E-Commerce in Russia E-COMMERCE IN RUSSIA What brands, entrepreneurs and investors need to know What international to succeed one merchants, of the world s brands hottest and entrepreneurs markets must know to succeed in a fast-growing and ever-changing market CROSS-BORDER SALES TABLE OF CONTENTS I N P A R T N E R S H I P W I T H Merchant Risk Council The National Mail Ordering Association W I T H T H E S U P P O R T O F
E-COMMERCE IN RUSSIA CROSS-BORDER SALES 8 C H A P T E R S 285 PAGES 1 5 C A S E S T U D I E S & I N T E R V I E W S 50 PARTICIPATING ORGANIZATIONS To order a free summary or the full version of this report, please email us at report@ewdn.com 2
E-COMMERCE IN RUSSIA CROSS-BORDER SALES About this study This comprehensive research study was created by East-West Digital News, the international resource for Russia s digital industries, in partnership with leading consultancies and industry associations. It was conducted in cooperation with leading consultants and universities, and based on interviews with over 50 industry players and experts. To order a free summary, or the full version of this report (8 chapters, 285 pages) please email us at report@ewdn.com. About the publisher East-West Digital News is the first international information company dedicated to Russian digital industries. Its website EWDN.COM provides news, market data, business analysis and updates pertaining to the Internet, e-commerce, mobile and telecom industries, digital TV and satellite systems, software and hardware innovation, as well as to related investment activity and legal developments. A consulting branch, East-West Digital Consulting, provides international players with business development assistance in Russia and advises Russian companies on their international strategies. For more information, please contact us at contact@ewdn.com Advertising, sponsorship and distribution opportunities To inquire about advertising and sponsorship opportunities, or if your would like to get involved in the distribution of this study, please contact us at ads@ewdn.com. 3
E-COMMERCE IN RUSSIA CROSS-BORDER SALES Participating organizations ONLINE RETAILERS SERVICE PROVIDERS RESEARCH PARTNERS Merchant Risk Council MEDIA PARTNERS 4 National Association of Mail Order and Distance Selling (NAMO)
About the full version Intended for practical use by online retailers and service providers, this research study the first of its kind sheds full light on crossborder sales to Russia. Based on interviews with 50 top market players and experts, this study provides fascinating data and insights about: 8 C H A P T E R S 285 PAGES 1 5 C A S E S T U D I E S & I N T E R V I E W S 50 PARTICIPATING COMPANIES The latest market evolutions: How the market skyrocketed in 2013, why Western e-merchants recorded slower growth or decrease in 2014 while flows from China reached new heights, and what to expect next; Russian consumers preferences and fears, how to inspire their trust and turn them into loyal consumers; The opportunities for international online retailers in Russian SEO, contextual advertising, online marketplaces, SMM, email marketing, offline campaigns, and other channels; Why and how international online stores and PSPs should integrate localized payment methods; How to optimize shipments to Russia and get through the Russian customs seamlessly; How to fight fraud, and how to increase payment acceptance rates when working with Russian card holders; How to comply with the Russian legislation from forbidden goods, to IP protection requirements, to personal data collection, storage and use. THIS REPORT IS MOST USEFUL WHEN: è Preparing or beginning operations on the Russian e-commerce market è Developing and optimizing an existing business è Preparing or fine-tuning a business plan è Defining a fulfillment strategy or optimizing an existing fulfillment approach è Preparing marketing campaigns and optimizing related costs è Choosing and managing payment solutions and providers è Adapting to Russian legal requirements (including legislation on personal data, marketing practices, and consumer rights) è Analyzing the market, setting benchmarks and international comparisons 5
About the full version Contents Contents of the full version of this research study Introduction: Cross-border sales throughout Europe By E-Commerce Facts Chief Editor Janine Nöthlichs Part 1: The domestic e-commerce scene 1.1. Europe s largest Internet market 1.2. The Russian online retail market: Key facts, figures and trends 1.3. Segment analysis 1.4. Market growth forecasts 1.5. International comparisons Part 2: Figures and trends 2.1. Market overview Exclusive data from key market players 2.1.1. Overall volume 2.1.2. Countries of origin China Expands dominance in parcel deliveries USA & Europe Market still growing, but competition hardens 2.1.3. Product categories Clothing Electronics Auto parts Toys and games 2.1.4. Average order value Cross-border merchants AOVs compared 2.2. Market forecast 2.2.1. Optimistic growth outlook General e-commerce growth drivers Specific cross-border drivers improved customs, postage and competition 2.2.2. Pessimistic growth outlook Impact of new legislations Economic and political risks 2.2.3. Extreme scenarios: Death of the market or accelerated growth Special insight: Is market growth coming to an end? Why Western e-merchants have recorded slower growth or decrease in 2014, and what to expect next Analysis: Chinese giants make their move into Russia Part 3: Cross-border consumers 3.1. Number of e-shoppers 3.2. Where do they live? Internet connectivity The capitals vs. the regions 3.3. Implications for online retailers A mature market in the capitals Lucrative opportunities in the regions 3.4. Who are they? 3.4.1. Segmentation by gender 3.4.2. Segmentation by age 3.5. Why do they abroad? 3.5.1. Assortments In-demand luxury, plus-size clothing and maternity markets reviewed 6
