Conference speaker interview: Understanding e-commerce in Russia

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Georgy Alikoshvili, deputy CEO, international business, JSC Russian Post, will share his thoughts on how the e-commerce market in Russia has developed, at the forthcoming Parcel+Post Expo Conference, in Vienna, this October, as part of the ‘Developments in e-commerce, logistics and supply chain’ track on Thursday, October 14.

What is the Europe-Russia cross-border market like today?
Last year the Russian e-commerce market showed impressive growth. According to research by Statista and Data Insight, the growth rate was 69% and the total volume reached US$37bn. In our estimation, in 2021-2024 the growth will remain at the level of 30%.

In 2020 the pandemic spurred the shoppers’ switch from offline to online: the share of online in retail increased from 5.6% to 8.7%. As reported by the National Research University Higher School of Economics, the volume of cross-border trade (GMV) in 2020 amounted to RUB320bn [US$4.3bn]. According to the Association of Internet Trade Companies, the cross-border segment accounted for about 26%.

Last year was challenging for cross-border trade and delivery. Before the pandemic, the majority of shipments from Europe were delivered by air. Due to Covid-19, passenger air traffic was almost fully halted and has not yet returned to its previous scale, and air fares have increased: on some routes from Europe they have grown from €1 [US$1.18] to €11 [US$12.98] per kilogram. Cargo flight capacity has been limited. Also, the duty-free limit in Russia at the beginning of 2020 was reduced from €500 [US$590] to €200 [US$236] per item.

Nevertheless, Russian customers continued to make purchases in foreign online stores. Among the European online platforms most popular with Russians in 2020 were ASOS, Bonprix, La Redoute, Yoox, Farfetch and Boohoo. The most frequent orders from European shops were clothes, accessories and shoes – including for children.

As a company that accounts for almost 94% of the Russian cross-border market, we can see that today the volume of orders from European online stores exceeds the one from the USA, but still is inferior to Chinese sites.

The factors most attractive for Russian customers in European online stores are the quality and wide range of goods. Also, shoppers can buy goods at a reasonable price.

How can this cross-border market be improved?

We can single out potential growth points that can stimulate the cross-border segment in the coming years. For instance, bonded warehouses: the solution will fast-track the delivery of international parcels.

We see the development of mail forwarding services and the placement of goods of European brands on large Russian marketplaces as a separate vector in the cross-border segment. The largest marketplaces in Russia today account for a little less than half of the country’s online sales. Most retailers in Russia are already diversifying their sales via marketplaces as an additional online channel.

The duty-free limit plays an important role in cross-border segment development. To maintain export-import flows, it is necessary to keep a reasonable balance taking into account overseas practices on that front.

If we generally take the development of cross-border trade in Russia, as practice shows, customized online store websites and comprehensive customer service support (including the support on the logistics operator’s side) contribute to an increase in sales. Russian customers must understand who they will have to interact with to receive the goods, how the customs clearance process will be performed and how returns can be made (if needed). Russian Post’s authorized operator status makes delivery from abroad and payment of any duties fast and convenient.

What is the biggest challenge in developing supply chains for this market? 

In 2020 the pandemic introduced changes in the Europe-Russia delivery market. I will tell you about two cases to illustrate the situation:

Due to the restrictions, a client in the UK had a backlog of over 150 tons. It was necessary to change the traditional routes and ensure the traffic continuity. There was no regular passenger air service with Europe, there was a shortage of air capacity and tariff rates increased. The solutions were additional charter flights on our own aircraft to Russia and charter cargo flights to the UK. We also launched trucks through the Eurotunnel. After air connection with Europe was closed, we began to deliver goods to Germany and further to Moscow.

As a UPU member, Russian Post has provided multimodal transit solutions for delivery from Japan to 13 European countries to ensure the steadiness of traffic. Previously, Japan Post used a solution that did not require high delivery speed. Last year, to stabilize the traffic, the partner switched a significant part of the air volumes to a multimodal solution. Japan Post transported goods by sea to the international postal exchange office in Vladivostok. From Vladivostok to Moscow they were delivered by rail. Then they were driven further on to Europe by road.

The evidence showed that several factors helped ensure continuous cargo shipping: a diversified logistics system, flexible supply chains, the system of alternative routes, our own capacities (mail and baggage carriages, trucks, aircraft), a distributed network of sending and receiving facilities, and partnerships with the largest players in the logistics market.

Don’t miss Georgy’s presentation, entitled, ‘Europe-Russia cross-border market: features of supply chains development and transformation’, which is part of the ‘Developments in e-commerce, logistics and supply chain’ track, on Thursday, October 14. 

See the full conference program, here.

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With over 20 years experience in editorial management and content creation for multiple, market-leading titles at UKi Media & Events (publisher of Parcel and Postal Technology International), one of the UK's fastest growing publishing companies, Anthony has written articles and news covering everything from aircraft, airports and cars, to cruise ships, trains, trucks and even tires!

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