Low share of online sales in overall retail leaves much room for Russian eCommerce growth, says Frost & Sullivan
Over the last few years, Russia and other developing countries have seen eCommerce gain traction as the number of Internet users reached critical mass. Expanding at annual rates of 20 to 30 percent in recent years, the Russian eCommerce market is still set to plough on and at least partially defy current macroeconomic challenges. The largest Internet audience in Europe and the still low share of online sales in overall retail sales will continue to drive Russian eCommerce growth.
New analysis from Frost & Sullivan, eCommerce in Russia, finds that in rouble terms dynamic growth has continued in 2014, whilst in foreign currency terms, market growth has felt the impact of the rouble devaluation.
"Both online-only shops and traditional retailers have been reinforcing their online presence," said Frost & Sullivan Information & Communication Technologies Lead Consultant Martin Hoff ter Heide. "In fact, a number of retailers across Russia have been harnessing the complementary strengths of eCommerce and offline retail channels by adopting hybrid concepts."
While the largest number of orders in business-to-consumer (B2C) eCommerce still came from Moscow and St. Petersburg, the greatest opportunities now lie in smaller cities across Russia. To speed up growth, market participants need to overcome a number of fundamental challenges including underdeveloped logistics systems and service environments, still limited uptake of electronic payments, shoppers' lack of trust in shops without a physical presence, and the dearth of a qualified workforce.
"Some of these issues can be resolved by educating customers on the process of purchasing online, building and operating high-performing fulfilment systems, and developing reassuring customer service capabilities," stressed Hoff ter Heide.
Recent sentiments of foreign investors towards Russia, coupled with the specifics of the national language and culture, will require eCommerce players to implement strategies and operations that are adapted to the country's business environment.
Overall, the Russian eCommerce market has a long way to go to catch up with Western countries. On one hand, eCommerce participants will have to continue to make significant efforts in coming years to realise this potential. Beyond taking inspiration from Western business models there is also need for adapting to Russian specifics. On the other hand, the existing 'catch-up potential' means that the market holds significant opportunities, even amidst the tough economic climate.