E-Commerce in Russia — the Outlook for 2015

At the precipice: Russia's e-commerce outlook for 2015

At the precipice: Russia’s e-commerce outlook for 2015

The collapse in the Russian ruble which occurred in late 2014 and the forthcoming dislocations in the Russian economy as a result of externally- and internally-imposed sanctions will undoubtedly have a strong impact on the Russian e-commerce market in 2015 and beyond.

As digital marketing consultants and operators of several Russian e-commerce projects, we have observed the initial impacts first hand.

Below, we briefly outline the trends and expectations for the short-term in various sub-sectors of the Russian e-commerce market.

Economic backdrop

From a macro perspective, the major challenge for the Russian economy is the ban imposed on US and European banks from extending long-term credit to Russian borrowers. There is simply not enough capacity to replace these banks with alternative lenders from Asia or other regions. Ultimately, the Russian central bank will have to step in, in order for these companies to pay off their foreign debts, and will thus force a major decline in Russia’s official foreign currency reserves. That is, it will be the case if the Russian corporate borrowers don’t default directly. They are basically dependent on the Russian state to bail them out, at least for those highly-leveraged borrowers such as banks which don’t have the ability to pay off their debt from internal resources. The Russian government may well make selective rescue efforts or at the very least put pressure on foreign lenders to share in the pain. Either way, liquidity will be scarce in 2015.

However, as a nation Russia is eminently capable of weathering this economic storm. The country remains a net exporter and does not have material foreign currency debt at the sovereign level. The modern Russian state has faced far more severe economic shocks. Indeed, there is historical precedent to fairly reliably understand the impact on retail and consumer behaviour.

The impact on Russian e-commerce

In the short term, Russian consumers are seeking to lock in some kind of value for their rapidly-depreciating rubles. The preferred store of value has traditionally been capital assets such as foreign cars and big-ticket items like furniture, although more recently imported electronics such as iPhones and iPads have been very popular too, especially since Apple and their local dealers did not react quickly to update ruble prices with current exchange rates.

Referring specifically to e-commerce, the economic shock will have an uneven impact on e-commerce sellers depending on their business models.

1) Cross-border sellers

Major cross-border sellers such as ASOS, Yoox, Amazon, etc. do not price in Russian rubles but rather convert their base currencies to rubles at the current exchange rate solely for the informational convenience of Russian shoppers. Many cross-border sellers from the US use BorderFree’s software to perform these calculations automatically, and thus their prices are “marked to market” daily. The underlying transactions are in foreign currencies and Russian buyers pay at the exchange rates charged by their banks or credit card providers.

These types of sellers will be losers in the short-term, even moreso if the products they sell are also available from local (Russian-based) retailers. A major reason why Russians shop on foreign websites is for the cost savings on equivalent items — they are able to save the 18% Russian GST and also benefit from the EUR1000 exemption in import duties.

At this time in the purchasing cycle the local sellers have the advantage because they have generally not adjusted prices on their existing inventories to reflect the ruble devaluation. Thus, there are temporary anomalies in prices for equivalent goods, which Russian consumers are exploiting. However, as Russian-based retailers replenish stock in future these differences will dissipate and cross-border e-commerce sellers will once again have the upper hand in selling branded goods.

Given that Russian consumers’ foreign currency buying power has basically been halved, lower sales are expected for both cross-border and local retailers of foreign branded goods, particularly in the luxury sector.

Another consequence is the relative gain by Chinese e-commerce sellers. While they don’t supply equivalent goods, their lower prices are still advantageous compared to US and European online sources. While Chinese sites have always been popular with Russian buyers, Chinese online sellers have taken an even greater share of the Russian online retail market in 2014, with AliExpress ranking as the #1 e-commerce site for Russians, ahead of any of the local players.

2) Local sellers of imported soft goods

Local e-commerce retailers like LaModa and KupiVIP which focus on soft goods have invested heavily in warehousing and logistics in Russia, in the belief that these would constitute lasting competitive advantages versus cross-border sellers.

Not only have they tied up capital in physical facilities, but they are also “traditional” stockists in the sense that they employ buyers and commit to seasonal bulk purchases, and must then clear and store their goods in Russia. In this sense, the online retailers of soft goods are very similar to their physical retailing counterparts, many of which are experiencing severe disruptions in their operations as the ruble crisis affects their ability to plan.

