AND   PRESENTKEY INSIGHTS
About this studyThese are excerpts from a comprehensive research study offered by East-West Digital News, the internationa...
Foreword                      Marina TreshchovaIn 2010, while deciding on our first company to launch, there was no doubt ...
Chief Editor’s note                    Adrien HenniWe are pleased to offer key insights of a year-long research project on...
18   Russian E-commerce 2011                                                               million   THE NUMBERS          ...
Russian E-commerce 2011INTERNATIONALCOMPARISONSIn 2011, the sales volume of online retail in      The fact that Russia ran...
Russian             E-commerceFORECASTSWe anticipate an at least 2.5-fold market          In a long term perspective, acco...
Russian E-commerce 2012THE TRENDS     Source: East-West Digital News         The market is growing by at least 25% each1  ...
TOP RUSSIAN                                    An exclusive ranking                                    by East-West Digita...
Methodological                      NoteIn the absence of officially disclosed      Vseinstrumenti.ru, a site offering too...
A research by Fast Lane VenturesV E N T U R E                       in partnership with                                   ...
A research by Fast Lane VenturesV E N T U R E                       in partnership with                                   ...
A research by Fast Lane VenturesV E N T U R E                                               in partnership with           ...
10 CHAPTERSContents                                    316 PAGESof the full version                         12 CASE STUDIE...
•	   I N T E R N E T 	   •	   M O B I L E 	   & 	   T E L E C O M 	   •	   S O F T W A R E 	   & 	   H A R D W A R E 	   I...
E-commerce in Russia
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E-commerce in Russia

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Отчет по рынке эл. коммерции в России от Fastlane Ventures и East-West Digital News

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E-commerce in Russia

  1. 1. AND PRESENTKEY INSIGHTS
  2. 2. About this studyThese are excerpts from a comprehensive research study offered by East-West Digital News, the international resource on Russian digital industries, inpartnership with Fast Lane Ventures.Based on interviews with over 80 industry executives and experts, theresearch was conducted with the participation of leading consultancies anduniversities.To receive an executive summary at no charge or order the full version(10 chapters, 316 pages), please email us at report@ewdn.com About the publisherEast-West Digital News is the first international information company dedicatedto Russian digital industries. Its website EWDN.COM provides news, marketdata, business analysis and updates pertaining to the Internet, e-commerce,mobile and telecom industries, digital TV and satellite systems, software andhardware innovation, as well as to the related investment activity and legaldevelopments.A consulting branch, East-West Digital Consulting, provides internationalplayers with assistance for business development in Russia and advisesRussian companies on their international strategies.For more information, please contact us at contact@ewdn.com
  3. 3. Foreword Marina TreshchovaIn 2010, while deciding on our first company to launch, there was no doubt in our mindsthat it should be an e-commerce startup. We were absolutely sure that the time hadcome; the e-commerce market had started to boom and would continue to grow quicklyand exponentially. We saw a large gap in the market; the absence of convenient andnecessary consumer services available in Russia. It may be difficult to believe but twoyears ago, when we started Sapato.ru, there were no online shoe shop in Russia!Skeptics tried to convince us that Russian women would never buy shoes online but 2year later Sapato.ru is the №1 online retailer generating millions in revenue andreceiving hundreds of thousands of orders per year.This proved to be a game changer; we proved the necessity of qualitative internetservices for Russian consumers and now see huge opportunities in the future.In a recent study into the potential growth of e-commerce in the emerging markets madeby consulting company A. T. Kearney, Russia was ranked number three. The key driverbehind this ranking is clear; Russia’s constantly expanding internet audience. Currently,the demands of Russian consumers are still not being met, and so we anticipate thenumber of online retailers will increase dramatically to satisfy this demand.The number of the new online services reflects Russia’s expanding online audience.There are about 30,000 online shops in Russia at the moment. We have seen a newgeneration of customers appear, those that demand perfect service and a wide choicein goods, and it is these customers who prefer the advantages of online retailers.Furthermore, we see an unprecedented growth in the number of internetentrepreneurs in the country, and e-commerce is one of the key market sectors settingthe tone in the development of Russian internet businesses.Fast Lane Ventures continues to be on the cutting edge of the Russian internet,launching new e-commerce businesses with the capability to become market leadersand setting new standards for Russian customers. With other players of the market,we are bound to take Russian e-commerce to the next level. Marina Treshchova is the CEO and a co-founder of Fast Lane Ventures
