This document provides an overview of e-commerce in Russia, including key statistics about the country's geography, population, and internet usage. It notes that while Russia has a large internet audience, internet penetration is still relatively low, representing significant growth potential. The document also examines Russians' online shopping behaviors and preferences, such as a preference for cash-on-delivery and lack of trust in online payments. It summarizes sales data that shows electronics, clothing, and children's goods as top purchase categories in both large cities and regional areas.

1. E-commerce in Russia: Reality Check
Arkady Sandler
Sunday, May 27, 12

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 English
Sunday, May 27, 12

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)
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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%
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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 2011
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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.com
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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 Insight
Sunday, May 27, 12

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. 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
business
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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, 2011
Sunday, May 27, 12

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, 2011
Sunday, May 27, 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, 2011
Sunday, May 27, 12

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
line
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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. 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 terminals
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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 understanding
Sunday, May 27, 12

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.
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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 customers
Sunday, May 27, 12

19. Thank you!
Arkady Sandler
arkady@sandler.vc
@arkadysandler
Sunday, May 27, 12