The eDays E-Commerce Conference is an international event dedicated to Russian e-commerce. It focuses on the most important industry trends and developments in both their domestic and cross-border dimensions, and highlights the related operational aspects.
3. Partners
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5. THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
5
Contents
Forewords 5
Program 12
Speakers 18
Key facts and figures
of Russian e-commerce 24
Market overview 28
Interviews and analysis 43
7. Your communication goals:
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- Online platform with over 650 top influencers registered
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The online influence
specialists
Our website: www.buzzfactory.ru
Facebook: /BuzzfactoryRussia
For any questions: tcellerin@Buzzfactory.ru
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Contacts:
8. Thierry Cellerin
Founder and General Manager, Buzzfactory
What does “innovation” really mean in 2015?
You probably noticed the buzz around this word and the countless conferences that use it.
However, when we decided that the 2015 edition of the Edays conference should cover
the innovative dimension of online retail, our intention was to not to jump on a trend but to
analyze thoroughly the matter in its various dimensions.
The traditional business models we have known for decades or centuries have changed
drastically over the past 10 years. And this is just the beginning. Startups like Uber, Airbnb,
or Teads, are completely altering the way we see and understand business. The rise of
these startups, the falling costs of accessing technology, the development of the sharing
economy and the creativity of the digital native generation can reshape virtually any
business model in any possible industry.
For businesses, innovation is no more just a matter of competitiveness – it is now the only
way to survive. Creating better products is just not enough, every company must
understand that if they can not adapt to the new business rules, and if they do not
transform their activities fast enough, they are doomed (Kodak anyone?).
While speaking of a “digital transition,” nobody knows where this transition is leading us.
Even for digital professionals, it is hard to anticipate what the future will be like in some
three or five years.
In such circumstances, isn’t wise to observe and listen to the market through the
experience and insights of the greatest industry players and experts?
This is what you will be able to do at this conference.
Enjoy!
8
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
FOREWORDS
9.
10. 10
Pavel Chinsky
Managing Director, Franco-Russian Chamber of
Commerce and Industry (CCI France Russie)
Dear friends,
One year ago, the Franco-Russian Chamber of commerce of industry (CCI France Russie) and a
group of passionate IT analysts and entrepreneurs joined forces to organize the very first
international event entirely dedicated to e-commerce in Russia: the e-Days e-Commerce
international conference.
The project came out of a simple observation: in a few years, Russia has become the leading
European country in terms of Internet users, and numbers are still growing, as new and more
effective technologies enter the market and reach distant regions. This major shift has brought
about a complete revolution in the way goods are sold and bought on the largest territory on the
planet.
Despite a year of economic turbulences, online retail continues to show great promises for the near
future. Yet, adapting to new conditions requires knowledge and vision. The second edition of e-Days
e-Commerce conference aims to provide both, through inspiring ideas and analysis put forward by
experts and professionals from among the most innovative companies in the world.
The first day will be entirely devoted to innovation in retail, with presentations and keynotes
addressing the technological dimensions of success in Russia and abroad.
The second day will focus more on Russia’s market conditions, the strategies to launch and expand
business in times of crisis, with practical panels covering all aspects of online buying and selling,
with the participation of top executives and experts from Russian and international firms.
No doubt the second e-Days e-Commerce international conference will provide deep insights and
countless opportunities!
Faithfully,
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
FOREWORDS
11. Digital Russia
in English
Daily news • Analysis
International consulting
www.ewdn.com
East-West Digital News is the first international
information and consulting company dedicated to
Russian digital industries. Get in touch with us at
c o n t a c t @ e w d n . c o m
12. Adrien Henni
Chief editor, East-West Digital News
Few companies in Russia today are unaware of the important potential of the online retail market,
which is expected to triple by the end of the decade — up from around $20 billion last year. Yet a
surprisingly high number of brands and retailers – those domestic as well as foreign – remain absent
from the e-commerce scene, or have reached just modest results so far.
One of the reasons is that going online – which can imply designing complex multichannel models –
may appear particularly challenging in Russia. Among the key issues are fulfilment and delivery across
this immense country, as well as payments, which some puzzled foreigners perceive as a jungle.
On the other side, a number of successful projects prove that these challenges can and indeed must
be addressed by any player attempting to follow – or anticipate – the inevitable evolutions of retail in
the world of today and tomorrow.
Having followed the Russian e-commerce scene closely for several years, East-West Digital News is a
proud organizer of the e-Days E-Commerce Conference. To shed full light on this market, its
opportunities and its hurdles, we have brought together the industry’s most prominent players and
experts. Not only will they offer reliable and precise information on this market, but beyond business
analysis they will also explore the technological, financial and legal dimensions of this market. Above
all, the e-Days conference will highlight operational issues – from marketing to payments, to fulfillment,
delivery challenges, and cross-channel integration.
Last but not least, a section of the event is specially devoted to cross-border sales – a market that
increased by nearly 75% in 2014, reaching an estimated $4 billion. We are honored by the presence of
speakers and attendees coming from all Europe and as far as from China to hear and meet prominent
industry figures.
Our special gratitude, finally, goes out to the sponsors behind this event, who provided us with the
necessary means to organize it at such a high level.
We hope you enjoy this day and wish you every success in your e-commerce projects.
Sincerely,
12
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
FOREWORDS
13. OUR SEKeyareasofourresearchandconsultancy
activity – what we study:
PayPal
PayU / Naspers
Svyaznoy
Banki.ru
Fastlane Venture
Prostor Capital
Ad-hoc researches
Standard
reports
Public
resea
Ecosystem of b2b services for e-commerce:
logistics, payments, marketing solutions
Ecosystem of digital advertisement:
services, technologies, measurements
E-commerce, including online retail of material
goods, e-travel, online services, m-commerce,
consumer behavior
Ecosystem of startups and investments
AMONG OUDATA INSIGHT.
RESEARCH & CONSULTANCY AGENCY
+7 (495) 540-59-06
a@datainsight.ru
www.datainsight.ru
Established in 2010. Focused on Internet & e-commerce researches.
Our core competence: analysis of non-complete and heterogeneous
information, search for non-standard data sources, data comparison
and data combination. Any estimates and results we publish are
cross-checked by multiple methods to get consistent outcomes.
15. 15
8:10 – 9:00 - ATTENDEE REGISTRATION
9:00 – Introductive remarks
By Buzzfactory founder Thierry Cellerin, CCIFR President Emmanuel Quidet, and East-West Digital News
chief editor Adrien Henni.
9:15 – Visions of the Future
Ivan Mazour, a Russian-born, London-based serial entrepreneur, investor and author, will present the latest
trends in the UK and US e-commerce scenes and share his vision of the future of retail marketing.
Nicolas Vedrenne, Managing Director Europe of the Merchant Risk Council, will draw a picture of the future
of electronic payments and its impacts on online retail.
9:45 – The digital transition: What does it stand for? What is at stake? What is at risk?
Panel discussion with Oxymore Head of Strategy & Research Jean-Christophe Bonis, UK serial
entrepreneur and author Ivan Mazour, and Sanoma Independent Media President Jean-Emmanuel de Witt.
Also participating will be Mikhail Fisher, General Manager of Uber in Saint Petersburg, who will present the
way his company has changed consumers’ mentality around the concept of “sharing” versus “owning.” He
will also comment on the the disruption of the traditional business models and its consequences.
10:30 – BREAK
11:00 – Mobile commerce: Latest global and Russian trends
Ozon Head of Projects Mikhail Osin will present the mobile history and strategy of his company, which now
generates the majority of its revenues via mobile devices.
Igor Eremin, CEO of Russian mobile ad network iVengo Mobile, will comment on the slow development of
mobile commerce in Russia and how retailers’ strategies could evolve in the future.
Serge Korneev, Clickky.biz VP Business Development, will bring our attention to the latest novelties in
mobile retargeting, mobile video and mobile programmatic buying.
12:00 – The future of marketing
Participating in this panel discussion will be Thierry Cellerin (Buzzfactory), Emin Aliev (Criteo), Pierric
Duthoit (Google) and Bas Godska (Acrobator).
Mr. Berchenko will unveil some of the findings of Google’s internal research on the Future of Retail. In
particular, he will tell us how the US search giant envisions the interaction with the so-called”Generation C,”
which is key to understand the digital marketing of tomorrow.
12:45 – THE EDAYS FLYING SURPRISE
13:00 – LUNCH
Day 1, morning (June 4)
“Online & Offline Retail Technologies”
In partnership with Skolkovo’s IT cluster, La French Tech,
the Merchant Risk Council, and The Untitled investment company
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
PROGRAM
16. 16
14:15 – The drivers of e-commerce performance: High tech and Big Data
Lado Lebanidze of Google will highlight the technological and marketing challenges of advertising buying
when complex customer data is involved, and offer his vision of the latest and future trends in this field.
Andrey Sverdlov, regional manager at international analytics solution provider AT Internet, will tell us how
best analytics may be used to improve e-commerce performance.
Roman Zykov of Retail Rocket, a Russian startup developing advanced personalization solutions, will show
how “Big Data can be transformed into big money.”
Ksenia Yolkina of Yandex Data Factory will share her vision of the growing role of Big Data in the e-
commerce industry and comment on the Russian search engine’s plans in this field.
This discussion will be moderated by Efim Aldukhov, founder of E-Commerce Solutions, who will also
comment on some of the most interesting technologies currently available to Russian online retailers.
15:00 – Logistics and delivery: New approaches, new technologies
Matthieu Hallouin of Savoye, an international provider of logistics equipment, and Michael Poetschke,
General Manager at Arvato Russia, will share their vision of innovation in the field of e-commerce fulfilment
in Russia and in Western Europe.