  4. 4. Chief Editor’s note Adrien HenniWe are pleased to offer key insights of a year-long research project on theRussian online retail market, one of the fastest growing but least known (andunderstood) on the planet.The report provides international audiences with the first reliable and precisedata on this market, plus middle and long term forecasts and trends.Beyond capital-centric analysis, the full version also explores the regionale-commerce scene – now nearing the tipping point in a market thus fardominated by Moscow and St. Petersburg.Yet our research is, above all, a practical guide. In the full version, more than150 pages are dedicated to analysis of and recommendations for each of thekey issues defining the industry – from marketing to payments, from fulfillment tolegal requirements and on to little known HR challenges.Last but not least, entrepreneurs and investors will enjoy a review by Fast LaneVentures of the e-commerce-related investment deals that have taken place inRussia over the last two years, with an analysis of the financial issues pertainingto Russian e-commerce and the exit perspectives in the industry.We hope you enjoy this groundbreaking collaborative effort and wish you everysuccess in your e-commerce projects. Adrien Henni is the Chief editor and a co-founder of East-West Digital News
  5. 5. 18 Russian E-commerce 2011 million THE NUMBERS Russians   shopped onlineSources: Data Insight and East-West Digital News in a 6-month period,unless stated otherwise or 14% of the population 18+ (or 7 million monthly) Total of whichmarket $10.5bn was spent on size: (310bn rub.) $7.8bn physical (230bn rub.) goods… …while cross–border sales reached   $ 700 mOnline retail accounted of the total Russian 2%for less than retail market… …but grew by at least in one year +25% 89 orders of which of physical goods 45 million   were made during the year million   (or 245,000 per day) (or 125,000 per day) came from the regions Insales counted   25,000 of which only 10 made $100m or more in sales (physical goods only) Internet shops while the revenues of the 30 top players up from 16,000 in 2010 or just 268 that same totaled less than $3bn year, according to the Russian official statistics or 1/3 of the total market size (physical goods only)
  6. 6. Russian E-commerce 2011INTERNATIONALCOMPARISONSIn 2011, the sales volume of online retail in The fact that Russia ranks fairly high amongRussia was similar to that in Italy, Spain or European countries in share of onlineBrazil, while significantly behind the USA shoppers in total Internet users, does notand the EU. The share of online retail in total provide evidence of exhausted growthretail amounted to less than 2%, compared potential. The mid-term potential of Russia’sto between 7% and 9% in the USA and most online shopper base to expand could beWest European countries. In the UK, the higher than that of European countries.share has gone beyond 10%. The lowpenetration of e-commerce in Russia (where This optimistic outlook is based on the factin 2011 only around 15% of adult population that many characteristics of Internet use inshopped online) is, however, linked not so Russia, such as Internet behavior, is less likemuch to lack of interest in online retail, but other European countries and more like whatrather with a relatively low Internet is seen in Asian and Latin American markets,penetration. where the Internet audience is significantly more involved in e-commerce than inRelevance of Internet retail in Russia is fairly Europe.high, as 40% of Internet users shoppedonline in 2010, which was ahead of Italy, In Europe, only the UK has a share of onlineGreece, and new EU members from Central shoppers as a percentage of total InternetEurope and the Baltics. The share of online users that has surpassed the 80% level,shoppers in total Internet users in Spain that whereas the level is well above 80% in suchyear was comparable to that in Russia, while other developed markets as the USA andbeing 1.5-2 times higher in the most Japan, and developing ones, such as Brazildeveloped countries (65-85%). and China.
