29 December 2012, 10:50

Russia’s e-commerce: 2012 marks record rate of market expansion

Russia’s e-commerce: 2012 marks record rate of market expansion

This year marked the growing interest of investors in the Russian e-commerce market. The trend fails to surprise experts though, as they have been citing a record rate of market expansion, despite certain peculiarities unique to the county, such as a preference of Russian customers to pay cash on delivery rather than to use any of the available online payment methods.

Typical for the country, Moscow has been at the forefront of envisaging e-commerce growth at a rate of 3-5 times greater than that of traditional retail. The dynamics spurred demand for quality warehouse space in the city during 2012, as distributors struggled to find adequate premises to store large volume goods. Valentin Gavrilov, director at one of the world’s leading property consultancies CBRE said in a telephone interview that, “In 2012, e-commerce generated demand for 120 – 130 thousand m2 of A grade warehouse space. Large online operators prefer warehouses with 15-20 thousand m2 of available space and the possibility of deep automation of inventory management process,” adding that, “therefore, in 2013 we will see the continuation of the growing demand for warehouse space from online retailers.”

Yet another example that the online retail boom in Russia gained steam over the course of the year is a recently announced decision by Swiss private equity fund, Pluribus Optimum, to invest 100 euros in e-commerce projects in the country and its neighboring states by the end of 2015. The initiative is directed towards improving of quality of management and organization of online retail in the region.

When commenting on the move, Mika Romanoff, the director of the fund’s management company stated, “We have identified e-commerce as an extremely attractive investment field in Russia. The potential growth is obvious when looking at such key things as: the number of Internet users, which has doubled over the last two to three years, the growth of online shopping, which is estimated at 25% growth per annum, the growth of average transaction size in value, which repeats what we previously witnessed in the US and Europe.”

The company also outlined that its primary focus will lie in the development of fulfillment centers and logistical services for online shops, rather than taking the beaten path of investing in online retail companies themselves. The experts view these segments as particularly underdeveloped when comparing Russia with other states, while their importance for the efficiency of e-commerce can hardly be underestimated.

With cross-border online shopping gaining momentum, another issue becomes more apparent: the fact that it often takes longer for foreign goods to clear customs. Consequently, delivery time often exceeds the average time across Europe, creating obstacles in the way of the sector’s growth. The concern has been brought up in a number of conferences and exhibitions related to the sector during the course of the year, with business representatives hoping for some amendments to the existing practices to kick in soon.

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