; and made mobile payment methods available to its Russian consumers.
The AliExpress free Android app became number one by the number of downloads on Google Play—ahead of social networks and IM services, which traditionally lead the ranking.
In June JD.COM, China’s largest online retailer, launched a Russian version of its platform with the stated goal of conquering a 20% share of the Russian e-commerce market. The company announced that it could invest “several dozens and up to one hundred million dollars” to address Russia’s logistics challenges.
Meanwhile, the activity of western merchants—which had seen their sales to Russia grow dramatically in 2011-2013 and stagnate in 2014—was severely hit by the ruble’s depreciation: the sales volumes of many of them decreased by more than half in 2015.
This article first appeared on East-West Digital News, a news site that covers e-commerce and other digital industries in Russia. It is reprinted with permission.