Lately, Russia has been witnessing a host of ecommerce initiatives opening up new opportunities for merchants and PSPs alike. We interviewed Ivan Glazachev, CEO at Yandex.Money on these developments and learned about the latest trends in Russian ecommerce.
Russia triggers a lot of interest at the moment: the economy is recovering and the GDP is growing. How did the ecommerce market in the country change in the past years in terms of size and growth rate, and how do you see this development in the future?
Russia has been one of the fastest growing ecommerce markets in terms of percentage growth. According to AKIT (Russian Association of Internet Trade Companies), the volume of ecommerce market in the first half of 2017 grew by 22% compared to the first half of 2016, when it grew by 26% (compared to the first half of 2015), reaching RUB 405 billion (USD 7,03 billion). In the first half of 2017 the volume of ecommerce market reached RUB 498 billion (USD 8,7 billion).
Cross-border payment volumes have been growing several times faster than domestic online payments and the preference for purchasing beyond national borders is particularly strong in our country. People are getting used to online payments and distant purchases. The future of the industry looks promising. Given the overall digital personalization trend, ecommerce industry might utilize new tools and personalized offers to target new audiences.
Cross-border ecommerce is a great opportunity for merchants to grow their businesses. Who are the most popular non-Russian ecommerce players gaining access on this market?
The popularity of online foreign stores in Russia has grown significantly in the past years. Specifically, Chinese online stores have rapidly increased in popularity with more than 90% of all foreign online purchases coming to Russia from China. The largest Chinese ecommerce company Alibaba operates by far the most popular online retail site in Russia, AliExpress. The introduction of online marketplaces like AliExpress revolutionized the way we shop and opened the door to a world of possibilities for bargain hunters and savvy shoppers. Chinese online stores are particularly popular in smaller cities since there are fewer retail store options.
There are also interesting scenarios when foreign players from different industries come to Russia and start selling their products online. For instance, payment sevice providers can partner with representative of automobile companies like French Renault or American Tesla to offer Russian consumers online prepayment payment methods.
How do Russians prefer to pay online? What features are important to the average Russian consumer (e.g. return policy, loyalty programmes, quality trademarks)?
Whereas the Internet and smartphone penetration in Russia is higher than average for Eastern Europe, Russians still prefer cash-on-delivery payment method for online purchases more than half the time. On the other hand, the slow erosion of cash continues and the popularity of online payments is rapidly growing. Mediascope research company has recently studied how Russian users make electronic payments. The results revealed that most often, respondents made payments using online banking (83%), bank cards (82.8%) and electronic money (66.3%). The popularity of mobile payments has also grown significantly compared to last year.
There are three main reasons why Russians are buying online from abroad: to save time, to save money and to purchase items not available in traditional stores. As to key features and characteristics, the majority of Russian users decide on purchases based on the low prices offered. The safety of payments, delivery issues, data security, the opportunity to see the product first and return it if something doesn’t fit are also important.
Could you provide some insights on successful entry strategies for merchants willing to expand into Russia? What are the main challenges?
Distant models do not really work here: companies willing to expand into Russia and become successful need to open a local entity in order to ensure full control of business processes. The main challenges are logistics/delivery together with quality control. I believe the key to success here is localization and the possibility to offer a competitive model or service among the rising consumer demand. Offers and discounts also seem to be effective growth strategies for merchants.
About Ivan Glazachev
Ivan Glazachev is CEO of Yandex.Money and spent the last 10 years at Russian Standard Bank where he became a member of the Board in 2012. With his active participation, Russian Standard Bank became the third biggest player in acquiring industry in Russia and developed and implemented the biggest white label card-to-card money transfer platform, which is now used by many commercial organizations in Russia. Furthermore, the Bank relaunched its mobile and online banking solution.
About Yandex.Money
Yandex.Money is the largest electronic payments service in Russia, according to TNS survey in 2017. The service is the joint venture of the search engine Yandex (NASDAQ: YNDX) and Sberbank and it hosts about 34 million user accounts with about 15,000 new accounts opened daily. Yandex.Money also offers Yandex.Checkout, which allows merchants to accept credit cards, e-wallets, mobile billing through the top Russian providers, and cash via over 250,000 cash-acceptance points all over the country and CIS. Yandex.Checkout offers a fast payments set-up with the release of a new API and convenient business analytics, with inbuilt marketing instruments for targeted offer distribution.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now