Andrey Krylovich, Executive Director at Russian startup Delivia, will present a new solution allowing retailers
to coordinate and optimize operations with several delivery services. Another innovation, presented by
Valery Ilyukh of Logistics IT, is intended for delivery services to calculate and optimize shipping routes.
Copter Express CEO Oleg Ponfilenok will comment on the technical, commercial and legal aspects of the
use of drones for e-commerce delivery in Russia.
15:45 – THE EDAYS INNOVATION SHOW
16:45 – BREAK
17:00 – The security challenges of today and tomorrow: From payment fraud to data protection
Nicolas Vedrenne, Managing Director Europe of the Merchant Risk Council, will present the key findings of
MRC’s latest global research on payment security.
PwC expert Roman Chaplygin present the key findings of PWC’s Global Information Security Survey 2015
and their implications in the retail and consumer sectors.
Intelligent Emails CEO Jean-Stéphane Bagoëe will draw our attention to the theft of email databases in
Russia, how e-commerce companies are affected, and how they can protect themselves.
Kaspersky Lab Senior Researcher Yury Namestnikov will comment on the most serious threats affecting
online retail, and the ways to reduce them.
17:45 – Payment innovation: From payment experience to profitability
Participating in this panel discussion will be Elena Miroshnikova of LifePay, a leading Russian mobile
acquiring solution provider, Polina Dobriyan, PayU Russia’s new CEO, and a representative of Tinkoff Bank,
which is offering credit solutions for online purchases.
18:30-20:30 – NETWORKING COCKTAIL
Day 1, afternoon (June 4)
“Online & Offline Retail Technologies”
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
PROGRAM
17. Day 1 (June 4) at 15:45
The eDays Innovation Show
Five Russian innovations which could change your retail business
17
AddReality will allow you to organize interactive communications
with your customers on points of sales – with a variety of analytics
and advertising instruments. www.addreality.com
The BonusMall online auction technology will make your site’s
purchase experience even more attractive with its irresistible
gaming features! https://bonusmall.ru
Delivia will change the way you manage your delivery service
providers – and reveal considerable optimization possibilities.
www.delivia.ru
The Giftoman SaaS platform will allow retailers to manage your
loyalty programs, monitor customer satisfaction, and enhance
employee motivation. http://partner.giftoman.ru/
Logistics IT’s solutions will allow you to optimize shipping routes
and a variety of other logistics processes, reducing cost and
improving service quality. http://nplab.ru/
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
PROGRAM
The winner will participate in the finale of the Retail Big Challenge contest,
which will take place on June 16. East-West Digital News is glad to offer a
free marketing campaign during up to 6 months via its publications and events!
★ ★
YOU
are the judge!
Vote online for your
favorite innovation!
IN PARTNERSHIP
WITH
18. 18
8:10 – 9:00 - ATTENDEE REGISTRATION
9:15 – Russian e-commerce in crisis times
Fedor Virin, co-founder of Data Insight, will present the latest trends in the domestic market and offer
forecasts about the future.
9:45 – Key players - Situation & strategies in the domestic e-commerce scene
This panel discussion will gather the CEOs or top executives of some of the leading Russian online retail
companies, including: Vadim Fedotov of Groupon Russia, Oskar Hartmann of KupiVIP, Danny Perekalsky of
Ozon Holdings, Alexandra Savina of Ulmart.ru, Martin Schierer of Otto Group Russia, and Niels Tonsen of
Lamoda.ru. They will comment on their companies’ reaction to the crisis and further development plans.
10:30 – BREAK
11:00 – From offline to online, the transition accelerates
Martijn Peeters of PwC Russia will present the key offline-to-online trends in Russia with significant cases of
new online projects. International comparison points will be offered by highlighting global retailers’ best
practice.
Retail Rocket’s CEO Nikolay Khlebinsky will present a customer personalization case at Korablik, a Russian
offline retailer.
Pavel Kashcheev, who served a variety of Russian and international offline companies as e-commerce
project director or consultant, will comment on the complexities of the online to offline transitions, with cases
of success and failure.
Olga Kuznetsova, Digital Solutions Manager at Saint Gobain Russia, will present her group’s current and
future e-commerce projects and comment on the related distribution strategies.
11:45 – Latest online marketing trends and challenges in the Russian market
International marketing expert Bas Godska, who served leading Russian e-commerce companies during
several years, will offer a presentation on the latest evolutions in the industry.
Flocktory founder Ilja Eisen will comment on the growing role of social media and personalization in the
marketing strategies of Russian online retailers.
Nikolai Khlebinsky of Retail Rocket will provide his analysis on how customer data is actually used for
personalization purposes by Russian retailers.
Jean-Noël Rivasseau of Kameleoon will comment on the conversion challenges of e-commerce sites.
12:30 – Russia’s new payment regulations and their business impact
Electronic payments expert Elena Orlova will offer an overview of Russia’s new regulatory environment and
its business impact. Her presentation will be followed by a discussion with market players and experts.
13:00 – LUNCH
Day 2, morning (June 5)
“Market trends & perspectives”
in partnership with research companies Data Insight and Esper Group,
industry associations Electronic Money and NAMO
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
PROGRAM
19. 19
TRACK 1
14:15 – CROSS-BORDER SALES: Key trends;
Legal and tax environment; Delivery and
customs issues
Adrien Henni of East-West Digital News and
Alexander Ivanov of the NAMO industry
association will present the key findings of
their latest research on the Russian cross-border
sales market.
Darya Bobrovskaya of the German trade industry
association BGA will offer specific insights on the
Germany-to-Russia segment.
These expert presentations will be followed by a
discussion with Charles Bellissen of VisualMeta,
Artem Pereslavtsev, Commercial Director
of Russian Post, and Alex Vassiliev, International
Development Director at SPSR Express.
15:00 – CROSS-BORDER SALES: The new
Chinese kings of Russian e-commerce
After a presentation of the key trends and figures
in the China-to-Russia segment, EWDN chief
editor Adrien Henni will moderate a discussion
involving Alexander Ivanov of industry association
NAMO, Artem Pereslavtsev of the Russian Post,
and AliExpress’s Russia representative Mark
Zavadskiy.
15:45 – The realities and challenges of Russian
logistics and delivery
DHL Russia General Manager Tatyana
Lyubimova, Arvato Russia General Manager
Michael Poetschke, Hermes-DPD Deputy CEO
Joseph Saary will share their views on the matter.
Also participating in the discussion will be
Alexander Ivanov, President of the NAMO industry
association, who will express the retailer point of
view.
Day 2, afternoon (June 5)
“Market trends & perspectives”
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
PROGRAM
TRACK 2
14:15 – Featured segments: Fashion, Home
Decor and DIY
Darya Yadernaya of Esper Group will unveil her
company’s most recent research on fashion online
consumers. Data Insight co-founder Fedor Virin
will present his analysis of the current trends in the
Home Decor and DIY segments.
15:00 – Alternative marketplaces
Less visible at first glance than AliExpress, eBay or
Yandex.Market, some marketplaces nevertheless
develop or even thrive on their segment or niche
market. What are their strengths and weaknesses
compared to the market giants? Which types of
merchants and consumers do they attract
Representatives of Russia’s Price.ru, Germany’s
Shopalike and China’s Osell will comment on
these and other questions.
15:45 – The financing of Russian e-commerce:
From venture investment to profitability – or
bankruptcy?
The financial question is particularly acute as
many Russian e-commerce companies of all sizes
remain unprofitable, or even go bankrupt. Still,
some Russian e-commerce entrepreneurs manage
to raise money, as witnessed earlier this year by
Bonum’s commitment to invest up to 25 million
euros in Aizel.ru.
These and other matters will be discussed by
Arseny Dabbakh of RMG Partners, Alexey Kaurov
of AFK Sistema, Igor Karpovich of Sberbank,
Konstantin Siniushin of venture fund TheUntitled,
and David Waroquier of Mangrove Capital
Partners.
Also participating will be Juliana Gordon, General
Manager at Aizel.ru.
