E-commerce in Russia: Reality Check                                          Arkady SandlerSunday, May 27, 12
Meet        Russia         The biggest territory in the world:         17,075,400 km2         Population: 143,030,106     ...
Meet        Russia      Distance between to 2 widest separated points is      8,000 km      Transport:           ➡ Railway...
Meet        Russia      Largest cities:                      Most businesses concentrated in          ➡   Moscow: 11,800,9...
Internet Audience,         December, 2011                 Russia                                                       50,...
Internet Penetration, %      December, 2011            90                       82.7        82.0    80.0      79.9      78...
Ecommerce Markets,        Volume, Growth, 2011                           15% yearly                           $680.6 bln. ...
E-Commerce or....?           In the US e-commerce volume reached $197 bln. or 9%           of all retail                 O...
E-Commerce or....?                     Brick&Mortar                               Online                     Find location...
Russia:    what people bought in    2011                                                     Volume/year, bln. rub.    Ele...
Russia:    what people bought in    2011                                                     Volume/year, bln. rub.    Ele...
Russia:    what people bought in    2011                                                     Volume/year, bln. rub.    Ele...
Russian online    shopper                                                               No trust                          ...
Russian online shopper                                                                 No trust                           ...
Russian online shopper                                                                  No trust                          ...
Russian mentality:    Different HR    More and more companies               Startups with limited funding:    online:     ...
Global ecommerce:    2012 expectations                            Already an important part of marketing strategies. Socia...
Globalization      More brands will sell direct in international markets          • few companies have truly global online...
Thank you!                     Arkady Sandler                     arkady@sandler.vc                     @arkadysandlerSund...
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E-commerce in Russia reality check. May 2012

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What is e-commerce in Russia at 2012. Global and local challenges and solutions

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  • Arkadiy, great article!

    I would like to add this. There are many intermediary companies that specialize in buying from the US online stores and shipping to Russian consumers. So basically US merchants deal with those broker companies instead of buyers in Russia. For example, take a look at Global Orders USA - http://www.globalorders-usa.com . I think it a great model for the American retailers and quite a good deal for the Russian buyers. Of course, International shipping is rather expensive, but in most cases prices for the same goods are considerably lower in the USA compared to Russia.
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E-commerce in Russia reality check. May 2012

