Is Russia the Best Emerging Market in Digital Right Now?

January 29, 2019

Despite controversial news and sanctions, Russia is still one of the most promising e-commerce markets in Europe.

The dip in 2015, caused by the unstable Ruble didn’t last long, and by 2017 the e-commerce landscape had not only bounced back, but actually increased when comparing to pre-crisis. Furthermore, according to a Morgan Stanley report, by 2020 the market will reach an impressive 31 billion dollars.

The cross-border market in Russia has recently been booming, with the main attraction being cheaper prices, as international retailers do not have to pay import duties

What is moving this huge market?

Russia is on the path towards total digitalisation. Internet penetration rate has nearly tripled in the last 3 years, and has reached an impressive 72% of the 140 million population.

The second main driver of increasing e-commerce trade is the significant improvement of the logistics infrastructure. Although the majority of online orders are processed by Russian Post or it’s premium brother EMS – service and process of delivery have hugely improved in recent times.

So are you excited?

Well don’t get super excited just yet. There are a few things you need to remember about the Russian market:

  • There is a fairly high level of multi-platform split and some of the traditional marketing methods will not work on this snowing land.

  • Yandex is still dominating the market with 56% market share, making it the biggest ad network in Russia. With 90+ different products from Maps to Car Sharing it’s hands down the dominant tech company in Russia.

  • Local social media giant VK and YouTube out perform all other major social media, such as Facebook and Instagram.

Language Barrier

As I mentioned, cross boarding market has boomed and it’s mainly due to more and more international players going through localisation. The vast majority of Russians do not speak English, so a Russian site is essential. Which means to be successful in the Russian e-Commerce market you have speak your consumer language.

When it comes to purchasing online, Russian’s are known to be picky and cautious. Unfriendly design or badly translated pages will scare Russian consumers off.

What is the Reason for Cross-Border Boom in Russia?

After a major ruble dive in 2015, Russian consumers generally haven’t changed their shopping habits, but what has really changed and driven cross-border trade, are prices.

All purchased goods from foreign stores for private usage are exempt from customs tax, which makes a big difference. Before 1st of January of 2019, Russians could purchase goods with 0 import tax up to 1000 euros per month. Now the government has reduced this price to 500 euros per month but to most people, it doesn’t make any difference.

So essentially, if a brand decides to start working with the Russian market tomorrow they will have a price advantage against any local online or offline store. The second important point worth noting, is the wide assortment and uniqueness of the products in the local market, which may not be covered by an international online retailer, looking to move in to Russia.

Final Thoughts

We are currently facing the beginning of the eCommerce age in Russia. It’s a country with a huge potential but with no global dominant eCommerce player. Even though Russia may not be an obvious destination for holidays, it certainly should not be ignored when it comes to opportunity for business growth.

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