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E-commerce in Russia (Updated): What You Need to Know to Sell Online in Russia in 2019

If Russia is your next e-commerce market, allow us to make a few things clearer.

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E-commerce is being used more and more by companies around the world, not only because of the rise of online shopping in recent years, but also for its versatility: it can be used to test products on a new market or to add a new channel on top of traditional ones to increase sales.

One thing is certain: managing and promoting a successful e-commerce website requires a thorough knowledge of Internet processes and the market, especially when dealing with a region so vast and far away as that of Russia.

We will now discuss some aspects of e-commerce in Russia and a few tips that can make clear how to sell online in Russia.

Why Russia?

With a share of just 3%, E-commerce still hasn’t that much of an impact on the total retail industry in Russia. However, on the other hand, the Internet penetration rate is high, with 80%, and the same goes for the smartphone usage (66%). The Morgan Stanley’s analysts believe Russia is reaching a critical mass of mature Internet users, which will lead to more online transactions, making it within just a few years’ time, one of the most tempting markets for those who want to do business on the Internet.

Driven by growth in the number of Internet users, lower fixed and mobile connection costs and the increasing competence of web users, e-commerce in Russia has enormous potential: According to data from AKIT (Russian Association of E-commerce Companies), the volume of online sales in Russia had y-o-y growth of 15% in 2016, reaching 850 billion rubles (about 13 billion euros.) and is expected to reach 17 billion euros in 2018.

According to the Morgan Stanley report on e-commerce in Russia relesed on September 2018, the Russian e-commerce market for physical goods will grow to 27 billion euros by 2020 and may reach around 45 billion euros by 2023.

e-commerce in Russia 2018

Another interesting fact concerns spending by Russians on foreign e-commerce sites, which saw y-o-y growth of 37% at 300 billion rubles (4.5 billion euros) in 2016. Russians’ love for foreign e-commerce sites is also evidenced in a study by the Russian Yandex Market and GfK Rus, which shows that the percentage of Russians making purchases on foreign websites (especially from China) is growing steadily. In autumn of 2016, this percentage became equal to that of buyers purchasing products online in Russia from outside of their home cities.

What do these data tell us? First of all, Russians, regardless of the town or area they live in, are buying online more and more. Secondly, they are increasingly buying their online products from abroad, such as from China and other countries.

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Which brings us to the next section ...


Why do Russians buy online from abroad?

According to the same study by Yandex and GfK Rus, 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.

Regarding making purchases on foreign e-commerce websites, shipping “scares” potential clients since it is perceived as a long, difficult and costly process.

Before seriously thinking of selling on the Internet in Russia, you will need to reflect on your product, your business and the entire sales process abroad. You might be in one of the following situations:

  • Your product cannot yet be found in Russian territory. You will need to think of a targeted promotion strategy so online Russian consumers will understand and perceive the value of your product and want to buy it. 
  • Your product is available only in some cities in Russia. It would definitely make sense to use e-commerce to sell it online in other regions, even more so if it will be possible to send products that are already in Russia instead of from the stockpile in your country. 
  • Your product is already present in Russian stores, but you want to try the online channel as well. No problem, but be sure avoid competing with your retailers. 

Note: These are just three, perhaps over-generalized examples. The possible number of scenarios is in fact endless and each must be assessed individually.


Why do Russians buy online?

As in years past, this year the products most purchased by Russians on foreign e-commerce sites were clothing and shoes, baby products, cosmetics, and household/gardening items. In Russian online stores, however, they mainly bought clothing, cosmetics, small appliances and health products.

As shown in the table below, some product categories are more appealing to online buyers than others. In addition, depending on the type of product, buyers can be concerned with the geographical origin of the e-commerce site: health products are bought exclusively from Russia (trust issues?) as well as food and alcoholic beverages (customs issues, licenses and penalties).

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Devices

The number of users who browse and choose products via smartphones is increasing. This once again underlines the importance of having a mobile version or an adaptable design.

In 2016, the percentage of Russians who bought from online Russian stores using a smartphone was 14% compared to 12% in the previous year. Although the percentage is increasing, most Russians still prefer using desktop computers while making online purchases.