16:30 – BREAK
17:00 – ONE-TO-ONE MEETINGS
21. 21
Amin Aliev
General Manager
Criteo Russia
Jean-Stéphane Bagoëe
Founder
Intelligent Emails
Efim Aldukhov
Founder
E-Commerce Solutions
Yuri Berchenko
Industry Manager, Retail
Google
Jean-Christophe Bonis
Founder
Oxymore
Charles Bellissen
Global Head of Sales
Shopalike / VisualMeta
Roman Chaplygin
Director Risk Assurance
& Information Security Services,
PWC Russia
Polina Dobriyan
General Manager
PayU Russia
Arseny Dabbakh
Managing Partner
RMG Partners
Thierry Cellerin
Founder
Buzzfactory
Igor Eremin
CEO
iVengo Mobile
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
SPEAKERS
Martin Avetisyan
General Director Russia,
CIS & Baltics
Farfetch
Darya Bobrovskaya
External researcher
German Association for
International Trade (BGA)
Ilja Eisen
Founder
Flocktory
22. 22
Mikhail Fisher
General Manager
Uber Saint Petersburg
Juliana Gordon
General Manager
Aizel.ru
Vadim Fedotov
General Manager
Groupon Russia
Oskar Hartmann
Founder
KupiVIP
Valeryi Ilyukh
Project Manager
Logistics IT
Matthieu Hallouin
Head of Business
Development Russia & CIS,
Savoye
Igor Karpovich
Head of Strategic
Business Development
Sberbank
Alexey Kaurov
Executive VP Corporate Finance
AFK Sistema
Pavel Kashcheev
Independent e-commerce
expert
Alexander Ivanov
President
NAMO
Alexey Kibkalo
International IT architect
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
SPEAKERS
Bas Godska
Founder
Acrobator
Adrien Henni
Co-founder and Chief editor
East-West Digital News
Nikolay Khlebinsky
CEO
Retail Rocket
23. 23
Olga Kuznetsova
Digital Solutions Manager,
Saint Gobain
Lado Lebanidze
Principal Analytical Lead
Google
Sergey Korneev
VP Business Development
Clickky.biz
Ivan Mazour
Founder
Ometria.com
Yury Namestnikov
Senior Security Researcher
Kaspersky Lab
Tatyana Lyubimova
Managing Director
DHL Russia
Mikhail Osin
Head of Projects
Ozon.ru
Danny Perekalsky
General Manager
Ozon Holdings
Martijn Peeters
Partner, Strategy
PWC
Elena Orlova
Independent electronic
payments expert
Alexey Petrovsky
Chief Analyst
Price.ru (Rambler & Co group)
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
SPEAKERS
Andrey Krylovich
Executive Director
Delivia
Elena Miroshnikova
Director Corporate Sales
LifePay
Artem Pereslavtsev
Commercial Director
Russian Post
24. 24
Oleg Ponfilenok
General Manager
Copter Express
Jozeph Saary
Sales Director & Deputy CEO
Hermes-DPD
Michael Poetschke
General Manager
Arvato Russia
Martin Schierer
General Manager
Otto Group Russia
Andrey Sverdlov
Regional Manager
AT Internet
Aleksandra Savina
Chief Marketing Officer
Ulmart
Alex Vassiliev
International Development
Director
SPSR Express
Fedor Virin
Co-founder
Data Insight
Nicolas Vedrenne
Managing Director Europe
Merchant Risk Council
Niels Tonsen
CEO
Lamoda.ru
Jean-Emmanuel de Witt
President
Sanoma Independant Media
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
SPEAKERS
Jean-Noël Rivasseau
Founder
Kameleoon
Konstantin Siniushin
Managing Partner
The Untitled
David Waroquier
Partner
Mangrove Capital Partners
25. 25
Darya Yadernaya
General Manager
Esper Group
Mark Zavadskiy
Russia representative
AliExpress
Lawrence Wright
Co-founder and Chairman
GVA LaunchGurus
Roman Zykov
Analytics Director
Retail Rocket
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
SPEAKERS
Ksenia Yolkina
VP Marketing
& Business development
Yandex Data Factory
A D V E R T I S E M E N T
26. KEY FACTS
& FIGURES
O F R U S S I A N
E - C O M M E R C E
26
These are excerpts from a research study conducted by East-
West Digital News in partnership with leading universities and
consultancies. To order this study (10 chapters, 300 pages),
please contact us at report@ewdn.com
27. 1
3
4
5
6
7
8
4
2
9
RUSSIAN E-COMMERCE
THE TRENDS
27
The domestic market is still growing (+35% in rubles in
2014, +15% in USD), but the crisis has affected severely
some segments (e.g. consumer electronics).
Since mid 2014, venture investment activity has decreased
considerably – but some investors are still active.
While pure players are facing financial difficulties and
some even go bankrupt, most major offline retailers
and manufacturers keep investing in e-commerce.
Most large and mid-sized cities are served by shipment
companies in satisfactory conditions, while the Russian
Post is reforming itself to improve service.
Cash-on-delivery is the rule for physical goods and will
remain so for a long time, even though the use of
electronic payments is increasing slowly.
The lack of qualified human resources appears to be
one of the most painful issues, hampering the entire
Internet industry.
The regions are catching up fast, with some pioneering
retailers already generating more than two thirds of
their sales in the regions.
Becoming more mature and competitive, and facing less
favorable macroeconomic environment, the industry is
now entering a period of optimization and consolidation.
Cross-border sales are growing dramatically – especially
from China – but foreign e-merchants have to carefully
localize their site, adapt their marketing approach and
deal with customs clearance and delivery issues.
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
KEY TRENDS AND FIGURES
28. D O M E S T I C
E-COMMERCE 2014
THE NUMBERS
28
Source: Data Insight unless stated otherwise
30% in rubles
in nominal terms
$14.5bn
(560bn rub.)
or
approximately
Total domestic
market size for
physical goods:
of the total Russian
retail market2%
In 2014, the market
grew by at least
43,000
e-commerce
sites
with a shopping cart
function
Insales counted
of which
around
made $100m
or more in sales
(physical goods only)
50
Approx.
$86
(3,300 rub.)
Average
order
value or up to 15% in real terms
or in USD
Russians shopped online
at least once per year
26 million
About
Domestic sales of
physical goods,
not including
cross-border
sales; food
deliveries, C2C,
MLM, tickets,
coupons, etc.
generating an estimated
148 million orders
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
KEY TRENDS AND FIGURES
29. 29
+75%
15 million
Russians shopped
in foreign online stores
Approximately
$4bn
Total
market
size:
generating from
50 to 70 million orders
Up to
Up from 2013
in value
Of
of which Chinese retailers
generated around
In value
In volume of
fulfilled orders70%
50%
C R O S S - B O R D E R
S A L E S 2 0 1 4
THE NUMBERS
Source: EWDN unless stated otherwise
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
KEY TRENDS AND FIGURES
30. M A R K E T
O V E R V I E W
30
These are excerpts from a research study conducted by East-
West Digital News in partnership with leading universities and
consultancies. To order this study (10 chapters, 300 pages),
please contact us at report@ewdn.com
31. 31
1. The Russian Internet market
1.1. Internet penetration
In the fall of 2014, 62% of the adult population, or 72.3 million people, were connected on a
monthly basis, according to the Public Opinion Foundation (FOM). Of them, 59.9 million
people used the Internet daily.
The Internet became popular in Russia much later than in advanced European countries,
with a mere 10% of the adult population connected in 2003 and just 20% in 2007.
Today, Russia still lags behind most other European countries in terms of penetration, with
roughly half of the adult population connected. Russia is catching up quickly however, with
average annual growth in Internet users exceeding 10% over the last few years. In
September 2011, Russia overtook Germany as the market with the largest number of
unique Internet users in Europe.
If growth continues at its current rate, it will take Russia less than a decade to reach the
current levels of Europe's most connected countries.
Source: Public Opinion Foundation (FOM)
Internet penetration rate in Russia (2003-2014)
Unique users 18+
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South
North-West
Volga
Urals
Siberia
Far East
Source: FOM
Distribution of Internet users by federal district (Autumn 2014)
Center
incl.
Moscow
Nationwide – 100%
(72.3 million unique users)
28.6%
20.7 м
10.8%
7.8 м
19.3%
14 м
14.5%
10.5 м
8.8%
6.4 м
13.7%
9.9 м
4.2%
3.1 м
A D V E R T I S E M E N T
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33. 1.2. Regional contrasts
Internet penetration in Russia is still uneven. There is a two-fold difference in the percent of
Internet users on a monthly basis between the capitals, Moscow and St. Petersburg which
have over 77% Internet penetration, compared to only 50% in Russian small towns villages,
or an average 58% in the Volga federal district, according to a FOM report from Q3 2014.
Among the key factors explaining these regional contrasts are differences in the standard of
living, purchasing power and development of broadband and wireless Internet access, as
well as computer and Internet literacy.
The differences between regions by usage intensity are even more profound. Internet
penetration and usage intensity are interconnected: the higher the percent of Internet users,
the higher the level of Internet activity and vice versa.
As of Q3 2014, just 11% of Russian Internet users lived in Moscow, 4% in St. Petersburg and
12% in other cities with more than 1 million inhabitants, while 21% lived in rural areas.
Almost three quarters of all Russian Internet users live in the European part of Russia.
1.3. Russian audience world-wide
The Russian-speaking audience exceeds 90 million users, if taking into account an
approximate 20 million Russian speaking users in the former Soviet republics, Western
Europe, Israel and North America.
33
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What international businesses should know
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ongoing compliance with Russian law
V1.1 – APRIL 2015
Request your free copy at report@ewdn.com
PERSONAL DATA
STORAGE IN RUSSIA
What international businesses should
know to organize data transfer to Russia
and maintain ongoing compliance with
Russian law
A comprehensive analysis by EWDN with EY’s
top legal analysts and key market players
34. 2. The online retail market
2.1. Market size
In 2014, according to Data Insight, the Russian online retail market for physical goods
neared 560 billion rubles ($14.5 billion), up 30% at least (+10-15% in USD), depending
on estimates, from the previous year. This volume did not include cross-border sales as well
as food deliveries, C2C, MLM, collective purchases, tickets or bookings.
As much as 40.1% of e-commerce orders in 2014 came from consumers living in Moscow
(11.5% from St. Petersburg), according to InSales.
Regarding market segments, the general picture is rather clear, although different
methodologies from different sources reflect some differences. The categories of physical
goods most in demand are apparel and footwear, household appliances and home items,
consumer electronics and computer hardware as well as car parts and children’s goods.
* In nominal terms; inflation exceeded 11% in 2014
Source: InSales
Top 10 e-commerce segments (by turnover, in billion rubles, 2014)
Segments Turnover Growth/2013*
Household appliances & electronics 146 37%
Clothing, footwear 92 21%
Computer, notebooks, computer parts 69 22%
Car parts 38 44%
Mobile phones 32 24%
Home items 31 60%
Children’s goods 30 23%
Furniture 27 34%
B2B equipment 23 24%
Construction materials 21 43%
• Detailed segment analysis by sales volumes, number of buyers, spending
amount and average order value;
• User segmentation by gender age, income level, education and occupation;
• User segmentation by gender and age applied to different product and price
categories, with highlights of geographic contrasts and variations.
To order this study (10 chapters, 300 pages), please contact East-West Digital News
at report@ewdn.com
IN EWDN’S RESEARCH STUDY:
34
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2.2. Current situation and growth forecasts
Due to the current economic downturn, some e-commerce companies have seen their
sales volume stagnate or even decrease in late 2014 and early 2015. The crisis has not
affected all segments equally: while consumer electronics have been hit hardly, children’s
goods, for instance, seem to go through the crisis without damage.
