In 2016, ecommerce revenue in Russia grew 21 percent compared to 2015, to $16 billion. This is according to the Russian Association of Internet Trade Companies. The Association expects Russian ecommerce revenue to reach $20 billion for 2017, which will be another 25 percent increase. Roughly 25 percent of ecommerce sales, for $5.6 billion, are to consumers in other countries.
In this post, I’ll provide an overview of ecommerce in Russia. I’ll also offer suggestions for foreign ecommerce companies to sell in the Russian market.
Ecommerce in Russia
First, ecommerce is relatively new and is growing rapidly. Roughly 70 percent of Russian consumers — 145 million people — access the Internet. But only 46 million of them regularly buy goods online, representing a compelling opportunity for growth.
More than half of Russian online shoppers are age 25-34 and live, collectively, in Moscow (46 percent) and in St. Petersburg (11 percent). Fifty-one percent of online shoppers are female.
The most popular product categories online are apparel, cosmetics, and small appliances.
Foreign ecommerce sales into Russia grew by 37 percent in 2016 compared to 2015. Fifty-one percent of cross-border sales are from China. Twenty-four percent are from Europe and 12 percent are from the U.S. Sixty-four percent of Russian consumers spend less than $26 for an order. Only 21 percent spend up to $60 for the order. Delivery charges, on average, cost another $21.
China-made imports are typically the least expensive. But Russian consumers are willing to buy from higher-quality European and U.S stores if the price is agreeable.
User experience. Russia-based ecommerce sites often have a poor user experience. Complaints from online consumers are constant, and growing. Most online stores in Russia are difficult to use. Responsive design is uncommon for Russian online sellers. Load speed is a huge problem.
Personal information security worries Russian consumers. Seventy percent of Russian consumers prefer payment on delivery, according to Nielsen, the research firm. Forty-seven percent of consumers will pay on delivery with a debit card.
Most online shopping in Russia is from desktop computers. However, a Data Insight survey in Russia found that 27 percent of respondents would make purchases using mobile devices if the store were mobile friendly. Mobile shopping and mobile payments will inevitably grow with the younger generation. In fact, a smartphone is the primary online shopping device for Russian consumers under 25 years old.
Delivery is painful for Russian shoppers. It can be long, expensive, and unsafe. And even if the package reaches its destination intact, it can be different from what was ordered.
In fact, leading cross-border retailers such as Gap, Debenhams, and Marks & Spencer do not officially deliver goods to Russia. But others, such as Macy’s and ASOS, do.
Nevertheless, delivery limitations from top international retailers do not stop Russian consumers from buying from foreign brands. It has created a niche, in fact, for Russian entrepreneurs who purchase goods in other countries on buyers’ behalf and then deliver to them in Russia. The process is simple. The delivery provider has a long list of supported online stores and malls. The buyer chooses a product to buy, creates an account at delivery provider’s system, completes the order information, and pays for it electronically. The owners of these services welcome new foreign online stores.
Taxes and duties. Foreign merchants that sell less than €1,000 per month, for goods that collectively weigh less than 31 kilograms per month, do not have to pay duties for deliveries. That allowance is going down to €500 in 2018 and to €200 in 2019. Deliveries over that limit will become a subject to 30 percent duty.
Soon, major foreign marketplaces operating in Russia — such as Amazon, eBay, and AliExpress — will have to pay 18 percent VAT for the purchases made by Russian consumers. Those marketplaces will presumably add this VAT to subtotal cost, making those goods more expensive for Russian consumers. But goods purchased on the marketplaces, with the 18 percent VAT, will have expedited crossing into Russian, meaning faster and safer.
Language. EF English Proficiency Index attempts to rank countries by their English-language skills. It reports that roughly 52 percent of Russians know English. But expansion into the Russian market demands localization. Consumers in Russia (and other countries) are naturally used to shopping on their own language, using their local currency. Russian consumers are more likely to purchase from a brand if they can understand promotions and use filters without translating.
How to start selling in Russia
- Sell popular categories, such as apparel, cosmetics, small electronics, or gadgets.
- Do not accept returned goods from Russia. Customers must agree with the no-returns policy before purchasing.
- Try selling gifts or handmade items. The average 2017 Christmas holiday budget for a Russian consumer amounts to €250. Chocolates, perfumes, and cosmetics are the top gift choices.
- Offer premium or high-end goods. Luxury boutiques are relatively popular among affluent Russians.
- Offer quality. Though Russians are used to budget limitations, they nonetheless value quality and positive purchasing experience.
- Target big cities. Citizens in Moscow and St. Petersburg spend two times more shopping online than other regions.
- Use social channels. This is the fastest way in Russia to build brand and reach consumers.
- Consider payment-on-delivery. It is the most popular payment method.
Marketplaces are a good way to reach Russian consumers. Popular marketplaces include:
- Amazon. The simplest way. Russian consumers are already there.
- eBay. Not as popular as Amazon, but can still produce sales.
- Yandex.Market. Yandex is the largest search engine in Russian.
- Avito. The Russian Craigslist. Anyone can join and sell.
- Ozon. The Russian Amazon. It’s the national marketplace of everything.
- Litres. The dominant digital bookseller; a national leader. Self-publishing is supported.