Russia: Trust is everything
By Georges Berzgal, VP & Managing Director, Global Ecommerce, EMEA, Pitney Bowes
Russian consumers want to buy from British brands, but it can be a tricky market for retailers to crack. Trust, consistency and efficiency are crucial for success. Here are our top tips for British retailers looking to sell cross-border to Russia.
The Russian ecommerce industry is an interesting proposition for international retailers that, if approached correctly, can be very profitable. Since 2014, due to sanctions, consumers began to go online for retail goods, and given the sheer scale of the country, this represents massive market potential. To quantify this, the ecommerce industry in Russia was worth $17.8 billion in 2016. This is an impressive year-on-year increase of 20%, and by the end of 2017, it is expected to reach around $19 billion. What we’re now seeing is that Russian consumers increasingly prefer foreign retailers, with non-Russian sellers accounting for almost a third of the total ecommerce market in the region. Conversely, the cross-border market outgrew (37%) the domestic one (6%) last year.
Chinese retail makes up the majority of cross-border ecommerce in Russia. Bulk products can be bought cheaply, and domestic e-retailers are struggling to stay competitive with the influx of goods from the Far East. For British retailers, it is inadvisable that they try to compete with China in this particular bracket, as Chinese goods can be produced mass-scale and much more cheaply than commonly possible in the UK. However, for higher quality, more expensive products, there is a real demand for British brands among Russian consumers, and this is where the ecommerce opportunity lies for those companies.
That said, the growth of cross-border trade in the Russian ecommerce market is mostly due to the lower prices consumers enjoy compared to what’s domestically available. Foreign companies don’t have to pay taxes or fees for exporting their goods into the country, which is a huge advantage to foreign retailers and local consumers. Small parcels entering Russia are exempt from customs duties, for example, while Russian retailers who import their goods need to pay various tariffs for the opportunity.
Yandex is a local online search engine with which foreign online traders must be compatible. While Google is still popular, Yandex has over 60% market share, and also accounts for 45% of the country’s total online advertising. Retailers must be aware of this opportunity and ensure their SEO with Yandex is up to scratch, otherwise they will lose custom to more savvy retailers. When it comes to payment methods, cash-on-delivery (COD) is by far the most popular choice for online buyers in Russia. However, online payments are on the rise, with Yandex.Money, WebMoney and Visa QiWi offering a strong alternative to COD, especially for the higher-end products – where British brands have an advantage.
Within Russian ecommerce, many retailers debate whether to localise the content of their existing website for the Russian market, or to establish a new Russian domain name. This can be somewhat of a dilemma. The SEO benefits that accompany ‘.ru’ registered web pages must be levelled against an existing domain’s brand consistency and consumer image, as well as its marketing convenience. It is however key to localise currencies and payment methodologies.
In terms of demand for British goods, the Russian market is evidently interested in what UK retailers and brands have to offer.
Ultimately, what these behaviours all speak to is a retail culture based on trust. Russian consumers are newer to ecommerce than European counterparts, and the logistics networks are less well developed to ensure the same consistency of super-efficient delivery. This is not a flaw in the market, rather a cultural factor to be mindful of when entering the online retail space. Traders who have robust, localised online offerings will be likely to reap the rewards of inspiring trust in their consumer base. In doing so, they will be able to cash in on a cross-border marketplace that increased 80% year-on-year in the number of p8arcels and small packages ordered from overseas in 2016.
On the logistics side, retailers need to be confident they can rely on their distribution partner to deliver their products on time and at an effective price point to their customers. Pitney Bowes’ 97-year heritage of leveraging long-standing relationships with retailers and international trading authorities allows us to offer retailers safe passage in to new markets, which removes the complexities of going it alone. This enables them to do what they do best: capitalising on whichever international markets they choose.
Learn about Complete™ Cross-Border from Pitney Bowes, the scalable end-to-end global ecommerce solution that can handle all facets of enterprise retail cross-border expansion.
Read more about the global ecommerce landscape from both the retailer and consumer perspective by downloading the Pitney Bowes Global Ecommerce Report, the first report to comprehensively analyse these two perspectives.