Since the purchase terms for imported goods generally mandate cash at shipment point, in the short term these sellers have locked in their purchase costs at historical ruble rates and can sell without raising ruble prices and still show a trading profit on their acccounting books, although in economic terms they are surely losing on the plummeting ruble value of their inventories. In the short-run, as with the physical retailers, online sellers benefited from a surge in sales. But once their stocks wind down, they will have to confront the new reality that mainstream Russian consumers can no longer afford the brands they have come to adore. This is now the case.

Another big pressure point for these sellers is their dependence on foreign capital. None of these companies are profitable (in terms of net income) and they have raised large rounds of foreign venture capital to subsidize their operational losses and invest in fixed assets and customer acquisition. To sustain their operations they will have to look to Russian investors, while also undertaking restructuring to focus more on cash flow rather than growth.

3) Local sellers of imported electronic goods

Electronics and computers constitute the largest segment of the Russian e-commerce market.

Russian e-commerce retailers focused on this segment, like Ulmart and Utinet, are some of the largest online sellers in Russia. In line with the “durable” nature of their products, they have experienced a surge in sales in 2014. To a large extent, this short-term buying will displace sales in 2015 because they were largely driven by panic buying.

The large physical retailers such as M.Video and Eldorado have agreements with the Russian distributors of major electronics brands which essentially guarantee them a margin regardless of the ruble exchange rate. While they contend that the exchange rate risk has effectively been offloaded to the distributors, it remains to be seen whether any of the distributors have been caught with an unhedged exchange rate risk. This could possibly disrupt the market for certain brands but would be isolated to those distributors who had been taking risks with their financing.

The outlook for Russian Internet stocks

Advertising-driven stocks like Yandex and Mail.ru have been buffeted in recent years by well-funded local and international players channelling money into customer acquisition campaigns. This momentum is now reversing. While overall traffic growth will not taper off, the prices that advertisers are willing to pay certainly will.

This has a dual effect on offshore investors — profits translated into US dollars or Euros will essentially be cut in half purely as a result of the currency devaluation. At the same time, advertising rates in local currency terms are also poised to fall, as the the major players take a pause to understand how the market will stabilize and as the “hot” money which has been pouring into Russian customer acquisition and brand building dries up.

Qiwi, as a financial services and marketing company, will also face profit pressures but not nearly to the same extent as the more advertising-driven players. A big portion of the company’s business is “cleaning” cash generated outside of the formal economy by Russians and migrant workers from Central Asia. While the ruble payments processed through Qiwi kiosks will not decline, once the accounting figures are translated into foreign currency for Qiwi’s financial reporting, the company’s aggregate revenues will show a substantial decline. The ancillary revenues which the company has been developing (such as advertising) will also suffer in the same manner as Mail.ru and Yandex.

As the chart below shows, the stocks of Yandex and Qiwi took a severe beating in 2014, with Yandex down 59% and Qiwi down 63%. The chart also compares their performance to Baidu (the leading search engine-based company in China) which was up 23%, and global Internet stalwarts Google (-10%) and eBay (+5%).

russian internet stocks vs international peers

(click to enlarge)

 

Venture investing in the Russian e-commerce sector

The big players in the Russian e-commerce sector — Ozon, KupiVIP, Ulmart, and LaModa have all raised substantial venture capital funding.

While these companies don’t have debt per se, they will face a less enthusiastic investor base and there is a possibility that those with weaker finances will be forced into seeking to sell or otherwise realize the value of their customer database.

LaModa is part of Rocket Internet AG, which went public in Germany in October 2014, so their operating metrics will be publicly disclosed going forward. It will be very interesting to observe how the Russian economic crisis has affected their growth and overall profitability.

It’s quite likely that we’ll see consolidation in the Russian e-commerce space as a result of the market dislocations of 2014. As the saying goes “… when the tide goes out, we’ll see who’s been swimming naked”.

The upshot

The secular drivers of the Russian e-commerce market’s positive outlook — increased broadband penetration, familiarity and comfort with online shopping — remain in place.

However, the purchasing power of Russian consumers has been significantly curtailed, and this will have an impact on overall e-commerce market growth until the situation in the economy stabilizes.

For the time being, Russians have not cut back on their online or offline purchases — quite the opposite. But this is a short-term effect, fostered by a fear of loss in purchasing power.

An important offsetting factor is that Russian buyers will now have a greater incentive to shop for better values, which will lead to greater awareness and activity for online retailers which can adapt by offering a value-oriented range of products. We see this effect already, in the prominence of Chinese e-commerce sellers.