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Speaking of mobile websites and purchasing via smartphones, customers of foreign e-commerce sites use smartphones the most to buy online (21% compared to the 14% figure in Russia). More "advanced" Internet users are more trusting when it comes to buying from abroad.

Another interesting fact concerns the use of shopping apps to buy online: 1/3 of users who buy from online Russian stores do so through an app.


Payment

According to a study by TNS Russia published in May of 2016, the vast majority (92%) of Russians who live in big cities make payments online at least once a year. The highest figure (95%) is for the extreme eastern region of Russia, and the lowest (90%) is for Privolzhe.

Regarding items purchased online, 77% of respondents bought phone rechargers and 66% bought other physical goods. These were followed by tickets for concerts, cinemas and theaters (37%), aircraft and train tickets (33%), online content (23%) and games (19%).

Russians are using a variety of payment methods for online purchases: credit and debit cards (79%), internet banking (80%), online payment systems (62%) and payment through SMS (49%). Cards and wallets are the preferred e-commerce payment means (42% and 28%). 54% of Internet users pay for online purchases in cash to the courier.

According to data from TNS Russia, online payment services used by Russians are: Sberbank Online (72%), Yandex Money (35%), WebMoney (30%), PayPal (30%) and Qiwi (28%).

Why do you need to know all of this?

In the past, one of the obstacles to e-commerce development in Russia was the tendency of Russian buyers to pay cash on delivery. But according to the study by Gfk and Yandex, online payment with cards became more popular than cash payment for the FIRST TIME EVER in 2016 (71% vs. 68%, the latter having been in steady decline over the last four years).

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This phenomenon was also identified by another study carried out by PayPal and DataInsight , which shows that online payments in Russia are now perceived on equal footing with card payments made in physical shops.

This trend is clearly beneficial for anyone who sells or wants to sell online in Russia from abroad. While it was once necessary to organize payment systems on delivery or settle for a smaller slice of the market, you can now limit Russian consumers to online payment exclusively, knowing that it is turning into a norm that is becoming increasingly accepted. With this obstacle overcome, e-commerce in Russia has become a bit easier to manage.


Shipping and delivery

For shipping in Russia, there are essentially two methods: the postal service and international couriers.

According to data from Yandex’s research, about 95% of the products that arrived in Russia from foreign e-commerce websites were delivered by the Russian Post. This figure, according to Deputy Director of the Russian Post express delivery service, Sergey Malyshev , is due to shorter delivery times, the implementation of new services and programs and, more generally, the development of the postal service infrastructure.

The choice of delivery method depends a lot on the locale and the online store from where the product is purchased. In small towns, when products come from other cities or countries, the most popular method is, as mentioned above, the postal service (67% of users). In Moscow, where possible, buyers prefer to pick up the product at stores. Moreover, couriers are more commonly used in Moscow than in the rest of Russia (71%). Moscow residents are also those who mostly use “quick” delivery.

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Before you start to sell online in Russia, you will need to decide how to ship your goods to your customers. You will need to know about prices and conditions of the various couriers. These will change depending on your product and destination. Russia is huge—sending a product to Moscow is not the same as sending it to Perm, Novosibirsk or Vladivostok. This is an important aspect, especially if you decide to offer free delivery to your Russian customers (which, as we will see later, is an important incentive to purchase).

As mentioned above, in addition to couriers, it is possible to send products by the postal service, or more precisely, via EMS (Express Mail Service), which is an international service providing integrated services that cover payment, shipping and delivery of the product, including the customs pass, customer service and returns management.

Note: Whatever shipping method you chose, make sure to be as clear as possible and to place all the necessary information on your e-commerce website. For Russian consumers (and actually not them alone), shipping is one of the most critical aspects. Display clear and detailed information on your website about not only timing, terms and costs of delivery, but also about the possibility of product tracing and your return policy.


Russian customs

Feared by many, undervalued by others, Russian customs (as well as those of other countries of the Eurasian Customs Union: Kazakhstan, Belarus, Armenia and Kyrgyzstan) can create many problems for those who sell in Russia. It is precisely for this reason that those who export to Russia often rely on local brokers to provide assistance during customs clearance.

Beginning on 1 June 2010, customs duties became uniform across the board, that is, they do not change depending on shipping method: the rules for the postal service and international couriers are almost identical (well, nearly! Some differences are described below).

