Russian Buyers Set To Drive Online Retail
The report states that by 2017, the local online retail market could increase by 12.5 percent. Currently, online retail sales account for less than 2 percent of total retail sales in Russia.
The main causes for such low numbers are attributed to a general distrust of online payment systems, limited use of credit cards, low broadband Internet penetration and concern over the reliability of delivery services among Russians. Jones Lang LaSalle found that Russians prefer to collect online purchases from special pick-up points, paying cash for their purchases, rather than home delivery. Thirty five percent of Russian online shoppers canceled their orders when they learned about the necessity to prepay, according to the research. In September 2013, PayPal began operating on the Russian market, allowing transactions to be made in rubles. Analysts expect that this should decrease the level of distrust among local customers making online payments.
The main local online retail markets are Moscow and St. Petersburg. Jones Lang LaSalle predicts growth of e-commerce in the regions, while the country’s two largest cities will maintain their leading positions.
“Over the longer term we expect [the popularity of online retail] to ripple out to the regions, where physical retail is still undeveloped, and where there is strong demand from consumers to access better-quality and reasonably-priced retail products,” said Pyotr Zaritskiy, the head of industrial and warehouse properties with Jones Lang LaSalle in Russia and the CIS.
“However, this growth will depend on improvements to logistics infrastructure in more remote areas, including the availability of better quality warehousing and parcel delivery networks,” he said.
Although younger generations are more educated in IT, most Europeans, including Russians, prefer first to see what they will buy and only then make their purchase online, according to CBRE. The tactile and visual perception of a product are more important for Russians than for any other nationalities.
The birth of the online retail market has had the most impact on sales of books, music and video.
“Online shops, alongside with the opportunity to download content from the Internet, played an essential role in the reduction in the number of book shops and shops selling music and video. Thus, online retail became a significant threat to traditional retail,” said Yelena Prozorova, a consultant with Maris, part of CBRE Affiliate Network, speaking to The St. Petersburg Times.
“Online retail also has a strong influence on the consumer electronics sector, which is why many players on the market, such as Eldorado and M-Video, have started to launch their own online shops” she said.
“To keep shoppers visiting, shopping centers need to offer good entertainment and lifestyle components,” said Mikhail Rogozhin, the managing director of retail premises for CBRE Russia.
This year brokers have noted that some retailers, especially those trading in consumer electronics, have begun to decrease their presence in shopping centers.
Currently, the largest share of the Russian online retail market is accounted for by consumer electronics. Another growing sector is clothes and shoes. According to data from Yandex.Market, 54 percent of Russian respondents bought clothes from online shops.
Popular online retail shops include both Russian and international online players. Yandex.Market data shows that 55 percent of respondents bought products from foreign web-sites. In 2012, online purchases from the U.S. by Russians increased by 41 percent compared with a year earlier. The flow of products from Great Britain increased by 36 percent for the same period. The highest growth was seen in products shipped from Germany (75 percent) and China (55 percent), according to PayPal research. According to Yandex.Market, women and people with low income tend to buy from China, while men over 40 years old tend to buy from other countries. This year, America’s Amazon expanded the variety of products offered to Russian shoppers. In the past, the online retailer only shipped books, audio recordings and films to the country.
The main reason most people turn to online purchases is to find better prices than may be available in local bricks and mortar establishments. Yet, this is a decisive point only for Russians. The search for lower prices is followed by savings in the amount of time spent shopping, the ability to locate items that are absent from local shops and the convenience of having larger items delivered.
The British, for example, say that they choose online shopping as they can do it at the time and place of their choosing.
Russia is a promising market for foreign online retail businesses, as it has Europe’s largest number of Internet users. In 2012, 61.3 million Russians used the Internet monthly, according to RIA Novosti. The country surpassed both Germany, with 52.4 million users per month, and France, with its 43 million Internet users. Moreover, the number of Internet users in Russia is rapidly growing. In 2012, the amount of Internet users grew 15 percent. As every month, the average Russian spends approximately 26 hours online, it is not surprising that 74 percent of St. Petersburg residents are reported to have made purchases online. Analysts from Jones Lang LaSalle predict that in the next four years, it will be developing countries that will drive online retail growth.
“Eventually, emerging markets may surpass mature markets in pure volume, owing to the size of their population,” said Kris Bjorson, the head of retail e-commerce distribution at Jones Lang LaSalle.
“We believe that e-commerce gives retailers the potential to reach new customers that physical locations cannot, particularly in remote, rural locations. As more and more consumers embrace e-commerce as a safe and convenient way to purchase goods, retailers in developing countries will invest in logistics models exposing new products to new populations.”
By Olga Kalashnikova