Unlike in other sectors of the Russian economy where the lack of foreign buying options will encourage domestic production, the retail sector suffers from a lack of Russian manufacturers and desirable brands. Multinational corporations operate Russian-based factories in the food, consumer products, pharmaceutical and automotive sectors. Apart from the food sector, these factories largely rely on imported inputs and thus there is limited scope to gain a competitive advantage by producing locally.

Russian epiphany ice dip

Is now the time to dip your toe into the Russian e-commerce market?

Is now the time to commit new investments to the Russian e-commerce sector? The answer largely depends on valuations and time horizons. It is certain that Russia will be the most significant consumer market in Europe and brand building will be less costly now that new foreign companies are hestitating to enter or expand their presences.

Large foreign companies such as Amazon, which have been eyeing the Russian market, may be presented with acquisition opportunities of local companies facing a crunch in their finances.

At the same time, companies looking at new international e-commerce markets will have difficulty justifying why they should invest in Russia as opposed to other large emerging markets such as China, India or Southeast Asia, which are not experiencing anywhere near the economic and political uncertainties of Russia, and which hold the promise of far larger total market sizes. Ultimately, Russia’s e-commerce opportunity (vis-a-vis other emerging markets) is limited by the country’s relatively small population, high transportation costs, and weak business/legal environment.

Reaching Russia Through E-Commerce

Opportunity RussiaWe recently published a short article in the annual Singapore-Russia trade journal “Opportunity Russia,” wherein we discuss the benefits of entering the Russian retail market through e-commerce, as part of a staged approach towards a full physical presence. The article discusses the types of products that Russians buy online, the economic disparity between Moscow and the Russian regions, the key online marketing platforms in Russia (search engines and social media), and specific trading and investment opportunities for Singaporean companies.

Full article (pdf  – 4 pages).

Russian Search Engine Wars – Part Deux

Yandex logoYandex, which owns Russia’s dominant search engine, reported healthy Q1-2014 earnings last week. Earnings per share in Rubles were 22% ahead of Q1-2013, and the company’s market share in search rose to 61.9% in Q1-2014 (the balance of the search market is primarily held by Google, with around a 27% share).

It was also a notable week for the Russian search engine market on another couple of fronts.

None other than President Putin mentioned Yandex’s capitulation to foreign influence and also made reference to the Internet itself being a “CIA project.” In fact, it was a DARPA project but that’s not the point of this post. Actually, I take that back. It is partially the point. An open Internet makes fact checking such as this too easy.

Creeping state control over the Internet in Russia has been bubbling in the background for some time, starting with selective bans on YouTube videos and pressure on VK to block accounts operated by the political opposition.

I was asked a couple of years ago by a large US  investment bank whether I thought there was an underlying ideological (anti-foreign) reason for Google’s travails in Russia and dismissed it at the time, arguing that, despite these worrying signs, Russia’s rulers valued the country’s integration into the world’s trading system as well as its perception abroad as a modernizing, progressive and confident society, and would fear a backlash from its citizens should they decide to curtail Internet freedoms like in China. In retrospect, I was wrong to minimize the risks to foreign Internet companies. It’s not so much that this fear has dissipated, but rather that the current internal conditions in Russia make the restricting of their own citizens’ liberties laughably easy. Indeed, many Russians are supportive of these moves.

Sputnik logoBack to the fact-checking, Russia has announced progress in developing “Sputnik.ru” a new search engine sponsored by state-controlled Rostelecom which was originally announced in October 2013. Plans are to make Sputnik mandatory in the state sector, which covers an increasingly large swathe of the Russian economy. It’s not hard to fathom the Russian government taking discriminatory actions against Google, Facebook, Twitter and other US-based companies, particularly as the economic sanctions against Russia as a result of the Crimean invasion and annexation, and the regime’s further agitation in eastern Ukraine appear set to escalate. It’s the perfect excuse for Russia to solidify state control over freedom of information access over the Internet. In order to “punish” the west, Russia will restrict their own citizens’ freedoms.

Google Russia logoThe importance of Russia to these global companies is limited. Looking at Google, the company has been a perennial also-ran in its competition for market share with Yandex. Back-of-the-envelope calculations would place Google’s Russian revenues at about US$500 million, less than 1% of the company’s 2013 revenues of US$57.86 billion. Moreover, profitability in the Russian market is certain to be lower than in the company’s core markets due to the requirement to support the Cyrillic language, as well as the significant bureaucratic and compliance overheads imposed by the Russian state (which are not specifically targeted towards Google, other than the censorship monitoring costs). Google’s shareholders may actually applaud the company’s withdrawal from Russia!

