Prestudy Russia eCommerce Growth 27.10.2015

1. How to benefit from 25 million Russian
online shoppers
Anna Vetrova, Finpro Russia & Kazakhstan
27 October 2015

2. Russian Market

3. Total potential market 100 million people
© Finpro3
25 %
shop online
7 % shopped
online
42 % online,
do not shop
23 % are
offline
Potential for Growth
11,1 13,0
16,6
21,2
27,0
34,3
43,6
2014 2015 2016 2017 2018 2019 2020
Forecast of domestic online
sales, billion euros
Source: Data Insight www.datainsight.ru

4. Ecommerce market Russia: volume & value
© Finpro4
Online sales,
RUB billion (2014)
Direct B2C cross-
border
Number of
orders
Value of orders
rate 50,5
China 35 million 900 million €
Other countries’
e-retailers
15 million 800 million €
1,7 bln €
(13 %)
CROSS-BORDER
DOMESTIC
50%
50%
USA: mainly electronics, average
purchase 100-150 $
Europe: mainly clothing, leaders are brands
from Italy (yoox.com) and casual from the
UK (asos.com) with average purchase of 200-
250 €.
Source: Data Insight www.datainsight.ru

5. Ecommerce Russia: 5 Key Trends
1. Cross border: growing share of Chinese online stores
2. Availability: faster delivery + decrease of the shipping costs
3. Commonness: growing share of inexpensive orders, including
FMCG segment
4. Mobility: growing number of orders submitted on mobile
devices
5. Brands and loyalty: growing # of repeat purchases, growing
importance of retailers’ brands
5 © Finpro

6. Product categories

7. Growth leaders and potential
Fastest growing product categories*
– Food & beverage +55 %
– Furniture +35 %
– Pet supplies +30 %
– Medicines, medical supplies 20-25 %
– DIY supplies 20-25 %
– Sporting goods 20-25 %
– Consumer electronics 20-25 %
– Books 20-25 &
– Tickets to events 20-25 %
* (growth of traffic in 1H 2015/1H 2014; median across
the stores in TOP-1000 list)
The market growth is expected in the
categories with
– low share of online sales at the moment
– high buying frequency (FMCG)
The following categories meet the criteria:
– Low share of online sales at the moment
– Food & beverage
– Pet supplies and detergents
– Household goods
7 © Finpro

8. Customers in Russia

9. Operates in RU-NET (Russian Internet)
© Finpro9
Search traffic, web-sites in the
category products and services
62 %
31 %
5 %2 %
Yandex
Google
Search.mail.ru
others
Socialize in Vkontakte
По-русски
Largest social media and the
most visited site in Eastern
Europe.
Vkontakte audience:
• 270+ million accounts
• 62+ million average daily
users
Source: Data Insight www.datainsight.ru

10. High loyalty to shops but fierce competition
© Finpro10
44 %
4 %
25 %
27 %
competition
of stores
loyalty
purchases
Knew in advance at
which particular store
they would make a
purchase
Did not plan this purchase -
online store offered/
recommended this product
Choose from several
shops’ offering
Did not know where
to buy the product
(price competition
between shops)
Source: Data Insight www.datainsight.ru
150 000 internet shops
in Russian Internet
Only 4000 receive more
than 10 orders daily

11. Great service and usability required
© Finpro11
Fast delivery with various options:
courier, sales agent with try-on option,
pick-up at various locations, postamat,
delivery service, Russian post
Payment options:
• Cash on delivery (still 50-60 %)
• Card on delivery
• Card pre-payment
• E-money
• Offline prepayment
Return management:
• Majority is not executed orders (yet
unpaid)
• Pre-paid orders returns <3%
Customer-centric approach Client service & support

12. Quick adoption and progress
• Online payments are getting more common:
Yandex.Money, Kiwi, PayPal, bank cards, loyalty
programs with payment options
• Mobile purchases: driven by women 20-30 with
kids (can buy online from smartphone) =>
responsible for 2/3 of household purchases
• Cross-border shopping via middle-man companies
warehousing in USA & EU, deliver from Amazon,
Ebay, Taobao, etc
• BRINGO: online platform to distribute couriers.
Delivery via a “bringer” – new approach
© Finpro12

13. Russia is much more than St. Petersburg
Online sales is the most popular in
Moscow and St. Petersburg:
– 44% of residents (aged 18-65)
buy goods online as compared
to the national average of 26%
85% of all sales concentrated in
European part of Russia (2000 km
around Moscow). 18 cities with
more than 1 million citizens are
growing their share in ecommerce
together with smaller towns.
© Finpro13
Source: Data Insight www.datainsight.ru

14. How to get on board

15. How you can get to the Russian market
© Finpro17
Your Expenses
Selling
B2C cross-border
Contracting
e-retailers in
Russia
Establishing
presence in Russia
Marketing in Russia
Managed by
e-retailer
for a fee up to
25%
Customer service & support
Payments
Deliveries & returns
Customs Applies to receiver
>1000 €
Legal issues (personal data
law)
Not applicable Not applicable You are in charge
Risk Medium Low High
Personnel required None or few None or few Team
Potential sales volume

16. Food for thought
1. Almost all cross-border purchases are 100% pre-paid. Returns are <3%.
2. Private citizen of Russia can import up to 1000 € per month with no duty.
3. High-end and luxury goods are in demand and Finland is known for high
quality goods. Such demand is concentrated in Moscow.
4. Contracting local e-retailer is the easiest way to penetrate the market.
5. Numerous service providers for everything are looking forward to partners.
© Finpro18