Drivers and Constraints of Russian E-Commerce growth

Posted on: Online Payment | B2C E-Commerce | Blog on September 04, 2018

Russian emerging E-Commerce market has a strong potential for growth.

Russia is an emerging E-Commerce market where a double-digit growth rate in the period from 2018 to 2022 is expected. However, the share of total retail sales coming from digital commerce was half the global average in 2017. There is still much room for growth in Russia’s online retail.

The evolution of the online shopping trends is the main E-Commerce growth indicator.

E-Commerce expansion shows that Russian consumers have a strong inclination towards online shopping, mostly because of the lower prices, wider range and exclusive products that are not available in offline stores. B2C E-Commerce in Russia is driven by young tech-savvy population groups, with more than half of online shoppers aged under 35 years old. The strongest market development trends are the popularity of mobile and cross-border digital shopping. Smartphones are used by close to a half of online shoppers in Russia to research products and make purchases. As for cross-border online shopping, B2C E-Commerce imports’ share of total B2C E-Commerce in Russia more than doubled within the last 7 years.

Lack of confidence in online purchases is a fundamental barrier for E-Commerce development in Russia.

Despite these trends and the growth of online shopping, there are still barriers hindering further development such as relatively low Internet and online shopper penetration, lack of trust in sharing personal and payment data, and increasing taxes or duties on international purchases. Logistic infrastructure is highly underdeveloped in Russia, especially in the rural areas. Most courier and delivery services are expensive and operate only in large cities. Russian Post is also unpopular because Russian consumers consider it as a low reliability and slow delivery operator. Lack of skills among the older population, lack of confidence in overall shopping on the Internet and technical difficulties, such as insufficient Internet speed, demonstrate the great potential for further improvement of the E-Commerce infrastructure and attitude of the Russian consumers to online shopping.

Russian government tries to support the E-Commerce growth in Russia.

To deal with the barriers to more intensive E-Commerce growth, the Russian government has introduced various laws and regulations that are directly or indirectly related to the digital commerce sector. To encourage a higher level of consumer confidence in online shopping, amendments to the Consumer Rights Protection law relating to the regulations of online shopping aggregators will enter in force in the beginning of 2019. The law aims to increase the responsibility of Internet aggregators, such as Yandex.Market, and to protect consumers from damage caused by unreliable information about a product or service on the Internet. Furthermore, in 2018 the Ministry of Industry and Trade of the Russian Federation elaborated a strategy for the development of E-Commerce in Russia for the period up to 2025. The main aims of the strategy are to create additional market mechanisms that will further the growth of online retail, through improving the related regulations, developing electronic payment systems, providing legal protection for market participants, enhancing cybersecurity, and achieving a balanced operating environment for the Russian and foreign online stores.

If you are interested in more information, see the full report Russia B2C E-Commerce Market 2018”.

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