  1. 1. E-commerce in Russia: Reality Check Arkady SandlerSunday, May 27, 12
  2. 2. Meet Russia The biggest territory in the world: 17,075,400 km2 Population: 143,030,106 GDP: $2,383 trillion ( per capita$16,736) Language: 142 mln. speak Russian, 5% have some command of EnglishSunday, May 27, 12
  3. 3. Meet Russia Distance between to 2 widest separated points is 8,000 km Transport: ➡ Railway: 40% of all freights, length - over 85,500 km ➡ Roads: 933,000 km, 755,000 paved. Lowest road density of all G8 and BRIC ➡ Waterways: 102,000 km ➡ Airports: 1,216 Demographics: ➡ Picked in 1991: 148,689,000 ➡ Since then constant decline ➡ Birth rate is higher than in Europe (12.6 /1000) ➡ Mortality rate extremely high (14,6/1000)Sunday, May 27, 12
  4. 4. Meet Russia Largest cities: Most businesses concentrated in ➡ Moscow: 11,800,992 Moscow and St. Petersburg. Dealer ➡ St.-Petersburg: 5,100,520 networks in regions. ➡ Novosibirsk: 1,397,191 ➡ Yekaterinburg: 1,332,264 ➡ Nizhny Novgorod: 1,272,527 ➡ Samara: 1,164,900 ➡ Kazan: 1,143,600 ➡ Omsk: 1,129,120 ➡ Chelyabinsk: 1,093,699 ➡ Rostov-on-Don: 1,048,991 E-commerce growth in big cities: 8-9% E-Commerce growth in regions: 40%Sunday, May 27, 12
  5. 5. Internet Audience, December, 2011 Russia 50,810 Germany 50,139 France 42,349 UK 37,197 0 15,000 30,000 45,000 60,000 Unique visitors, thousands *-Comscore Metrix Report, September 2011Sunday, May 27, 12
  6. 6. Internet Penetration, % December, 2011 90 82.7 82.0 80.0 79.9 78.2 69.5 60 43.0 30 0 South Korea UK Japan Germany USA France Russia Russia is #1 in Europe by Internet audience, but the Internet penetration is still low = great potential for further development * - www.internetworldstats.comSunday, May 27, 12
  7. 7. Ecommerce Markets, Volume, Growth, 2011 15% yearly $680.6 bln. 2.5% of total retail sales 10% yearly $197 bln. 9% of total retail sales 26% yearly 16% yearly 366 bln. rub ($12.2 bln.) 1.6% of total retail sales €200.5 bln. ($270.7 bln.) 8.8% of total retail sales * - Forrester Research; FOM, Data InsightSunday, May 27, 12
  8. 8. E-Commerce or....? In the US e-commerce volume reached $197 bln. or 9% of all retail Online banking, tracking compare prices, find shipments online, renew hotel, book vacation and driver license, change air tickets, find address, contractor, order pizza, etc... E-COMMERCE Internet is just another necessary channel for sales, promotion, and information. Online presence is inseparable part of every current business model.Sunday, May 27, 12
  9. 9. E-Commerce or....? Brick&Mortar Online Find location Plan layout Hire designer Warehouse = Payment system No HTML Promote knowledge Customer Service needed Loyalty Ads Discounts Brand Set of tools, actions, and steps have already been developed. No “special” Internet knowledge is required to start an online businessSunday, May 27, 12
  10. 10. Russia: what people bought in 2011 Volume/year, bln. rub. Electronics, appliances 57 Computers 35 Clothing, Footwear 34 Children Goods 14 Groceries 12 Mobile phones 12 Automotive parts 12 Furniture 11 Sporting goods 8 Office supplies 7 Group discounts 7 Books 5 0 15 30 45 60 * - InSales, Data Insight, 2011Sunday, May 27, 12
  11. 11. Russia: what people bought in 2011 Volume/year, bln. rub. Electronics, appliances 57 Computers 35 Clothing, Footwear 34 Children Goods 14 Groceries 12 Mobile phones 12 In big cities, the proportions are almost equal Automotive parts 12 Furniture 11 Sporting goods 8 Office supplies 7 Group discounts 7 Books 5 0 15 30 45 60 * - InSales, Data Insight, 2011Sunday, May 27, 12
  12. 12. Russia: what people bought in 2011 Volume/year, bln. rub. Electronics, appliances 57 Computers 35 Clothing, Footwear 34 Children Goods 14 Groceries 12 Mobile phones 12 In big cities, the proportions are almost equal Automotive parts 12 Furniture 11 Sporting goods 8 Office supplies 7 In regions, leading categories are Group discounts 7 clothes, shoes, beauty products Books 5 0 15 30 45 60 * - InSales, Data Insight, 2011Sunday, May 27, 12
  13. 13. Russian online shopper No trust Payments Typical Russian internet user: Delivery Male, under 34, with high education Average monthly spending: in cities over 1m: $170 First time online shoppers prefer in other areas: $70 communication in person before they purchase. Active online purchasers: 15% of Russian internet users (7 mln) Large: Call centre Small-to-Medium: Representative in the 75% prefer cash-on-delivery office 12% are unhappy about delivery 28% choose offline, buy online • Online chats • Online voice calls • Click-to-Call from Internet to phone lineSunday, May 27, 12
  14. 14. Russian online shopper No trust Payments Typical Russian internet user: Delivery Male, under 34, with high education Average monthly spending: 80% online purchases paid for by cash - no trust in banks in cities over 1m: $170 - bank cards: still low penetration in other areas: $70 - debit cards, pre-authorization required Active online purchasers: 15% of Russian internet users (7 mln) 75% prefer cash-on-delivery ‣ Cash-on-delivery ‣ Electronic money 12% are unhappy about delivery ‣ Qiwi terminals 28% choose offline, buy online ‣ Cash-by-transfer (Sberbank, Russian Post)Sunday, May 27, 12
  15. 15. Russian online shopper No trust Payments Typical Russian internet user: Delivery Male, under 34, with high education Average monthly spending: Huge distances - limited infrastructure - Expensive delivery in cities over 1m: $170 - Coverage is not complete in other areas: $70 - Many courier services, but trust is an issue Active online purchasers: 15% of Russian internet users (7 mln) 75% prefer cash-on-delivery ‣ Big players - their own delivery ‣ Russian Post becomes an active player 12% are unhappy about delivery (own API) 28% choose offline, buy online ‣ Purchases abroad under 1,000 EURO ‣ Drop-off shipments to terminalsSunday, May 27, 12
  16. 16. Russian mentality: Different HR More and more companies Startups with limited funding: online: • close to zero loyalty • lack of skilled professionals • demand for higher salaries growing faster than profits • no educational institutions • inflation and productivity • Internet is not considered a • complicated tax system “serious” field • tax burden is carried by employer more than by employee To survive: higher prices, less choice Result: less competitive market Growth in cross-border shopping: Solutions already exist: Cheaper Language Better choice Currency Trendier Delivery Product promotion Local understandingSunday, May 27, 12
  17. 17. Global ecommerce: 2012 expectations Already an important part of marketing strategies. Social shopping is Social Networks still in early stages. Retail based social networks from smaller businesses to “collect” followers. Daily deals, Private Extremely fast growth. Although, the space is crowded, customers sales, Local still appreciate the offers and looking for new models. ecommerce Push-shopping - a new concept in retail is showing signs of Push-shopping and popularity. Instead of overwhelming Amazon catalogues, these sites penny auctions ask customers for their preferences, and based on that profile, return with suggestions to purchase. The expectations are that mobile ecommerce numbers will soon Mobile shopping catch up to those of traditional ecommerce. International and Big retailers already offer at least shipping to different countries. Amazon, Ebay and other large players are opening local sites. cross-border Smaller players already account for 10-20% of their sales being shopping international. Order online, pick up at the store. Another model: choose online, In-store pickup buy at the store.Sunday, May 27, 12
  18. 18. Globalization More brands will sell direct in international markets • few companies have truly global online presence • companies that ship internationally will start localizing their sites to avoid language barriers • 2/3 of online consumers in France and Germany shop only in their native languages International shippers will invest more in promotions in specific markets • direct targeting in local market • localized landing pages • improve local customer experience • local fulfillment options in the most lucrative markets Tier 1 retailers and brands will invest in their online presence • luxury brands recognized growth opportunities in BRIC countries long time ago • offline presence has been successful • will try to increase and promote their online presence in local markets Growth of international ecommerce supporting solutions • payment systems, warehousing, translation services • cross-market advertising opportunities • few companies offer localization of product offering targeted to local customersSunday, May 27, 12
  19. 19. Thank you! Arkady Sandler arkady@sandler.vc @arkadysandlerSunday, May 27, 12

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