As of now (21/03/2017), Russian citizens can receive an accumulated total of products weighing less than 31 kg that are valued at less than 1000 euros each month without having to pay customs duties ( source in Russian). This is great for those who want to sell online in Russia.

In the event that the weight or value of the product exceeds the allowed limit, customs duties amount to 30% of the excess value with a minimum of 4 euros for every extra kilogram. For example:

For a shipment weighing 34 kg that is worth 500 euros:

Customs duties: (3 excess kg) x 4 = 12 euros.

For a shipment weighing 20 kg that is worth 1400 euros.

Customs duties: (400 excess euros) x 30% = 400 x 0.3 = 120 euros.

Of course, there are exceptions that depend essentially on the type of product purchased. Here are just a few examples:

  • Indivisible goods (e.g.: furniture, televisions) that exceed a weight of 35 kg. The purchase of these products from abroad is subject to a special series of taxation: customs tax, excise duties and VAT. To calculate this value, you must know the TN VED code of the product. 
  • Goods that cannot be classified as goods "for personal use" (from camera equipment to diamonds). Again, you can see the complete list of products and custom duties. 
  • Goods that cannot be imported. 
  • Goods for which importation for personal use is limited. 
  • Cultural heritage items. 

As for the last three categories of products, there are differences with respect to shipping method. Cultural heritage items, for example, can be shipped by courier but not by post.

Are you thinking of selling food online in Russia?

Because of the sanctions we are all aware of, Russia has banned the import of certain foodstuffs from the US and European countries. Products such as ham, cheese and fruit can no longer be imported.

Officially, no one in Russia is forbidden to order foodstuffs online from abroad for personal use ( Paragraph 1 Article 3 of the Agreement on the movement of goods by individuals for personal use ).

In practice, however, this aspect is not regulated, and the Russian buyer who purchases a sanctioned product on your e-commerce website will never be able to receive it. Consequently, before you sell, make sure your product is not included on the “black list” in Russia.

Note: Again, customs duties in Russia are paid by the buyer! This aspect is important for the calculation of possible sales volume and to know what products, in what quantities and with what kind of taxation Russian customers can buy online. This information holds decisive importance in the pricing strategy for your online store: Russian consumers must perceive the convenience of buying from your e-commerce website.


Impulse buying

In this section, you will not find any strategies to promote your online store in Russia—that is a very complex and diverse topic, so I have decided to dedicate one of the next articles on our blog to digital marketing.

Here, I wish to use Yandex’s data related to impulse buying, i.e., the tools that pushed the potential customer in Russia to making an unplanned online purchase in 2016.

In total, 64% of Russian online shoppers bought something on impulse in 2016; women were more apt to do so than men at 70% compared to 58%. What pushed them to buy?

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Offers and discounts seem to have been the most effective strategies, followed by free delivery and e-mail marketing (which was less effective than the previous year).

Cosmetics and perfumes (44%) were the most frequently bought items on impulse. In second place was clothing and shoes (43%) followed by baby products (38%).


Website translation

As noted in our study on website translation, you must have a website professionally translated into Russian in order to sell online in Russia.

Potential Russian buyers prefer to buy in their own language and are very attentive to the quality of the texts. In addition, 81.7% of respondents said they would never buy medicine without being able to read a description in their own language, 37.4% wouldn’t buy tech products, 33.9% wouldn’t buy tourism services, 33% wouldn’t buy food, 20.9% wouldn’t book a hotel and 20% wouldn’t buy clothes.

One of the major objectives of e-commerce is to allow the user to perceive the website as safe and reliable. For this task, product descriptions play a fundamental role. Just as in the "real" world, what you say and how you say it in online sales play a fundamental role on a potential customer’s decision to purchase your product or service.


To sum up

The Internet is definitely a tool that will allow you to expand your business beyond national borders and to sell your products all over the world. But it is not as simple as it seems!

As we have seen, to sell online in Russia, you must have in-depth knowledge of the market and its dynamics in order to implement effective sales strategies.


Did I forget anything?

Do you have any questions about this article, or do you not agree with my viewpoints?

Let me know below or write us at info@balalaika-bs.com!

Fausto

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