  7. 7. Russian E-commerceFORECASTSWe anticipate an at least 2.5-fold market In a long term perspective, according togrowth between 2010 and 2015. The total e- moderate forecasts, the market size of Russiancommerce market could amount to somewhere e-commerce could reach $50 bn by 2020. In nobetween 690 bn rubles ($23 bn) and 900 bn case should this figure, which representsrubles ($30 bn) in 2015, at 2010 values. This around 6% of Russias total retail market, becorresponds to up to 5% of total retail volume regarded as a maximum. Further strong growthin Russia. For reference, the same level of e- will be fueled mainly by such structural factorscommerce existed in the USA in 2008, i.e. as:Russia is behind approximately 10 years, by •  Fulfilment infrastructure reaching maturity:this measure. With reduced delivery costs, the scope of e- commerce will extend to cheaper productThe fastest growth rate, 3.6-fold or more, is categories;expected to be found in the regions, with a •  E-signature and online payments becomingconsiderable flow of new Internet users from more popular, with mass demand for non-there. They will account for the majority of the material products such as insurance and tourgrowth of the e-commerce market – for 87% in package offers.terms of number of new online shoppers andfor 59% in terms of market value growth Russian e-commerce could thus represent abetween 2010 and 2015. market of up to $150 bn within 15 to 20 years.
  8. 8. Russian E-commerce 2012THE TRENDS Source: East-West Digital News The market is growing by at least 25% each1 year; some major online retailers are even seeing their sales double or triple. The regions still lag behind the capitals, but2 pioneering retailers now generate more than half of their sales from the regions Major offline retailers are now coming to3 e-commerce while online-offline concepts multiply. Investment activity is growing fast, but exits4 are still exceptions and are likely to remain so at least in the short term. Logistics and delivery are still bottlenecks for5 e-commerce in the regions; major retailers overcome this by building their own capacities. Cash-on-delivery is the rule for physical goods 6 and will remain so for a long time, but merchants find ways to cope with the related issues. The lack of qualified human resources7 appears to be one of the most painful issues, hampering the entire Internet industry. Cross-border sales have grown considerably8 over the last few years, but foreign e-merchants still have to pull down two major walls: customs clearance and delivery across Russia.
  9. 9. TOP RUSSIAN An exclusive ranking by East-West Digital News and Data InsightE-COMMERCEPROPERTIESO N L I N E S A L E S 2 0 1 1 PHYSICAL GOODS SERVICES & VIRTUAL GOODS
  10. 10. Methodological NoteIn the absence of officially disclosed Vseinstrumenti.ru, a site offering toolsfigures for most players, establishing a and appliances for the home andranking of the top Russian online garden, had remained under the radarsretailers is a daunting exercise. until recently. Its importance on the Russian e-commerce scene is revealedSeveral rankings do exist, based on a for the first time in this ranking.variety of online measurements,information from industry sources and/or other unspecified methodology; none *of these can be considered completelyreliable. Our methodology for estimatingFor certain sites, 2011 sales estimates turnovers has been the following:may vary up to eight-fold between tworankings. In particular, the turnover of • We systematically requested figuresCitylink.ru, a major site offering and sometimes obtained them, eitherconsumer electronics, was estimated at officially or unofficially;$310 million by Online Retailer – a far •  For some other sites, we receivedcry from Insales more modest estimate information from reliable insiders orof $37 million. An internal source industry sources;assured us that Online Retailers figurewas close to reality, but Data Insights •  In still other cases, we relied on theexperts remained skeptical. Due to expertise of Data Insight, whosethese uncertainties, and in the absence analysts are among the best on theof an official answer from the site, market;Citylink.ru has not been included –perhaps unfairly – in our ranking. •  In the absence of official or unofficial figures, reliable sources or an estimateWhile KupiVip.rus turnover "varies" from Data Insight, we averaged thefrom $77 milllion, according to Insales, figures from existing rankings – or didto $193 million, according to Online not include the site in the ranking whenRetailer, a well informed source told us the latter seemed unreliable.that the sites gross merchandise valuewas actually close to $160 million. In the absence of official figures, we felt we reached a high degree of certaintyIt is very likely that Amazon and eBay whenever at least two reliable industryshould be included in our ranking, sources, or experts, converged in theirbased on the assumption that cross- estimates; or when the three mainborder sales may have totaled some existing rankings offered similar figures.$600 or $700 million in 2011, and thatthese two sites account for a significant In other cases, the figures should notpart of this volume. However, neither be considered more thansite agreed to disclose data on their approximations, with a much lowersales to Russia. degree of certainty.
