1.
Why Russia doesn’t have eBay? January 2009

2.
Russia is the single market in the entire world that still doesn’t have a major online marketplace ?

3.
Different people give different reasons for that… <ul><li>Myth 1: There is no suitable payment systems </li></ul><ul><li>Myth 2: The logistics in Russia is very rudimentary and challenging to build </li></ul><ul><li>Myth 3: The internet penetration is too low for a marketplace to take off </li></ul><ul><li>Myth 4: The trust among online users is too low </li></ul><ul><li>Myth 5: Russians simply lack necessary mentality to adopt that kind of service </li></ul>

4.
Payment: there are plenty of online services but to start a marketplace one doesn’t really need them <ul><li>We have counted over 50 online payment systems in Russia. They serve less than 10% of online transactions. Once a dominant marketplace emerges this share will gradually grow. </li></ul><ul><li>Credit cards are responsible for another 10% of transactions. The number of credit card users is also growing but… </li></ul><ul><li>Like the majority of developing countries Russia remains cash-driven and cash-dominant economy. More than 80% of online customers prefer to pay cash. One can build a marketplace around cash-paying customers. It has been done multiple times over the last 8 years… </li></ul>

5.
As in other markets, cash-paid online transactions will work perfectly in Russia <ul><li>There are three ways of accepting cash for ecommerce: </li></ul><ul><li>Cash on delivery – already being practiced by Ozone in Moscow </li></ul><ul><li>Instant terminals – currently being used for a limited number of services (such as internet, cell phones, etc.) but are expected to evolve in a major payment tool </li></ul><ul><li>Banking transfers/direct deposits without opening a bank account – works perfectly in Latin America and already exists in Russia </li></ul>

6.
Logistics: already developed and not that challenging <ul><li>Overwhelming majority of online transactions in any developing country takes place within large cities </li></ul><ul><li>Similarly, there are strong reasons to believe that same-city transactions will constitute up to 90% of Russian online transactions </li></ul><ul><li>Thus, to build an online marketplace one needs local carriers in large cities </li></ul><ul><li>Today every large city in Russia has at least a dozen of carriers that provide delivery services for local businesses and online shops/restaurants </li></ul><ul><li>There are also many national-wise service providers: EPS, Pony Express and others </li></ul><ul><li>Combining this already existing infrastructure with cash-on-delivery approach with solve all logistical problems altogether. The company named Estafeta provides a very compelling case for such a solution in Mexico. </li></ul>

7.
Internet penetration increases by 3-4 % annually which makes Russia one of the fastest growing markets for e-commerce <ul><li>Drivers of growth: 2000-2008 </li></ul><ul><li>Rapidly growing computer penetration in households, workplaces, classrooms and Internet cafes; </li></ul><ul><li>Exponentially increasing availability and decreasing prices of broadband Internet; </li></ul><ul><li>Significantly increased Internet security protection, including telecommunications networks and systems; </li></ul><ul><li>Availability of advanced electronic or other payment systems, including credit card, instant terminals and online banking systems ; </li></ul>

8.
Trust: how much trust does one need to spend $100 online? <ul><li>Answer 1: Depending on one’s disposable income. Then it becomes not an issue of trust but an issue of growing disposable income of the Russian customer. </li></ul><ul><li>Answer 2: Depending on where one is shopping. Why on earth 16M Russian internet users that were buying online in 2008 should trust an online marketplace less than they trusted unknown online shops?! </li></ul><ul><li>Answer 3: Probably similar to that in other supposedly low-trust economies (such us Panama, India) where the issue of trust doesn’t prevent people from massively engaging in online transactions. </li></ul>

9.
Mentality: is it true that Russians are that different from the rest of the world?... <ul><li>Argentina </li></ul><ul><li>Mexico </li></ul><ul><li>India </li></ul><ul><li>Panama </li></ul><ul><li>Poland </li></ul><ul><li>Japan </li></ul><ul><li>Brazil </li></ul><ul><li>China </li></ul><ul><li>Australia </li></ul><ul><li>New Zeeland </li></ul><ul><li>UK </li></ul><ul><li>South Africa </li></ul><ul><li>South Korea </li></ul><ul><li>Germany </li></ul><ul><li>France </li></ul><ul><li>US </li></ul><ul><li>Holland </li></ul><ul><li>Hungry </li></ul><ul><li>Belgium </li></ul><ul><li>Uruguay </li></ul><ul><li>Malaysia </li></ul><ul><li>Switzerland </li></ul><ul><li>Chili </li></ul><ul><li>Denmark </li></ul><ul><li>Philippines </li></ul><ul><li>Turkey </li></ul><ul><li>Singapore </li></ul><ul><li>Czech Republic </li></ul><ul><li>Italy </li></ul><ul><li>Taiwan </li></ul><ul><li>Ireland </li></ul><ul><li>Canada </li></ul><ul><li>Austria </li></ul>Countries where a marketplace became a major means of online shopping:

10.
Rapid economic and infrastructure development created necessary conditions for an online marketplace to take-off 36% Internet penetration Russia becomes the second largest Internet country in Europe Russia becomes the largest Internet country in Europe 43% Internet penetration Russian becomes the fifth largest Internet language in the world 46% Internet penetration Russian GDP per capita, current USD Broadband Internet penetration in Moscow, % of Internet households Russian Internet population, mln. people ??? Russian “Google” Russian “Yahoo” Russian “eBay” Valuation ~$2-5bn Valuation ~$1-2bn Valuation ???

11.
The real answer: nobody has really tried <ul><li>Argument 1: Building a marketplace requires a long-term commitment and a lot of capital. There have been very few well-funded and long-term oriented startups in Russia so far. </li></ul><ul><li>Argument 2: Building an online marketplace is hard. With that much capital and commitment Russia provides plenty of less demanding lucrative opportunities. </li></ul><ul><li>Argument 3: Online marketplace is more about business processes and relentless marketing efforts than it is about technology. The example of Molotok.ru illustrates this very well (as opposed to identical Allegro in Poland) </li></ul>

12.
The last opportunity to build a large-scale proven business model in Russia…