About the full version Contents 3.5.2 Looking for better prices? An especially key factor in Chinese purchases The favorable impact of tax-free conditions However, cost is not always the priority for consumers Interviews: - Five Russian e-shoppers share their experience with Western and Chinese sites - E-merchant interviews about Chinese cross-border B2B Part 4: Merchants 4.1. How many players 4.2. Foreign vs. Russian players: Key competition points Price and assortments Language barrier Payment options Tax and legislations Brand awareness 4.3. Notable cross-border players Case studies: - How AliExpress became the number one e-commerce site in Russia - Affordable fashions from the UK ASOS comes to Russia - A pioneer in Russia, ebay sees its position threatened by the ruble s fall and Chinese competitor AliExpress - imall.eu bringing European luxury to Russia effortlessly - Sendmebox, the making of a next-gen cross-border marketplace - Shopotam from selling notebooks on ebay to an international mail-forwarding network Interviews: - Vladimir Kholyaznikov, KupiVIP General Manager: Cross-border now exceeds 25% of our total volumes and we expect strong growth in 2015 - Erik Bosgoed, Logistics at Groupon International GMBH Switzerland: We will resume our crossborder shipments to Russia when the ruble stabilizes Part 5: Customs clearance and shipment 5.1. Shipment and delivery 5.1.1. Delivery via postal operators The Russian postal service EMS, the Russian Post s subsidiary for express delivery Russia-oriented offers from foreign postal services 5.1.2. Alternative carriers Western operators Russian carriers First-mile operators 5.1.3. New service features 5.2. Customs duties and clearance. 5.2.1. Customs duties 5.2.2. Customs clearance: Procedures explained and recommendations provided 5.3. From cross-border sales to market entry 7
About the full version Contents Interviews: - Aarnio Heli, Itella Senior E-Commerce Development Manager: "We aim to keep market leadership in both Finland and Russia - Stuart Hill, wndirect Managing Director and Co-Founder: "Customer satisfaction is intrinsically linked to successful delivery and returns - Sergey Podkin, Boxberry Head of International Sales: The volume of deliveries is falling, but this will not lead our market to catastrophe - Michael Poetschke, Arvato Russia General Manager: Some Western players have suspended their e-commerce plans for Russia, but the effect of the international tensions might also be positive - Alexander Stsekotin, Omniva International Post Coordinator: "We provide a full solution to Russia from logistics and shipment, to customs, payment and accounting - Alex Vasiliev, SPSR International Development Director: Turkey could be the next rising star of the Russian cross-border scene - Three questions to Karen van de Weijer, TNT Post Market & Communications Coordinator for international parcels - Leonid Zondberg, DPD Commercial Director: "European online retailers could lose the Russian cross-border market" Part 6: Payments 6.1. Payment methods used by Russian online consumers 6.1.1. Bank cards The Russian bank card scene Bank cards are used more for cross-border than domestic transactions 6.1.2. Electronic currencies International e-currencies Russian e-currencies 6.1.3. Cash payments Pre-payment by cash Cash on delivery 6.1.4. Other payment methods Online purchase on credit Recurring and one-click payments Mobile payments Internet banking 6.2. How international online stores address Russia s payment specifics 6.2.1. Local payment offers are still rarely offered 6.2.3. International PSPs and local aggregators 6.3. Fraud and refusal issues 6.3.1. Fraud 6.3.2. Failed transactions 6.3.3. Anti-fraud systems from PSPs Special insights: - Exclusive data on the use of local and international payment methods in cross-border transactions and their evolutions in 2013-2014 - Virtual payment cards: A new generation of payment method in Russia Interview: Elena Orlova, PayU Russia General Manager: Russia is very different in terms of user preferences to make payments Expert analysis - Russian consumers are not all fraudsters, by Stephan Manduro and Nicolas Vedrenne of the Merchant Risk Council - "Fighting against fraud A few facts and recomendations," by the PayU expert team 8
About the full version Contents Part 7: Marketing & sales channels 7.1. Site localization 7.1.1. Translating into Russian Why translating into Russian is necessary to serve the Russian market Exceptions to the rule 7.1.2. Other aspects of localization 7.2. Russian online marketing specifics 7.2.1. Inventory: The domination of local players 7.2.2. Some marketing instruments are less mature or less used in Russia 7.2.3. User perceptions and responsiveness can also differ 7.2.4. Price hikes are distorting the market 7.2.5. Local and foreign agencies 7.3. Marketing tools and sales channels 7.3.1. Search engine optimization 7.3.2. Contextual advertising 7.3.4. Display advertising Display advertising networks Performance-based affiliate networks 7.3.5. Marketplaces and offer aggregators International platforms Russia-focused cross-border platforms Russian domestic platforms 7.3.6. Social networks Social networks as a communication tool Social networks as a customer care center Social networks as a sales channel 7.3.7. Email marketing Email marketing for customer acquisition Email marketing for customer relationship management 7.3.8. Other tools Shopping clubs Cash-back platforms Mobile channels Offline marketing Customer relationship management Interviews: - Guzel Galeeva, Project Manager of Alibaba s itao social network: Why we launched a social network for Russian cross-border shoppers - KAYAK Russia GM Andrew Verbitsky: Now we have 9 million keywords and nearly a thousand ad campaigns Case studies: - Shoes of Prey Tailor-made Australian shoes for Stylish Russians - How a Chinese tea company resolved market entry challenges Expert analysis: - "Yandex.Direct and Google AdWords compared," by Alexander Egorov of Alytics - Translations in Russia e-commerce, by Maggie Little of TranslateMedia 9
About the full version Contents Part 8: Legal aspects of cross-border sales Guidelines for compliance with Russia s personal data legislations Products affected by legal restrictions in cross-border retail operations Intellectual property issues that affect cross-border sales to Russia New rules on user identification in cross-border payments from Russia This section was prepared in partnership with Ernst & Young Russia and Borenius-Attorney at Law 10 Dos and Don'ts for foreign e-retailers selling to Russia This section was prepared by market entry consultant Leighton Peter Prabhu 10
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