beyondbrics

Online retail promises to be the next big thing in Russia as shoppers, bruised by last year’s recession, turn to the internet for their bargain hunting sprees.

Russia’s online retail market is worth about $5bn a year, a tiny fraction of the country’s total retail trade, according to Ebay. But it could easily quadruple in the next few years as internet access expands and the novelty of glitzy city malls wears off.

After long deliberation, heavyweight international web retailers are now beginning to move into the country.

Ebay launched a Cyrillic version this year, bringing its web auction services into competition with Russia’s Molotok.ru and allowing buyers to pay for the first time in roubles.

Auchan, a French hypermarket group, is planning to introduce online services at its Moscow chain of stores too.

At the funkier end of the market, Groupon, the world’s fastest growing web company, bought Darberry, a Russian start-up, this week as part of an international expansion that has taken it to more than twenty countries.

Like Groupon, Darberry has enjoyed awesome success with deal-of-the-day offers that help customers band together to get discounts.

“We borrowed $1m to get started and we have spent less than a quarter of that and are already profitable,” says Elena Maslova, one of five Russians who founded Darberry early this year.

In a recent report, Nielsen, an international market consultancy, said Russia had “massive growth potential for online retailers.” At least 83 per cent of Russian internet users now shop online after a sharp rise from only 56 per cent in 2007.

But there are obstacles. Russia’s antiquated postal service admits it cannot handle all the parcels that are being dispatched by web traders and landing at its door. And when consumers buy from foreign websites, customs officers tend to nitpick about taxes and prices, adding to delivery delays.

Payment is another complication. Many Russians are wary of cyber crime and prefer to queue at Sberbank, the state savings bank, to pay for goods than risk using credit cards.

Russia’s internet shoppers are still largely confined to the country’s big cities. But Ozon.ru, one of the country’s biggest online retailers with a turnover of more than $100m a year, sees the best opportunities for growth in the regions where physical retail is still undeveloped.

As competition builds between the web and bricks-and-mortar shops, Russia’s bad weather could be another factor that deters consumers from stepping onto the streets.

Shoppers deserted Moscow stores this month as the city baked in a record heatwave. But Utkonos.ru which handles 90 per cent of Muscovites’ internet food orders, said its sales rose close to record heights.

Related reading:
Heatwave hits Russian growth forecast, FT
Online retailing in Russia (pdf), PwC

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