Important differences can also be noticed depending on site size. According to Data Insight,
while the traffic of sites with less than 20,000 monthy visitors fell by 10%, those with more
than 200,000 visitors saw their traffic grow by 11% between Oct. 2013 and Oct. 2014.
Several large players, e.g. KupiVIP and Umart, are expecting significant growth in 2015.
Beyond the current ups and downs, it is clear that the full potential of Russian e-commerce
market is far from being tapped. Important growth is likely to resume after the current crisis,
fuelled by such structural factors as:
• The growing Internet and e-commerce penetration in Russia’s regions;
• E-signature and online payments becoming more popular: mass demand for
non- material products such as insurance and tour package offers.
• Fulfillment infrastructure reaching maturity: With reduced delivery costs, the
scope of e-commerce will extend to cheaper product categories and be made
available even to small cities and remote areas.
The Russian e-commerce could thus reach or exceed the $100 bn mark in 10 to 15 years.
Domestic sales of physical and digital goods, including tickets but not hotel bookings, B2B sales and coupons.
The calculations are based on a moderate 10% to 20% yearly growth rate between 2014 and 2025
Source: EWDN
Russian e-commerce market growth forecast
(physical + digital goods)
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36. 2.3. Number of users; user profiles and behavior
Online shopping has already become a rather common method of consuming for active
Russian Internet users, particularly those with upper middle and high incomes living in
Moscow, St. Petersburg and large Russian cities. This is why online shopping penetration in
Russia, which is still weak compared to some Western European countries, is expected to
catch up in the long term with the most advanced countries like the UK, where up to 85% of
Internet users are involved in online shopping.
According to Data Insight, e-commerce involved 26 million active Russians in 2014. The
figure could exceed 30 million in 2015, with tens of millions of additional online shoppers by
the end of the decade. Three groups drive this growth in the number of online shoppers:
individuals in the regions, especially in small towns, individuals with low incomes and
individuals newly connected to the Internet.
Significant differences regarding online purchases can be observed between different
population groups. For example, men to spend more online than women; they more actively
purchase car parts, mobile phones and computers, while women are more attracted by
such categories as clothing and children’s goods. Generally speaking, people from younger
age groups, with higher revenues and that have completed higher education, tend to
consume more online than those from the opposite groups.
In a survey of its customers conducted in February 2015, fashion flash sales site KupiVIP
found that a new online consumer behavior is emerging in the current unstable economic
context. Only 5% of the respondents said they were going to increase their spending on
clothing, footwear and accessories this year, and only 12.6% believe that the crisis will not
have any impact on their purchasing power. No less than 83% of clothing and footwear
buyers are looking primarily for discounted products — a proportion 1.5 times higher than in
early 2014. As many as 58% have more than half of their clothes bought at discounted
prices. This new mindset explains the exceptional success of such recent sales events as
Black Friday and Cyber Monday.
Price has thus become the key factor in purchasing decisions for KupiVIP’s clients. Well-
known brands, new collections and exclusiveness tend to be less important, if of any
importance at all.
• A detailed analysis of user profiles with segmentation by gender, age,
occupation and education;
• An anaysis of the recency, frequency and motivations of online shopping
with international comparisons;
• Developments on the trust issue, with accounts from online players, service
providers and industry associations on how they deal with it.
To order this study (10 chapters, 300 pages), please contact East-West Digital News
at report@ewdn.com
IN EWDN’S RESEARCH STUDY:
36
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37. 3. Online retailers
3.1. Number of sites
In 2014, payment aggregator Robokassa and analytics company Openstat identified 1.17
million “commercial sites” (i.e. sites that offer payment functions) in the .ru, .su and .рф
domains out of more than 3 million sites on the Russian Internet in total. Of these
“commercial sites,” just a small part can actually be considered e-commerce sites as far as
physical goods are concerned. In 2014, InSales estimated the number of e-commerce sites
(with a shopping cart function) at 43,000. Of these sites, a mere 50 generated more than 4
billion rubles (approximately $100 million) in sales revenues per year, and 950 reached or
exceeded 200 million rubles ($5.2 million).
3.2. Market fragmentation
A consequence of the limited size of the market itself – with Russia's $13 billion in 2012
representing less than 40% of Germany's online retail market and one twentieth of the US
market – Russian online retailers are noticeable for their small sales volumes in comparison
with major foreign players. The order of magnitude is simply different: in 2012, the Ozon
group's net sales, for example, represented less than 3% of those of its model,
Amazon.com, in countries such as Germany ($250 million vs. $8,732 million).
In certain segments, there are no major professional players due to a lack of significant
investment, while existing small e-merchants generally offer poor service. This situation
particularly affects the fields of construction materials, furniture, plumbing and small niche
industries.
3.3. Gradual involvement of offline players
Large domestic retail companies began to enter the Russian e-commerce market much
later than in western countries, and many are still absent. As for international players
several still do not sell online in Russia even though they have strong e-commerce
experience in other countries.
However, a clear move toward online-offline integration has been noticeable over the last
few years. While traditional retailers are developing their first e-commerce activities, several
online players, in a reciprocal move, have gone offline.
3.4. Gray e-commerce
In certain market segments, a significant part of online retail – anywhere from 20% to 80%,
depending on the estimates – goes through unofficial schemes of varying scale.
It can even not be ruled out that even some of the largest Russian e-commerce players
keep part of their cash revenues undeclared. According to a controversial theory, it is
virtually impossible for legitimate e-commerce businesses to be profitable in the current
Russian market conditions (http://www.ewdn.com/?p=35696).
37
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38. 4. Investments in Russian e-commerce
From 2010 to 2013, according to research studies by Fast Lane Ventures, PwC and RVC,
e-commerce in the broad sense was the major destination for venture investment in Russia.
During these four years – if counting only publicly disclosed transactions – the Russian
online retail industry attracted nearly $1.3 billion in venture investment, including more than
$360 million for 2012 alone. Venture investment in Russian e-commerce fell to $235 million
in 2013, reflecting the contraction of the local venture market as a whole.
Attracting venture money became more difficult in 2014 and 2015 – even though not all
Western investors have withdrawn from Russia and a new generation of domestic investors
is emerging. In spring 2014, Ozon closed a record $150 million funding deal with Russian
investors while Ulmart held talks with leading US VCs. In September, Wikimart raised $40
million from Russian players – having failed to attract Western investors as initially planned.
In the travel segment, package tour online reseller OnlineTours.ru raised $7 million in July
from an international VC consortium. Its competitor Travelata.ru got the same amount from
EBRD and Polish fund MCI. Hotel booking service Ostrovok raised $12 million from a
Russia-connected fund in June and another $5 million in December 2014.
Few significant deals in Russian e-commerce were announced in the first half of 2015. The
most important, in January, was Bonum Investments’s commitment to invest up to 25 million
euros in Aizel.ru over the next few years.
The research contains:
• Full list of all disclosed venture investment deals from 2010 to 2014;
• The attractiveness of Russian e-commerce from an investor point of view is
also discussed with leading Russian and Western investors: Leonid
Boguslavsky of Ru-Net, Gleb Davidyuk of iTech Capital, Maxim Krasnykh of
Intel Capital, Damian Doberstein and Alexandra Rasskazova of e-Venture
Capital Partners, Bakhrom Ibragimov of EBRD, Edward Shenderovich of Kite
Ventures and David Waroquier of Mangrove Capital Partners.
Among the topics discussed are:
• The pros and cons of investing in Russian e-commerce;
• The financial impact of Russia's specific conditions for e-commerce venture;
• The impact of the international tensions on investors’ attitude;
• The exit issue, with an analysis of the existing exit cases as well as of the
M&A and IPO perspectives in the short, middle and long-term.
To order this study (10 chapters, 300 pages), please contact East-West Digital News
at report@ewdn.com
IN EWDN’S RESEARCH STUDY:
38
1. This figure encompasses "classic" e-commerce, travel services, private sales, daily deals and collective
buying as well as classifieds and other startups involved in e-commerce. The amounts invested in these sectors
could be significantly higher if undisclosed transactions were included.
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MARKET OVERVIEW
39. 39
Sources: EWDN, Fastlane Ventures – A comprehensive list of deals is offered in the full version of the study
Venture investment in Russian e-commerce (2010-2014)
Publicly disclosed deals of more than $10 million
Official data Unconfirmed amounts
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MARKET OVERVIEW
40. 40
5. Cross-border sales
Foreign retailers’ online sales of physical goods to Russia have grown considerably over
the past few years. Russian consumers appreciate foreign retailers’ diversified assortment
and enjoy the virtually tax-free purchases. The market reached up to $4 billion in 2014, up
from some $2.5 billion in 2013. Since mid-2014, however, Chinese players have captured
the better part of market growth while the overall sales volume from the West has stagnated
or begun decreasing – with a variety of situations, from continued growth to bankruptcy,
depending on market segments and individual players’ strategies.
• International giants eBay and Amazon, as well as a number of Western fashion
brands in the clothing segment, still enjoy trust and popularity among Russian
customers, but Chinese retailers are currently gaining an even stronger traction,
although in different product categories or price segments.
• Apparel and accessories, consumer electronics and gadgets, as well as
automobile parts are the most in demand product categories.
• Besides common localization, marketing, and customer service issues, foreign e-
merchants run into three key difficulties: customs clearance, delivery to the
consumer, and payment process.
5.1. Market figures and trends
The total number of B2C cross-border orders delivered to Russia has risen rapidly,
expanding by nearly 75% in a year to reach some 70 million in 2014, of which the vast
majority were packages weighing no more than 1kg, according to the Russian Post and
NAMO.2 More than 90% of the orders were delivered by the Russian Post, demonstrating
the dominant influence of the national postal operator on cross-border deliveries in spite of
the emergence of alternative service providers.