So, where do these actions leave Yandex and Mail.ru – Russia’s two most prominent, publicly-listed Internet companies?

Yandex has lost about 20% of its value in the wake of Putin’s comments last week:

Comparative performance of YNDX and GOOG in the last 5 days

Comparative performance of YNDX and GOOG in the last 5 days

While it’s not difficult for Yandex to restrict search results to comply with the state’s dicta, the more important impact is the signal being sent about the prospects for private Russian business (including e-business).

Yandex’s earnings are driven not only by the general Russian economy, but by the recent euphoria of new entrants in the burgeoning Russian e-commerce sector. Cross-border e-commerce retailers such as ASOS and eBay have been aggressively advertising on Yandex in the last 12 months. Moreover, the major locally-based online retailers have also been generous contributors to Yandex’s revenue growth, as a big share of their fundraising from international venture capitalists has been channeled into Yandex advertising in order to spur customer acquisition. The current geopolitical situation would merit at least a pause in the enthusiasm of foreign investors. The Russian online retailers are also likely to pull back, in turn, as international sanctions accelerate an already-weakening Russian economy and their prospects for follow-on venture funding dry up.

Mail.ru is safely in state-friendly hands and VK’s founder, Pavel Durov, has publicly stated that he’s left Russia for good and is shopping for a new host country (although he has been based abroad for quite some time already, ever since the controversy with his objections against state influence in VK started to become more public). De facto or even de jure state control looks to be Yandex’s ultimate fate as well. 

More on the Russian search engine market:

Yandex Reports Market Share Slippage

Battle of the Russian Search Engines: Yandex vs. Google

Update on Cross-Border Import Rules in Russia

Further to the proposed changes in import rules for overseas purchases, a Russian government commission has approved a draft law which would enable the government to set new limits of the value of goods for customs-free import.

The current limit is EUR1000 per month, which is unusually high in comparison to most other countries. Going forward, it’s set to become much lower. Most likely, the limits will be set at EUR150 in value and 10 kg in weight.

Customs duties are not supposed to change. They will remain at 30% of invoice value.

However, at the time of writing, these rules have not been finalized.

The idea is to impose the new rules in all countries of the Eurasian Customs Union. However, not all countries are happy with the limit of EUR150. An example is Kazakhstan, where KZ Post has finally become profitable thanks to international online trade.

 

Cross-Border E-Commerce Sellers to Russia Face More Barriers

cross-border e-commerce selling to russiaReports in the Russian press indicate that the Association of Express Carriers of Russia (АСЭП) which includes major international carriers such as DHL, FedEx, TNT and UPS, is preparing a letter to the Russian government announcing termination of cross-border courier services to Russian individuals.

Even before finalizing the letter, FedEx and DHL have announced a temporary cessation of all express shipments to Russian individuals, which will take effect by the end of January 2014. On the positive (!) side, Russian Post / EMS service is continuing with no immediate changes.

These actions are partially in reaction to the impending change in laws regarding cross-border e-commerce sales, which will see the duty-free import exemption drop from EUR1000 to EUR150.

However, they are also a reaction to changes in Russian customs clearance procedures imposed since the beginning of 2014 which have crippled these international couriers’ efficiency. For every express parcel clearing through Sheremetyevo and Vnukovo airports in Moscow, Russian customers must now furnish a copy of their passport with registration, a screenshot of the order details from the online store, a photo of the item(s) ordered, an original bank statement indicating the online store as the payee, an original customs declaration, and a copy of their credit card. In addition, an explanation is required if the delivery address does not match the recipient’s registered address specified in their passport. 

While not new, these extensive documentation requirements were imposed only selectively in the past, in cases where the customs officer suspected that an individual parcel was improperly valued. From personal experience, they had an impact on about 5% of the parcels passing through the clearance process. And even now, given that the new procedures are in place in only two customs clearance points in Russia, the vast majority of the value and volume of overseas e-commerce purchases will remain unaffected.

The АСЭП letter was leaked in draft form so, while not finalized, is an indication of the serious consequences of the upcoming rule changes. It remains to be seen whether the carriers will actually follow through with this threat. 

