Until recently, a number of Western online retailers of all sizes enjoyed growing popularity among Russian customers, who appreciated their diversified assortment and virtually tax-free purchases. Among the most popular product categories were clothing, consumer electronics and gadgets, as well as automobile parts.
According to `The Russian Cross-Border Sales & Payments Market` report issued by East-West Digital News, the market reached some USD 5 billion in 2014, up from USD 3 billion in 2013. However, Chinese players captured the better part of this growth. While Alibaba’s subsidiary, AliExpress, became Russia’s most visited ecommerce website in 2014, the overall sales volume from the West has stagnated or began decreasing, with a variety of situations, from continued growth to bankruptcy, depending on market segments and individual players’ strategies.
There are several reasons behind this unexpected market shift, such as recessionary tendencies in Russia which were propelled from early 2014 by the consequences of the political confrontation with Western countries and the fall of oil prices. GDP, which stagnated in 2014, could fall by 5% in 2015, hampering purchasing power.
Moreover, RUB lost around one half of its value between late 2013 and late 2014, making foreign purchases even less affordable. Market competition grew over the 2012-2014 period, which has limited the sales potential for each player, taken individually. There was also recorded a rise in patriotic shopping habits among the Russian consumers by some industry insiders, with some consumer groups snubbing Western retailers as a result of the tensions with the West.
While mail forwarder Dostami.ru (formerly BayRu) went bankrupt in late 2014, not all Western players have seen a slowdown in trade. iHerb, a leading US online store for health and beauty products, launched rather successfully on the Russian market in spring 2014. UK online fashion retailer Boohoo started shipping to Russia in early 2015. Fashion website iMall.eu, which targeted wealthy Russian women, developed significantly since its launch in 2012 and, as such, it was acquired by Farfetch in 2014. Sales have continued to grow fast in 2015.
Market prospects in 2015 are uncertain, given the macroeconomic instability. However, it would be premature to consider Russia a lost market. In the short term, RUB’s fall is affecting domestic retailers as well as cross-border sellers and consumption will obviously not completely stop in either case. Russian cross-border online shoppers continue enjoying tax-free purchases under a limit of EUR 1,000 per person and per month. The authorities have temporarily dropped their idea of lowering this threshold which, in any case, would not have affected individual cross-border purchases seriously.
What’s more, customs procedures are being simplified progressively while new offers from Russian shipment and payment operators have made cross-border ecommerce operations easier than in the past. Even in these troubled times the Russian market is worth giving a try.
About Adrien Henni
Adrien Henni is Chief Editor and co-founder of East-West Digital News, the international resource on digital industries and ecommerce in Eastern Europe. After 10 years of experience in the internet, mobile and venture businesses in France, Russia and Ukraine, Mr Henni has begun advising a variety of startups, funds and other organizations.
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