Source: Higher School of Economics
Average order value: Russian and foreign e-merchants compared (Q3 2013)
Clothing:
Russian online
stores
Clothing:
Foreign online
stores
Electronics:
Russian online
stores
Electronics:
Foreign online
stores
$115 $105 $455 $180
Sources: NAMO (Rutaobao, eBay, Aliexpress), Dostami.ru
Average order value from some significant cross-border retailers (2013)
Western mail
forwarder
Rutaobao eBay AliExpress
> $400
(for repeat purchases)
$160 ~$40 $24
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MARKET OVERVIEW
41. 41
Russian audience for AliExpress and eBay (Sept. 2013 – Oct. 2014)
CHART
2-1
The full version of this study includes a full set of data on the Russian audience of five top cross-border
sites over the past two years, in partnership with research company Gemius.
Foreign vs. Russian online stores: Online shoppers’ behavior
analyzed by product category (Sept. 2014)
In which product categories did you make
your last online purchase?
Clothing and footwear
Mobile phones, tablets
Cosmetics and perfumes
Small-sized household appliances
Children’s goods
Computers and notebooks
Consumer electronics (video, audio, photo)
Items for the home and garden
Car parts
Sporting goods
Large household appliances
Construction materials
Furniture
Handmade items
In which store did you make
your last online purchase?
25%
75%
12%
9% 3%
8%
9%
2%
<1%
2%
2%
2%
2%
7%
6%
6%
4%
1%
2%
4%
1%
3% 0%
2%2%
2%
0%
0%
1% <1%
Russian store Foreign store
Survey conducted in September 2014 among 2,400 online shoppers of 20 to 55 years of age from Russian cities
of 100,000 inhabitants or more – Source: Yandex GfK
Source: Gemius
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
MARKET OVERVIEW
42. Market growth benefits major international online retailers – first of all, Alibaba’s subsidiary
AliExpress and eBay – as well as many sites selling small quantities in niche segments.
Some of them report their sales volume and order size from Russian customers are
significantly larger than with any other country. However, since late 2013, many Western
online stores have seen their sales to Russia grow more slowly, stagnate or even decrease
– while sales from China reached ever higher levels.1
3.2. Why Russians buy abroad
Even taking into account delivery costs, many products are still cheaper if bought abroad
than on the domestic market. One reason for the price advantage in some categories is that
orders received by inhabitants of the Customs Union (including Russia) are not subject to
customs taxation if they do not exceed 31 kg in weight and 1,000 euros in value per month,
for each recipient.2
However, foreign Internet stores do not always have a price advantage over Russian ones,
and often the advantage will not carry across all products the retailer offers. In the
electronics segment foreign online stores, especially in China and Germany, offer more
favorable prices for cameras, but have no clear price advantage for smartphones. Russian
online stores show a wide range of prices for clothing and footwear and foreign stores are
located within this price range.
Additionally, a number of products are simply not available, or are hard to find, on the
domestic market. This concerns not only obscure collectables, but other items such as a
number of spare automobile parts and accessories, which when related to rare or little
known car brands are virtually nonexistent in Russia, especially in the regions.
1. In July 2014, AliExpress became Russia’s most visited e-commerce platform and one of the country’s top 10
most visited website. http://www.ewdn.com/?p=32192. In late 2014, this platform’s sales to Russia could reach
several hundreds of thousand orders per day.
2.. If weight or value do exceed these numbers, customs duty amounts to 30% of the value of the part in excess,
with a minimum tax fare of 4 euros per kg. Russian authorities may introduce a less liberal customs regime.
Reasons for shopping in Russian vs. foreign online stores (2013)
Clothing:
Favor Russian
online stores
Clothing:
Favor foreign
online stores
Electronics:
Favor Russian
online stores
Electronics:
Favor foreign
online stores
• Faster delivery
(49.2%)
• Ease of returns and
exchanges (21.7%)
• Less risk of
package loss (23%).
• Can purchase
products not available
in Russia (63.3%)
• Price differences
(46.6%)
• Wider assortment
(39.3%)
• Higher quality
products (35.8%).
• Faster delivery
(54.8%)
• Ease of returns and
exchanges (28.1%)
• Less risk of package
loss (27.8%)
• Product guarantees
(27.8%)
• Can purchase
products not available
in Russia (61.4%)
• Price differences
(48.5%)
Source: Higher School of Economics
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MARKET OVERVIEW
42
43. 3.3. What Russian consumers like – and fear
Russian consumers have unique qualities that often necessitate specific merchandizing
strategies to attract purchases. Among their fears and expectations are the following:
• Russian consumers are more distrustful of retailers and fearful of artificially
high pricing. They must be certain a product is worth paying for, whether this is
based on quality, warranty, brand recognition etc..
• Unlike Western consumers, Russians are anxious in regards to international
delivery and fearful of unscrupulous suppliers. High visibility and display of
postage conditions is vital.
• Russians love promotional offers and activities, especially those linked to their
cultural and social habits. Frequent and catchy promotions and discounts are
important to sustaining local consumer loyalty.
3.4. Customs clearance and shipment issues
Occasional slowdowns at customs checkpoints and the slow service of the Russian Post
create serious obstacles. However, a new generation of Russian and international delivery
providers and cross-border operators are emerging, thus offering more choices to
international players. Meanwhile, the Russian Post is progressively enhancing its capacities
in partnership with its foreign counterparts, while the customs service is introducing
simplified and faster procedures.
IN EWDN’S SPECIAL REPORT ON CROSS-BORDER SALES:
In addition to in-depth trend analysis and market figures, this report contains:
• An analysis of customs practices and customs legislation, as well as
possible changes in them;
• Interviews with representatives of Russian and foreign online stores and
intermediary sites;
• A detailed analysis of the product categories most in demand;
• An analysis of delivery difficulties, their causes and possible solutions
regarding the bottlenecks at the Russian customs;
• Information on the unreliability of the Russian Post and on alternative
courier companies;
• The options available to foreign merchants to promote their offers to
Russian consumers;
• A discussion of the different options for market penetration, from selling
from abroad to partnering with Russian operators to opening a local
representative office or subsidiary.
For more information about this report, please contact report@ewdn.com
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43
44. INTERVIEWS
& ANALYSIS
44
These are excerpts from a research study conducted by East-
West Digital News in partnership with leading universities and
consultancies. To order this study (10 chapters, 300 pages),
please contact us at report@ewdn.com
45. MCI Managing Director Tomasz Czechowicz:
"We are still interested in Russia and we will
continue searching for investment
opportunities"
Over the pas year, several western venture investors have withdrawn from Russia due to the
international tensions. This is not the case for MCI, a major Polish fund which actively investing
in a range of European countries as well as Russia and Turkey. In this exchange with East-
West Digital News, the fund's managing partner Tomasz (Janusz) Czechowicz shares his vision
of the Russian digital market and comments on MCI’s Russian portfolio companies KupiVIP,
Travelata and Oktogo.
– Please explain your fund’s strategy and the reasons why you are interested in the
Russian market.
MCI Management is the most experienced private equity group in emerging Europe with a
focus on digital transformation. We specialized in growth-stage investments in the CEE region,
DACH countries (Germany, Austria and Switzerland), Russia and Turkey. MCI’s investment
strategy is based on three growth pillars:
• Digital disruption investments: These are investments in pure-play Internet business
models. We believe that the strongest growth will be recorded in the fields of digital media, e-
commerce, marketplaces, fintech, Internet of Things, Software as a Service, cloud
computing, mobile Internet and digital entertainment.
• Digital ecosystem investments target companies operating on the Internet infrastructure,
such as telecoms and data storage centers.
• Digital adaptation investments are intended to support companies which, being already
well established in the traditional economy, aspire to become European- and global-level
players using opportunities offered by the Internet.
We believe that the Russian digital market – in particular, in the field of e-commerce – has a lot
to offer regarding good quality companies at the growth stage with the potential to become
national champions covering this hub e-commerce market. Thus we already invested in three
companies: KupiVIP in the field of fashion as well as Travelata and Oktogo in the travel
segment.
– What has been the impact of the recent international tensions on your Russia
strategy? Do you still consider investing in the country?
We are still interested in the Russian market and we will continue searching for investment
opportunities. Our strategy is to have about 10% of all assets located in Russia.
THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
INTERVIEW: MCI MANAGING DIRECTOR TOMASZ CZECHOWICZ
45
46. – What are your investment criteria?
We are interested in healthy businesses. These are characterized by a high growth potential, a
high-level management team, and perspectives to become a national or even global champion.
– In 2012, you invested 12 million euros in KupiVip. Why did you do so at that time?
What are the positive and the negative points with KupiVip, in your view?
The level of managing team and its track record hugely impressed us. Equally impressive were
the investors who had already backed this company. We are very happy with this investment;
the company’s current performance is very impressive – not only to us.
– A couple of years ago, KupiVIP’s founder Oskar Hartmann envisioned a Western IPO. Is
this perspective still valid?
At this particular moment we do not think that IPOs or full exits are the best solutions
for shareholders in leading online and tech companies in Russia. We believe it’s a time
to buy and build.
–Tell us a bit about your other Russian portfolio companies Travelata and Oktogo. Why
did you invest in them? What is so attractive in the Russian online travel market,
in your view?
We started to invest in online travel in 1999. We had a very positive experience from companies
like TravelPlanet in Poland and Invia in the Czech Republic. Both companies delivered close to
10-times returns from initial investment. This is why we are so bullish about online travel.
Russia is a huge consumer market and Russians are definitely “travelers.” As simple as that!