Russia has surged to the #5 international market for US-based e-commerce companies according to BorderFree, and the #1 emerging market. It would be quite a blow to the revenues and growth of the carriers as well as to their largest customers, and would certainly boost “alternative” channels which are currently well established but not used by the largest and most prominent e-commerce sellers. It will also boost the competitiveness of local Russian specialists such as SPSR and Pony Express, who can more readily adapt their processes to the Russian environment.

Another important point is that the e-commerce giant eBay has made a substantial investment in its Russian operations, and this policy move by the Russian government will have a severely negative impact on its business prospects, given that its customer base consists primarily of small and mid-sized foreign-based merchants. While such companies would typically use the US Postal Service for shipments to other countries, the lack of reliability of the Russian Post has meant that they tend to use DHL or FedEx for shipments to Russia. eBay must certainly be lobbying for some modifications to the proposals.

eBay has been a pioneer amongst foreign e-commerce companies in terms of investing in Russia. Other major e-commerce players such as ASOS, ShopBop and Taobao have chosen to service Russian customers from abroad, although they have been gradually localizing their marketing such as translating their sites into Russian, providing customer support in Russian, and establishing Russia-specific social media groups.

Additional pressure will be exerted by Russian consumers, who are understandably perturbed by the imposition of these cumbersome procedures which will require them to spend several hours to clear their overseas purchases, and pay customs duties as high as 30% of the purchase price.

There is even a public protest planned for 8 February in Bolotnaya Square, Moscow, the site of some of the largest political protests which occurred in the wake of the disputed federal elections of 2011. It will be intriguing to see the comparative size of the crowds mobilized by this issue vis-a-vis election fraud.

From the government’s point of view, the higher EUR1000 exemption has meant a loss of tax revenue and has been especially visible given the recent surge in cross-border purchases. Russians shop in foreign e-commerce stores not only because of price differences (which are largely erased by higher shipping fees), but primarily to access a much wider variety of goods. Shutting down cross-border purchases will not lead to increased revenues to the Russian treasury. Facilitating cross-border transfers and collecting duties more efficiently would seem to be the more logical direction.

The Russian government is due to make a final decision on the matter by 11 February 2014.

 

Update on Cross-Border E-Commerce Sales to Russia

cross-border e-commerce selling to russia

Cross-border sales to Russia have been skyrocketing as more and more Russians discover the wide selection and low prices of established foreign sellers such as Amazon/Shopbop, ASOS and Taobao.

In fact, many foreign sellers have instituted Russian-language versions of their sites while still fulfilling orders from abroad, thus making their sites more appealing toward the vast majority Russians, who are not fluent in English.

Other major frictions experienced by foreign sellers are also being addressed, with companies starting to offer enhanced payment options (including cash-on-delivery) to overseas sellers.

At the same time, current Russian regulations do little to discourage local e-shoppers from buying from abroad. Russian residents can import goods valued up to EUR1000 per shipment per month without having to pay VAT or customs duties, and the documentation requirements are relatively straightforward.

All of these factors add up to enhanced competition for Russian e-commerce players, who have responded by lobbying the Russian government to make the current import regulations more strict. Policy proposals include lowering the exemption amount to EUR100 from the current EUR1000.

Another response is that Russian sellers are starting to establish their own offshore fulfillment centres. Wikimart and KupiVIP have both announced such plans. Still, this is unlikely to make a significant impact in the trend to shop abroad, as the core of the problem is that Russian sellers offer a narrower selection at higher prices. Their higher prices are not solely due to tax differences, but rather that domestic competition is lower. They charge higher prices simply because they can.

Anna Oshkalo, who writes the “Russian Search Tips” blog has recently written an update about the cross-border e-commerce market in Russia in 2013, summarizing recent publicly-available market statistics. I’ve contributed some comments to the article. You can read her full post here.

 

New Survey Reveals Russian Consumer Attitudes Towards Fashion E-commerce

Esper Group survey of Russian online shoppingMoscow-based fashion consultancy Esper Group  recently conducted a comprehensive survey of Russian e-commerce consumers active in the fashion sector.

The online survey was conducted in June/July 2013 and involved 2,196 respondents across Russia, roughly equally split between men and women. The respondents were all active Internet users, meaning they access the Internet on at least a weekly basis.

