Russian e-commerce shops in 2016

“E-commerce in Russia. New retail. New opportunities” conference and afterward,  the online conference “UX in e-commerce” were held in Moscow at the end of November 2016 and at the end of January 2017, correspondingly. New-retail.ru gathered the opinions of speakers on the most interesting and current issues.

– What are the key differences between the Russian e-commerce market and foreign ones?

Ivan Kurguzov, head of RAEC/E-Commerce cluster: “We have a different view on trust. It relates to our most important challenge – cash on delivery. So, when the courier performs delivery, buyers also expect him to bring some money for a change. That occurs for 80-85% of transactions with the actual product.”

Note: According to Nielsen, in the second half of 2016, 70% of e-commerce goods were paid with cash on delivery in Russia. Globally, this method is not very popular and used by an average of 36% of consumers, including 8% in France, 12% in Germany, 16% in the United Kingdom, and 22% in Spain.

62% of Russian consumers said they do not trust their banking information to e-commerce shops, and 57% doubt that data transmitted via the Internet is secured.

“Second, the current logistical support. Though it’s wide-scale and good, it’s not keeping pace with the growing needs of merchants and consumers.”

Fedor Virin, Partner of Data Insight: “In fact, the difference between the American and Russian e-commerce market is the purchase selection process. How are electronics selected in the Russian online market? A customer chooses which phone model to buy and then selects the store where to buy it. The choice of goods is primary and followed by the choice of store. And the requirements for the store include price and delivery in the required time.

In the US, the user first selects a store and only after that chooses a product. If an American chooses a pullover, he or she first goes to Lamoda because it’s familiar, it offers some bonus to loyal customers, it has the expected product range, etc. And there the customer chooses a pullover.

We have fundamentally different, lower requirements for product display quality. And there is a very limited number of stores that provide visual quality, such as Asos.

The quality of photography provided in Russia is too low. It’s not just about the quality of photos, but also the angles, video for each item.

Look what L’oréal made for displaying its products on Ozon. Fantastic photos. Few shops do so. And it’s the quality and quantity of photos that provide sales.

We can criticize AliExpress, but if you look closely at the website, you will find 30-40 characteristics for each product – weight, size, material, close-up photos. Looks awful!

We always want to make it beautiful, but this beauty is provided by four characteristics, and they have 30 terrible ones. And they are winning for some reason. It turns out that users don’t need beauty in four ideal images, but 30 characteristics far from ideal.

Each shirt you buy on AliExpress includes a table with 8 sizes, whereas in Russia it’s usually one. Note that a high proportion of cross-border transactions isn’t due just to the low price.

The high volume from China is due to the descriptions of the goods: it’s not a good and beautiful translation, it’s detailed characteristics of the products that users buy. This is the customer experience, which we don’t have, that is a key difference between international players and Russian ones. Volume, details, description.”

– Does the Russian e-commerce market fit for large, medium or small sellers? Who is the main player?

Kurguzov: “I do think that there has been a strong trend toward the larger sellers for several years, and the share of small shops (up to 20 orders per day) remains more or less unchanged. It means that the share of the middle segment has reduced.”

– Large offline trading networks are growing. The difference in growth rates with pure online is huge. How does the buyer move from the offline to the online network? Is this a new customer for you?

Ilya Adamskiy, Director of E-commerce and Corporate Sales Management, Euroset: “It seems to me, the buyer does not distinguish between offline and online. The buyer believes he or she visits the website to check its opening hours, location, prices. And this process of information gathering to make a buying decision became online almost completely because it’s just much easier and faster.

It’s clear that some buyers then want to come to the store and look at the chosen item. Our online challenge now is to make the information collection and comparison process end up with a purchase in our shop. The location of the purchase doesn’t matter.

– Let’s talk about small shops with one niche. How do you survive if there is pressure from large stores? Due to what?

Maxim Faldin, founder of Wikimart, CEO of Little Gentrys: “I survive in Little Gentrys much better in terms of the economy than in the large Wikimart. I have experience in both companies and can compare them.

Here at Little Gentrys, more than half of the orders (60-70% in the next year) are from permanent customers. We have about a thousand orders per month. You can’t buy any of the products we sell at other major websites, such as Wikimart or Ulmart. Due to the fashion, decent brands will not go into any of these places for their own reasons.

In general, I believe that e-commerce has only two models. The first platform means faster, farther, more. A big platform is built for hundreds of millions of dollars of investor’s funds. I was building this model for five years and completed it in late 2014.

The second one is a model of niche shops, and the niche may be large. It’s not about instant capitalization and current profit. For now, the segment of clothing and children’s products is growing fast, and not just online. So, we sell clothes and children’s products. We work in the premium segment due to the fact that the non-premium one does not work in e-commerce.

I need 18,000 permanent customers to earn 1 billion rubles per year. It’s difficult in Moscow to find them. Only Azbuka Vkusa has 150,000 loyal customers.

An e-commerce business that makes 1 billion rubles a year is very expensive and very profitable. I need only 18,000 customers. And I’ll do it by 2020, 2021 at the latest. Therefore, I am quite fine, but it was not in the middle, between the platform and niche periods.”

A very important thing is that online shops have a large proportion of pickups from delivery points, terminals and shops. Consumers do not want to wait for a courier. Most of them prefer to pick the item up themselves on the road, rather than wait for home delivery.

This is a major factor that is growing. The number of pickup points significantly increased in 2016 and will continue to grow. This includes the number of customers choosing pickup, and the number of stores offering it.