Oktogo is our latest investment in Russia. The total investment round amounted to more than
$5 million with MCI and current shareholders converting a part of the debt into equity. Taking
part in this round MCI invested in Oktogo $4 million with another $3 million as an option for the
future. This will depend on the future results of the company. In our opinion, this is a very
healthy and well-run company. It grows by more than 100% every year, and we believe its
valuation should be somewhere at twice of the run-rate of gross revenues.
Travelata provides a convenient service for buying package tours online or over the phone.
If offers tours from more than 120 major Russian tour operators to all popular touristic
destinations. In July 2014, we announced a joint, $7 million investment with the EBRD for this
company. So far our total investment in it has exceeded $4.5 million.
(March 2015)
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INTERVIEW: MCI MANAGING DIRECTOR TOMASZ CZECHOWICZ
46
47. Wikimart ex-CEO Maxim Faldin: “Virtually all
Russian legitimate e-commerce companies
are unprofitable”
Launched in 2008 by Stanford graduates Maxim Faldin and Kamil Kurmakaev, Wikimart had
the initial ambition of creating a Russian analog of eBay. Funded initially by major US
investment funds, then byRussian investors, the startup has now become a major
marketplace offering its own products alongside nearly 2 million items from over 1,000
merchants.
Faldin’s controversial theory is that, outside the "grey economy," legitimate Russian e-
commerce businesses are doomed to be non profitable. A few weeks before resigning as
Wikimart CEO, Faldin was interviewed by Russian online publication Slon.ru. Here are the
main excerpts from this interview.
– Is it true that that the bulk of the Russian online retail industry is made up of the gray
economy?
I remember very well how, in the late 1990s, flea and wholesale markets were demolished in
Russia. One of them was next to my place. I remember that the products – milk, cheese –
there were 30% cheaper (because sales tax plus VAT amounted to those same 30%). And I
thought: why should a law-abiding business open a store here? It will obviously not be
competitive. As for Wikimart today, unfortunately we do not have such practice. Otherwise, we
would be more profitable.
– But traditional retail chains assert that low prices on the Internet are provided by
gray and black imports.
Retailers are mixed up in their concept of “gray imports,” which can mean different things.
Firstly, there are counterfeit, fake goods, which is a result of incorrect customs declaration.
Then there are import channels that are not agreed with the manufacturer. We disagree with
retailers on the last type: in my opinion, retail networks, in collusion with the producers, have
created in Russia a reservation where they control prices and receive all the profits. [In a
recent case,] Motorola has not given consent to import goods into the country, but it is
Motorola’s problem, why should we be concerned? There’s nothing illegal in this case.
Parallel importation is not against the law, it is the violation of the rights holder. As long as
there is demand, we will trade [these kinds of products].
This should not be confused with smuggling and tax evasion. We are audited by PwC, and
there are many control procedures.
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INTERVIEW: MAXIM FALDIN
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48. THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
INTERVIEW: MAXIM FALDIN
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– In early 2015 Wikimart changed investors. Instead of the American investment fund
Tiger Global your shareholder became a little-known banker, the co-owner of
Finprombank Anatoly Goncharov. Why have the Americans gone?
This is directly related to the political situation. Goncharov was a minority shareholder with
15%, while Tiger had about 50%, and they were actually leading the development strategy. It
was necessary to develop the business, to invest in it. (…) In July we agreed on everything –
but the Boeing fell in the south-east of Ukraine and the world changed. Only 12 hours after
the fall of the Boeing, I had a conference call with New York and they said: "We can no longer
fund the company, do whatever you want."
We sat for two months without money and with wage arrears. Then, when I arrived in October
to New York, I learned that Tiger Global was raising a huge investment round, and their main
investors were representatives of the Republican Party. It all became clear. On the same day,
they clinched a $1 billion deal in India.
– Is this a kind of plot against doing any business with Russia?
It's not quite like that. It is a question of the business environment: somewhere at a cocktail
party someone said something. You're not going to risk rounds worth billions in order to invest
an additional $15 million in Russia, which then will bring you $50 million.
– What do you expect for your industry this year?
In 2015, things will be very difficult. When household incomes fall, our revenues fall, too, but
the substitution effect will make people purchase cheaper goods instead of the more
expensive brands. This factor will play in our favor.
Meanwhile this is the perfect time to start a business! I have just launched a kid’s fashion site,
christened “Little Gentrys.”
– Wikimart recently teamed up with Terminal.ru, which owns warehouses and retail
outlets in the regions. You now have offline points of sale.
We do, but they are all terribly unprofitable. We are thinking of what to do with them. The
whole of 2015 will be spent looking for new formats.
– But your competitor Ulmart opens many offline stores.
Well, Ulmart is not a profitable company, and neither is Enter. We want to be profitable. That's
the whole story. Enter has around about 80 stores left. There were more, but they were
terribly unprofitable. What will happen now with Enter, nobody knows.
– Why is Anatoly Goncharov so engrossed by e-commerce? What is his ultimate goal?
He wants to make a technology holding company, which provides retail and financial services.
I know Goncharov many years; I practically led him into e-commerce. First, he bought a small
stake in Wikimart and supported us financially while we built the company with Tiger Global.
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INTERVIEW: MAXIM FALDIN
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He now has a controlling interest in Terminal and Wikimart. Owning two companies in the
same industry is pretty pointless, so he decided to combine them. I manage both companies;
we have merged and are looking for the most suitable model for profitability in the market.
In addition, Anatoly Goncharov takes part in the restructuring of companies under the
Svyaznoy brand.
– Are all law-abiding Russian e-commerce companies unprofitable?
Yes, all companies that we mentioned today are unprofitable. Ozon has been unprofitable for
17 years. But this should not be so, it needs to change. Another example is E5 [the online
interface of X5 Group’s supermarkets] which was simply shut down, writing off its losses. We
were the only bidders for the company. However, it was easier for the X5 Group team to write
off $50 million in losses than to save the project and work with us, even when we demanded
nothing from them. It’s a kind of apathy by the managers. It's not their money.
More generally speaking, in Russia all white online trade is unprofitable. In order to build a
profitable online retail platform, you require five to seven years and $100 million. Miracles do
not happen. Even more than logistics costs, the key expense is programmers' salaries. Of the
$50 million that was invested in us at of late 2014, we spent $30 million on the salaries of
programmers.
But the market will consolidate. Similar to what happened to us, and to Utinet. Nobody can
incur losses by themselves.
– When you started your business, you stated that in a few years you will surpass
Ozon.ru. This did not happen: they see 9.2 billion ruble revenues while you generate
only 4.7 billion.
We definitely grew faster than Ozon, but not fast enough to overtake them. We are six years
old, and Ozon is 16. In addition, the proceeds of Ozon are a little misleading if including their
travel ticket business. The comparison could be more relevant with Ulmart: although they are
only a year older than us, they have a lot more revenue [21 billion rubles].
I think we had a problem accessing capital. In late 2011, Tiger decided that Russia is not as
promising as India. Since then, they invested more than $1 billion in the Indian online store
Flipkart, but with us they invested only $15 million. There is a difference.
– How are you fundamentally different from Yandex.Market?
We are a retail company while Yandex is an Internet company. Yandex will never own the
products and think about them. We buy in advance one-third of the goods we have.
– The commission of Yandex.Market for orders from online stores is 1%, whereas
Wikimart charges from 2% to 15%.
The 1% is not an exact figure, it is just the starting amount for retailers that rises. In reality,
they do not have a fixed rate.
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– What about AliExpress and eBay?
AliExpress has 800 million items. I cannot even imagine such a number. eBay offers around
150 million goods in Russia. At Wikimart there is 2 million, although we believe that we have
the biggest range. But this 2 million is a drop in the ocean, compared to the offerings by
Alibaba's subsidiary. There are simply not that many products in Russia.
However, these are different products. Judging by the top 10 best-selling products, AliExpress
sells primarily cords and straps for mobile phones. You may find iPhones too, but it is likely to
be a Chinese iPhone with two SIM cards for 6,000 rubles – ugly-looking and with a slightly
different interface.
When you are not competitive in terms of range, you are not competing at all. The average
check of AliExpress is 300-500 rubles.
Buying from foreign online stores is becoming easier. That is why cross-border trade is
growing in Russia two times faster than the entire e-commerce industry. Meanwhile, unequal
tax treatment is an issue. Consumers pay VAT when purchasing items in a domestic offline or
online store; why do they pay neither VAT nor, in most cases, customs duties when buying
from a foreign online store?
– You were planning to build a warehouse with eBay in the Baltic states. What is
happening with this project?
It stalled. eBay is interested in the Russian market, but the Russians are buying Chinese
goods, which will always be cheaper in China. Now the task for eBay is to defeat Alibaba, so
all projects like a warehouse in the Baltics went to the periphery.
The full version of this interview was first published in Russian in online magazine Slon.ru 1 in
April 2015.
1. http://snob.ru/selected/entry/90635
51. Arvato Russia GM Michael Poetschke:
“Some Western players have suspended
their e-commerce plans for Russia, but the
effect of the international tensions might
also be positive”
After 18 years on the market, Bertelsmann subsidiary Arvato Russia has asserted itself as
one of the main fulfillment providers in Russia, both for traditional distance selling and for e-
commerce operations. In this exclusive interview, CEO Michael Poetschke — who arrived in
Russia almost 20 years ago — talks about the opportunities and the difficulties of entering the
Russian market for foreign e-commerce companies.
– How does the logistical chain work for e-commerce companies selling to Russian
consumers from abroad?
The logistical chain works most efficiently for customers of Arvato in Germany or other
countries in Europe, where we service their e-commerce businesses. This is because it is the
same warehouse where their goods are stored and picked, packed and dispatched to
different countries. For many Arvato customers, we service the whole value chain, including
running the online stores, carrying out e-marketing, order management, customer care,
payment processing and more.
