In our search for a comprehensive analysis of e-commerce markets across the globe, our first stop will be Russia. In this blog post, we’ll discover the size of Russia’s e-commerce market, learn some of its general characteristics, and go over details that concern potential entrants to the market.
But before jumping into all of that let’s, have a general idea of the Russian economy.
The Russian economy (In short)
- 9th most populous country in the world and home to 144 million people.
- 68th country in GDP per capita ranking in 2018 with $10.950 according to data provided by the IMF.
- 1.8% growth forecast for the Russian economy in both 2020 and 2021 according to a World Bank report.
Major economic strength
Russia’s economy benefits largely from the fuel and energy complex (FEC). The FEC complex refers to the production, delivery, and consumption of all energy resources. While the FEC provides energy to a variety of sectors in the economy, it also constitutes the country’s main export.
Now that we have a general sense of the economy let’s look at the Russian e-commerce market.
Today, the Russian e-commerce market has a 3% share of the retail industry. However, it is expected to grow 170% in the next five years. In 2017 the industry was worth €14.2 Bn, and now it is expected to reach €18.02 Bn in 2019.
Internet penetration to online shoppers
Internet users are high in number but the main issue is to convert them into online shoppers. Even so, a forecast by Digital Market Outlook estimates 105.8 Mn users in 2023.
Advantages of the infant retail market
If you are e new entrant to Russia’s online retail market, you have a significant advantage. The market provides the grounds on which businesses can establish their technological tools. It also has room for advancements in technology, which will give a headstart advantage for the new entrants.
Although the market size is promising, Russia lacks the human capital that will actualize its potential. Russians spend less time on online shopping than their counterparts in Western countries.
A fragmented yet huge online population
The population is segmented by various aspects like the standard of living, purchasing power, Wi-Fi access, computer and internet knowledge. These differences create an imbalance of internet penetration between the regions.
In general, the Russian online shoppers are most interested in beauty services, entertainment, sports, dining, and travel. The delivery system, pricing, and product information are the driving forces of the Russian e-commerce market.
Demographics of e-commerce in Russia
While men spend more time online, women in Russia spend more time shopping online. Men are generally interested in car parts and electronic devices, whereas women tend to purchase clothes and children’s products.
The market of fashion lovers
Fashion products account for more than half of online purchases in Russia. According to a report regarding the distribution of online sales on eBay, the categories fashion and collectible goods constituted half of the eBay sales in 2017 and 2018.
China’s Alibaba benefits from the increasing rate of cross-border sales more than any other retailer in the Russian e-commerce market. To further its influence, Alibaba just invested $100 Mn in a joint venture together with several Russian partners including Mail.Ru Group.
In 2013, Yandex and GFK surveyed Russian consumers on their motivations for shopping abroad online, and the results are enlightening. 52% of the participants indicated that foreign online shops priced their products better than Russian online shops. Consumer loyalty is very low due to price sensitivity.
Promotion via microbloggers (about 10,000 subscribers) is a current trend, resulting from their low publication price and loyal audience. Marketing agencies help out brands in finding microbloggers.
Throughout this blog post, we talked about some unique characteristics of the Russian e-commerce market. Although it carries population-wise advantages, its population is highly segmented when it comes to online shopping habits.
If you want to enter the Russian e-commerce market, you should consider:
- Its segmented population
- The technological advantages characteristic to the market
- Tremendous interest in fashion products
- Russian shoppers’ sensitivity to price
Hopefully, it will be helpful if you are considering entering the Russian e-commerce market. Remember, it is crucial to lean on your pricing strategy as it is the main concern of online shoppers in Russia.