  11. 11. A research by Fast Lane VenturesV E N T U R E in partnership with East-West Digital NewsINVESTMENTIN RUSSIAN E-COMMERCE Official data2 0 1 0 - 2 0 1 1PUBLICLY DISCLOSED TRANSACTIONS Unconfirmed data
  12. 12. A research by Fast Lane VenturesV E N T U R E in partnership with East-West Digital NewsINVESTMENTIN RUSSIAN E-COMMERCE Official data2 0 1 0 - 2 0 1 1PUBLICLY DISCLOSED TRANSACTIONS Unconfirmed data
  13. 13. A research by Fast Lane VenturesV E N T U R E in partnership with East-West Digital NewsINVESTMENTIN RUSSIAN E-COMMERCE2 0 1 0 - 2 0 1 1PUBLICLY DISCLOSED TRANSACTIONS These are excerpts from "The Russian Internet Deal Book," a comprehensive research on the financing of Russian Internet companies and startups in 2010 and 2011, offered by Fast Lane Ventures. To get your free copy, please contact Fast Lane Ventures Senior Investment Analyst Andrey Kulikov at akulikov@fastlaneventures.ru
  14. 14. 10 CHAPTERSContents 316 PAGESof the full version 12 CASE STUDIES & I N T E R V I E W S 9 8 I L L U S T R A T I O N SForewordsBy Ozon CEO Maëlle Gavet, Acrobator founder Bas Godska, and DavidWaroquier of Mangrove Capital PartnersKey figures and trendsTop 40 Russian e-commerce propertiesPart 1. Main market trendsPart 2. Demand side: Online consumersPart 3. Supply side: MerchantsPart 4. FulfillmentPart 5. The "Russian payment jungle"Part 6. Marketing and sales channelsPart 7. Legal aspectsPart 8. HR: The most painful issue?Part 9. E-commerce in the Samara region: A monographPart 10. Serving Russian customers from abroad:From cross-border sales to market entryTwelve case studies and interviewseBay – KupiVip.ru – The Otto Group – Ozon.ru – Sapato.ru – Shoesofprey.ru –Svyaznoy.ru – Travelmenu.ru – Utinet.ru – Vseinstrumenti.ru – VTB Capital –Daily deal sites
  15. 15. •   I N T E R N E T   •   M O B I L E   &   T E L E C O M   •   S O F T W A R E   &   H A R D W A R E   I N N O V A T I O N   •D I G I T A L   T V   •   S A T E L L I T E S   •   S T A R T U P S   •   I N V E S T M E N T   A C T I V I T Y   •   L E G A L   D E V E L O P M E N T S DIGITAL Digital Russia TV in English • SATELLITES • STARTUPS • INVESTMENT ACTIVITY Daily news • Analysis International consulting • LEGAL www.ewdn.com DEVELOPMENTS • East-West Digital News is the first international information and consulting company dedicated to Russian digital industries. Get in touch with us at c o n t a c t @ e w d n . c o m I N T E R N E T   •   M O B I L E   &   T E L E C O M   •   S O F T W A R E   &   H A R D W A R E   I N N O V A T I O N   •

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