The cut in our value chain happens when we have to hand over the prepared parcels to a
carrier delivering them to the final clients. We cooperate with the Russian Post, DHL and
other international carriers. Originally, one obstacle was that clients had to prepay their orders
by bank cards. Now solutions work that allow cash-on-delivery as well. The biggest remaining
problem is the procedure to return orders fully or partially. It is quite costly and very slow. This
is one serious disadvantage of cross-border online sales and concerns potential clients a lot.
– Is Russia very specific in this regard compared to other countries in terms of
processes, costs, etc.?
Russia is specific in many ways. What separates Russia from many other countries is that
there is a border, in terms of geography, but more importantly in terms of customs
procedures, bureaucracy and cost. Cross-border online trade is actually a loophole to reach
consumers in Russia. The sellers don’t have to certify all the goods they are selling compared
to the usual trade channels and nobody has to pay customs duties for the goods within
certain limits and neither VAT.
– Do you feel an actual or potential impact of the current international tensions on
cross-border sales to Russia?
Yes, there may be an impact from that. Even though the market, far from politics, continues to
grow, some Western players have postponed or suspended their plans to set up or enhance
their online sales channels to Russian consumers.
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52. 52
– Do you feel an actual or potential impact of the current international tensions on
cross-border sales to Russia?
Yes, there may be an impact from that. Even though the market, far from politics, continues to
grow, some Western players have postponed or suspended their plans to set up or enhance
their online sales channels to Russian consumers.
But the effect might also be positive. Already now usual wholesalers feel a credit shortage
due to Western sanctions and the rising interest rate of Russia’s central bank. Some Western
manufacturers or sellers observe declining sales to Russia through the usual retail channels.
But there are clients in Russia who want to buy products and still have the purchasing power,
be it apparel, electronic equipment or other goods being bought on a regular basis. They may
turn to cross-border offerings more actively now.
So far online demand for Western brands in premium segments has not necessarily
decreased. As a rule, the brands who managed to avoid sharp price increase have
maintained good sales volumes. Those who raised their prices very significantly have
exposed themselves to more severe sales contraction.
– How do you envision future developments on the Russian e-commerce logistics
scene? Do you still feel an important growth in demand? Have recent investments in
this field been sufficient to address the demand?
I expect the usual development – where there is demand, there will be an offer. As e-
commerce continues to grow in Russia more fulfillment capacities will evolve and more cost-
effective and faster delivery solutions will be proposed. We are noticing an increasing
competition and new offerings in this area over the last two years, which is very healthy and
the consumer wins. This development has finally even woke up the Russian Post, which is
also very much welcome.
Russia is such a vast country by geography that all kinds of distance-selling businesses have
an enormous potential to cover it and to reach consumers in all regions, towns and villages in
the long run. I expect online businesses to tap into this potential even more intensively in the
near future.
(Updated June 2015)
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INTERVIEW: ARVATO RUSSIA GENERAL MANAGER MICHAEL POETSCHKE
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53. THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
INTERVIEW: B2B-CENTER CEO ALEXEY DEGTYAREV
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B2B-Center.ru CEO Alexey Degtyarev:
“In 2014, Russian B2B e-commerce
amounted to $609 billion”
With a montly trading volume exceeding $2,2 billion in 2014, B2B-Center.ru, Russia’s main
electronic trading platform, serves more than 200,000 clients from 120 countries. CEO Alexey
Degtyarev recounted for East-West Digital News how this business started and gained such
strong traction in Russia and beyond.
– How does the Russian e-procurement market look – and does it differ from other
countries?
Russia’s model of B2B e-commerce is definitely unique: all stages of procurement, from
planning to contract award, are conducted online. Ten years ago there were only so-called
online boards which stored information about tenders. Some of these have evolved into full-
fledged electronic trading platforms, where you can conduct transactions for buying and
selling goods and services in real-time. In 2002, when we introduced the idea of B2B e-
commerce, we had to evangelize the market. Now e-commerce is an essential business tool
widely used by the biggest enterprises and organizations.
In 2014, according to our estimate, the volume of B2B e-commerce market in Russia
amounted to $609 billion. This figure includes the volume of electronic purchases in both
public and private sectors.
Using these platforms, thousands of new customers and contracts can be found – and
millions of dollars saved by vendors. The figures speak for themselves. In 2010,
Bashkirenergo saved more than $26 million, Tyumenenergo $81 million and Bashneft over
$60 million.
Today, our clients save up to 20% of original contract price by using our procurement
marketplace.
Furthermore, B2B e-commerce helps companies improve efficiency by automating processes,
among other benefits. Foreign companies enjoy the same benefits. We have users from 120
countries!
While first-generation online boards still exist in foreign countries, some electronic platforms
do offer full-fledged online trading procedures. However, these advanced features are less in
demand than in Russia, where companies use all bidding functionalities much more actively.
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– What about e-procurement platforms for the government?
Observing the success of the business, the government eventually decided to transfer
purchases for state needs in electronic form – both to save budget resources and combat
corruption. Since 2009 procurements for state needs have been conducted through electronic
auctions as well as via paper tenders. As a result, the better part of state orders is now
carried out in electronic form.
The State Duma is now considering a bill that involves digitization of other trade procedures –
tenders, request for quotations and proposals. As a result, state and local government
procurement (except for purchases from a single supplier) will be gradually converted into
electronic form.
The Federal Law “On the procurement of goods, works and services by individual types of
legal persons” came into force on January 1st, 2012 and served as a stimulus. A subsequent
resolution from the Russian government defined the types of goods, works and services to be
purchased in electronic form. The list includes paper; printing products; office supplies; office
equipment; medical devices; equipment and instruments for radio, television and comm-
unication equipment; vehicles and accessories; natural water; trading services; maintenance
and repair of motor vehicles, motorcycles and office equipment; and the cleaning of buildings.
To date, most of the tender-based procurement operations at large Russian companies are
made in electronic form. This process, which has been noticeable in recent years, has greatly
simplified their work.
– B2B-Center has been operating for more than 12 years now. What have you achieved
over this period of time?
The company was established in 2002 and, in fact, was one of the founders of today’s e-
commerce market in Russia. The first electronic trading platform, B2B-Energo, was solely
focused on the energy sector. Soon after that UES, Russia’s electricity giant, started
operating through our system. According to power engineering specialists, the cost of
equipment and services in the first year decreased by 50%, and the price of the products
purchased decreased by an average of 17.5%.
Since then, the list of our clients has expanded continuously. (…) Our cumulated trading
volume has reached $77 billion since launch. (…) The next step is to involve medium-sized
players more deeply in our platform. They already use it as supliers, we’d like to see them as
buyers as well.
In 2012, we launched B2B-Turkey. The platform incorporates more than 1,200 local
companies from the construction, tourism, woodworking and other industries.
In addition, we launched a pilot project B2B-Export with several African countries involved.
This project is potentially strong. Goods delivered by Russian suppliers, primarily in
machinery industry, were able to obtain access to foreign markets. This leaves a lot of open
questions with regard to logistics, insurance, customs clearance.
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– What has been the impact of the troubled 2014 year on your business, and what do
you see next?
After exceptional growth in 2013, the market slowed down in 2014. This tendency is related
not only to the economic situation, it was also affected by the completion of several
government-run giant projects, especially the Olympic games in Sochi. The public
procurement market in 2014 decreased both in volume and number of proceduresMeanwhile
the volume of transactions in the private sector remained unchanged.
Since late 2014, major customers altered their work, keeping in mind the experience gained
from the previous recession. They are adjusting investment programs and reducing the
volume of individual purchases.
Recession is a time of new opportunities for ETP. Buyers are eager to think about efficiency of
activity, while suppliers are looking for new markets and sales methods. ETP can give both
sides a great chance to get ahead.
– What is your business model and tariff policy?
Our users pay a one-time access fee and a monthly rate based on the options they select.
We have no interest in the amount or number of transactions and charge no extra fees for
additional services. Transactions and fees must remain independent – this is a matter of
principle to us. One of our most appropriate tariff plans, $150 per month, allows you both to
organize tenders and participate in an unlimited number of biddings.
– Who are your competitors and what are your distinctive advantages?
Many of our competitors are major commercial electronic trading platforms. We have had
healthy competition with them and we feel comfortable in this environment. It’s always
challenging to search for and develop new solutions.
– Is your platform profitable? How has it been financed so far?
B2B-Center is not only profitable, but also a high-growing company. Over the past five years,
the company has grown more than three times. Such performance was achieved due to the
development of electronic procurement, an idea which has attracted number of major energy
companies. Our solution has helped them improve procurement efficiency while attracting
new customers to our platform.
Among B2B-Center’s shareholders is a consortium of foreign or internationally-oriented funds
– Da Vinci Capital, Insight Venture Partners, Alfa Associates, Runa Capital – as well as the
leading private equity fund in Russia and CIS, Elbrus Capital. B2B-Center’s founder,
Alexander Boyko, is chairman of the board of directors.
(March 2015)
56. THE INTERNATIONAL BUSINESS & TECH CONFERENCE ON RUSSIAN ONLINE RETAIL
EXPERTISE: MATTHIEU HALLOUIN OF SAVOYE
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Optimizing e-commerce fulfilment:
A European and Russian perspective
By Matthieu Hallouin, Head of Business Development for Savoye
Russia/CIS and Eastern Europe
Stimulated by the emergence of new players, the multichannel initiatives of traditional retailers,
and made more accessible with high-speed Internet, e-commerce is becoming more and more
popular in Russia like elsewhere. Online consumers now benefit from a more diversified
assortment while bargains provide them almost permanently with attractive shopping
opportunities.