Amongst the key findings:

  • Russian e-stores outscore foreign e-stores by about a 2:1 margin in offering a user-friendly selection of clothing and footwear
  • 39% of Russian online clothing buyers prefer Russian e-stores vs. 27% who prefer foreign e-stores
  • Only 29% of buyers who had bought clothes online had returned their purchases
  • 45% of buyers of clothes, shoes and accessories spent between RUR1000-3000 per order (less than US$100)

A summary of the results is available here.

eBay Extends its Global Shipping Program to Russia

e-commerce international expansion

eBay sellers will soon have an easier way to ship products to Russian buyers.

Consistent with eBay’s drive to expand its presence in Russia, the company announced that its Global Shipping Program will extend to Russia as of September 23rd.

Russians are avid cross-border shoppers and eBay claims that it sold about US$400 million worth of goods to Russian buyers in 2012. Cross-border sales account for about 10% of total online sales in Russia.

Through Global Shipping Program, US-based sellers need only send their products to a US-based aggregator, which will then assume the responsibility for delivering the items to the buyer in Russia. eBay has partnered with Pitney Bowes to offer this service globally, including to Russia. Of course, this will involve additional fees for the buyer and less competitive all-in pricing for the seller, but on the positive side, there will be certainty about an order’s complete, landed cost in Russia.

Generally, the most economical method for sending parcels overseas is the US Postal Service. While it’s quite reliable in general, the issue in Russia arises when the parcel is handed off to the Russian Post for delivery within Russia. At this stage, the parcel enters a “black hole” as the Russian Post does not regularly update the parcel’s tracking information and provides shockingly poor and rude service for individual customers who might dare to visit their local post office in person to inquire about a parcel’s status. Moreover, if a parcel is not sent with a tracking number, the chances of it going “missing” during the Russian Post’s handling of it are about 50-50 (based on personal experience, this is even higher).

"Excuse me, could you update me on my parcel's status?"

“Excuse me, could you update me on my parcel’s status?”

While extending the Global Shipping Program to Russia is welcome news for eBay sellers and Russian buyers, the stumbling block over online payments still persists, given that payments on eBay’s platform are heavily tied to PayPal. Apart from the fact that most Russian buyers prefer to pay cash-on-delivery for their online orders, PayPal itself has been a laggard in the Russian online payments market, and is only now at the point of introducing local currency payments in Russia.

The preference to pay COD is particularly acute in the fashion and soft goods segments, which eBay claims is its most popular category, where roughly 80% of Russian online orders are paid on a COD basis.

So, for the moment, Russian-based online sellers retain a huge advantage due to their ability to offer more flexible payment options.

The full announcement by eBay is here.

 

 

Interview about Russian E-Commerce (Part II)

interview on russian search tips blogIn Part II of the interview, I discuss Russian consumer behaviour in the context of e-commerce:

Practical insights into Russian online consumer behaviour

Virtual Stores Come to Moscow

The concept of shopping with smartphones in a physical environment is being demonstrated in Moscow, at the Vystavochnaya metro station in Moscow City.

Vystavochnaya metro station in Moscow

Vystavochnaya metro station in Moscow

Inspired by examples like TESCO-Homeplus in South Korea, which debuted in 2011, the Moscow version is currently featuring the Russian branch of Germany-based Media Markt, part of the giant METRO retail group.

The concept is simple: billboards display images of products and associated QR codes, which shoppers scan with their smartphones. The scanned URLs open up the product detail page in the retailer’s web shop.

Media Markt "virtual store" in Moscow

Media Markts’ implementation of a “virtual store” in Moscow

Although it’s an interesting idea, it’s unlikely to be commercially relevant for a company like Media Markt. The value is mainly in its public relations impact. While electronics/technology is the single biggest category for online shopping in Russia (accounting for about 44% of total online retail sales in 2012), such products are generally not bought on impulse or habitually. Shoppers tend to take time to research their purchases, which is more easily done on a desktop or laptop computer.

Next up after Media Markt is Goodwin Project, a Russian start-up which will offer a broader array of product categories aggregated from different, independent, e-shops, and which will operate like a mobile shopping mall, receiving commissions on the sales it generates. The success of this channel will be tied to the types of products and merchants which the Goodwin Project platform can attract.

Such demonstration projects show that Russia can keep pace with other developed nations, but this is hardly a cutting-edge technology. While it could prove commercially successful by providing visibility to stores, brands, and products and facilitating mobile shopping, it does not address the principal frictions impeding the growth Russian e-commerce: logistics and payments.

 

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