As online shoppers have become more demanding and volatile, e-commerce websites can no
longer focus only on product-oriented offer. They must also ensure they provide quality services
to stand out, gain market shares, maintain margins, keep or reinforce their position on the
market. To respond to increasingly frantic consumption, and remain competitive, e-commerce
companies must have a responsive and efficient fulfillment and delivery network.
Superior-quality service requires continuous optimization of distribution schemes, efficient
information systems and flexible organization structures, while minimizing costs to maintain
profitable margins. This also requires optimizing logistics organization to manage increasing
shipped volumes and returns, offer high-level order tracking, and ensure the best possible
quality in order fulfillment and delivery. Supply chain management is becoming a differentiating
factor for e-commerce and more generally for the retail sector, as a crucial part of their offer.
A major challenge for companies is to integrate these changes by anticipating them, and to
engage in necessary reorganization. This mainly concerns the operational supply chain, which
must rely on a modular and efficient distribution platform in order to manage each stage of the
order lifecycle – from order reception and customization of goods and packages, to delivery and
returns management. Service level will be the key success factor for customer satisfaction.
Among the main challenges of the e-commerce supply chain are the following:
• Having the goods provided to consumers in minimized time – In addition to optimized
management of company stock, the use of an optimized WMS solution will enable stock
reliability to support fast and effective goods reception on the logistical platform, and
optimize stock-picking operations.
• Improve or maintain delivery service quality – The company should be able to adapt the
delivery to new customer expectations by offering them not only on-time delivery but also a
set of associated services. For example, optimized protective packaging will preserve the
goods’ integrity. This is an important issue to avoid returns, which are a major factor of loss
margin in online sales. Packaging solutions also exist to minimize the volume of the parcels,
which may also lower transportation costs. Finally, marketing and promotional items can be
inserted in the parcel.
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EXPERTISE: MATTHIEU HALLOUIN OF SAVOYE
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• Optimize order traceability, which are significant cost factors – Customers want to
follow up the delivery of their order from start to finish and to get information in real time via
email, SMS, etc. This information will allow the buyer to take action on the order before its
delivery, thus lowering the risk of return.
• Keep returns costs low – Since returns cannot be fully avoided, your logistics system
should be organized as to manage them efficiently at the lowest possible cost.
Here are a few ways to manage these challenges:
• A flexible and responsive supply chain – Online consumers are very demanding when
new products, or services, are introduced. While online stores must constantly adapt their
assortment and anticipate changes in fashion, their logistics must adapt to these changes
as well as to new delivery methods.
• High-performance Information System (IS) – In particular, your WMS should take into
account a variety of specifications for e-commerce order preparation and fulfillment: a wide
product assortment, various product types, a high number of end customers, orders with
many or a few items, returns management, etc. From this point of view, IS and software
offer is as varied in Russia as in Europe. Specific e-commerce experience should be a key
criterion to select a software provider.
• Optimized and automated order picking – When sales volumes reach a certain level,
costs may be reduced through warehouse automation. A mechanized order preparation
system – sometimes integrating sorting systems to handle waves of grouped orders – will
optimize processes that rely heavily on human resources. Labor costs are usually lower in
Russia than in Western Europe, which implies that the break-even point of this type of
installation will be different. Meanwhile, in the rapidly growing e-commerce sector, the
question of the mechanizing preparation processes relates first of all to quality and
performance considerations in terms of flows. There are different levels of mechanization,
ranging from a simple order preparation conveyor system, with stations for picking by
sector, to a fully automated system where goods come to the operator in a fully automated
preparation system ("goods to person").
• Optimized delivery process – In Europe, demanding online shoppers expect their orders
to be delivered within 24 hours. Such a short delivery time is not always possible across
Russia’s immense territory, but in urban areas, e-commerce companies can easily manage
to ensure deliveries within 48 hours.
Neither pure e-commerce players nor traditional retailers can ignore the deep changes in
consumers’ number and behavior, which is no less noticeable in Russia than in Europe.
Russian online retailers are facing the same challenges as their Western counterparts;
namely, having the appropriate marketing tools, modernizing their information systems into a
powerful performance tool, and ensuring that their sales are backed up by efficient logistics.
Increasing wages in Russia and the crisis context are shifting the focus to reducing costs for
the most labor-consuming operations. In order to remain competitive, e-commerce players
should reduce fulfillment costs while automating or optimizing processes, and reducing
delivery time. In Russia as in Europe, modern logistics technologies are key instruments to
reach these goals.
58. International e-marketing expert Bas Godska:
“Young Russian digital marketing
professionals are craving for knowledge”
Dutch online marketing expert Bas Godska came to Russia in 2008, when the Russian e-
marketing and e-commerce markets were still embryonic. He helped a range of international
and Russian players – from Ozon, to Lamoda, to KupiVIP, to Enter.ru – reach major positions
on the market and optimize their budget. Lesser known, but prolific, has been Godska’s
activity as a business angel: with more than 30 portfolio companies so far, he became the
number one foreign business angel on the Russian startup scene.
Godska shares here his vision of the market, its maturation over the past few years and
development prospects in today’s troubled times.
– You started working in Russia in 2008; what was the landscape at that time?
When I came to Russia, I noticed companies were behind in comparison to Europe; behind
by approximately five years in technology, the marketing ROI mindset and other important
issues. The lack of high-quality management resources was evident. Marketing budgets were
lower than in Western companies and money was spent carelessly on customer acquisition –
with a focus on gross demand, not profitability.
– What have been the most important changes/trends since then? And how do you
think the picture will evolve in the foreseeable future?
Here is my top 10 of the most important changes and current trends:
• E-commerce has evolved significantly since 2008, although even now it’s still only 1-2% of
all retail sales, so a lot is still ahead.
• Affiliate marketing is a nice example of a mature (yet fragmented) acquisition channel that
hardly existed in 2008.
• Retargeting and DSPs have become a widespread technology since early 2011, when
Mythings was launched in Russia.
• The data-driven marketing ROI mindset has evolved well: a lot of analytical and tracking
tools are used, maybe we’ll even see proper next-gen attribution tracking become
mainstream in the very near future!
• E-commerce as a sector is experiencing its second wave; more and more offline
companies are embracing the Omni channel business model where a few years ago it
was more a case of ticking a box for senior management. They all know that the digital
world has become an integral and unavoidable part of our lives and consultancy firms are
thriving.
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INTERVIEW: ONLINE MARKETING EXPERT BAS GODSKA
58
59. • Venture funds have found their way to the Internet shops and many have also abandoned the
arena, or have at least become more reluctant to accept high company valuations. One thing
that hasn’t changed much is the venture climate – it’s still maturing. I haven’t seen many
successful exits here, especially if you compare Russia to Silicon Valley.
• More foreign companies have begun to operate in Russia/CIS – eBay, Amazon, ASOS,
PayPal, AliExpress, Rocket Internet.
• Cross-border sales are here to stay and the competition is intense.
• Russian young professionals are craving for knowledge as ever, more than their Western
colleagues. Russians’ professional skills have improved. Digital marketing is hotter than ever
before: marketing master classes, seminars, conferences and webinars can be attended pretty
much daily if one wants.
• The government has become much more aware of the digital scene. Things have become
more regulated. Still – there was more paperwork a few years ago, now some processes have
become easier.
– You have served both Western and Russian companies and worked with professionals
from both sides. Did you notice significant differences in their approach?
Russians are ready to risk and react faster than, for example, their Dutch counterparts. The
speed of business is higher here in general. The gap in knowledge and competences has
become much narrower than compared to five years ago. I no longer feel big differences between
the Western and Russian management competence level in e-commerce, yet the operational part
and the focus on customer satisfaction is often at a lower level than in the West.
– Has corruption spared the Russian online marketing industry?
As the sector is digital there is a lot of transparency, everything is measurable. In e-commerce,
ROI-dominated performance marketing is king. So the corruption level seems not overly high for
Russian standards. In digital brand marketing, however, there is more room for shady deals, as
ROI is less relevant. I remember how a marketing manager of a large firm approached the sales
manager of one of my projects at the first meeting with a very professionally outlined corruption
offer. We were required to wire funds to an offshore account prior to getting the budget approved.
Needless to say, we declined the offer. Certainly such cases are not overwhelming, but may
happen.
– Do you feel that the recent international tensions and sanctions have had, or might have
in the future, an impact on the Russian online marketing industry?
A lot of foreign companies used to approach me with questions relating to Russian market entry
or market intelligence. There are a bit less of those foreign inquiries now, and those who were
quite ambitious earlier are watching now to see what’ll happen next. Local demand is on the rise
though.
I’d like to be an optimist about the future. But we are witnessing tough times now, some
companies live the market, some startups vanish, revenues and profits of many companies have
lowered. I think this year e-commerce in Russia won’t show the same growth dynamics as in
previous years, but still I do not lose faith and hope that downturn is temporary. New companies
come, technologies arrive still, all of them need to sustain their growth and boost marketing
efficiency where possible.
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INTERVIEW: ONLINE MARKETING EXPERT BAS GODSKA
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60. The Bible
of Russian E-Commerce
• Reliable and precise data on the
market and its different segments
with forecasts and trends to 2020
• A thorough analysis of
consumer practices, preferences,
and expectations
• "The Russian payment jungle:"
A 40-page overview of payment
methods with practical advice to
Russian and foreign merchants
• In-depth analysis and practical
advice on the most sensitive
operational issues, from
marketing, to order fulfillment, to
HR and legal aspects
• "Cross-Border Sales:" A
special report with market
analysis and detailed practical
recommendations on how to
organize and increase sales to
Russia
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E-Commerce in Russia
What brands, entrepreneurs and investors need to know
to succeed in one of the world’s hottest markets
E-COMMERCE IN RUSSIA
What international merchants, service providers and entrepreneurs
must know to succeed in a high-growth and fast-changing market
FULL VERSION
UPDATED JUNE 2015