The COVID-19 pandemic has helped fuel a surge in online shopping in Russia that has put even the remote icy expanse of Chukotka on the e-commerce map.
The windswept easternmost region of Russia, where winter temperatures can fall below minus-50°C, has started to boom for online retailers since the pandemic started keeping consumers at home.
It is a trend playing out across Russia, spurring explosive growth for online retailers.
Traditionally unable to make speedy deliveries in the world’s largest country, where roads become clogged with ice and snow for months, they have invested heavily in logistics centers and delivery points.
With foreign competition largely absent, Russian companies are capitalizing on the surge in online shopping.
“It’s very convenient,” said Alina Lunina, an English teacher from Samara who now buys clothes, books, makeup and sometimes groceries online.
She uses the Moscow-based Wildberries, which she said delivers to collection points in two days, even though Samara is more than 860km from its headquarters.
“There are many pickup points in my area,” Lunina said. “It takes me five minutes to walk there.”
The e-commerce boom is a welcome development for economists who have said that Russia is too reliant on oil and gas revenues, especially as retail sales — a gauge of consumer demand — plunged as lockdown measures kept people at home at the start of the pandemic.
E-commerce last year accounted for just 1.4 percent of Russia’s economy, research firm Data Insight said, compared with 2.6 percent in the US and 5.1 percent in China.
“The Russian e-commerce market is growing significantly faster than in the US or in the largest EU countries, thanks to the effect of a low penetration base,” Data Insight cofounder Boris Ovchinnikov said.
He put the market value in Russia for the first half of this year at 1.16 trillion rubles (US$15.2 billion).
Analysts from market research firm Euromonitor expect annual online sales in Russia this year to grow by more than 40 percent to about 2.5 trillion rubles and by 10 to 15 percent per year over the next five years.
E-commerce penetration in Russia has increased from 7 percent of total retail sales last year to about 11 percent this year, although that is still less than in the US, where penetration is about 19 percent, Marija Milasevic of Euromonitor said.
The Russian market is also very fragmented.
Privately owned Wildberries leads with 15 percent of the market, Data Insight said, while Ozon, which has filed for an initial public offering in the US, has 7 percent.
Behind them comes AliExpress Russia, a joint venture between Chinese online shopping giant Alibaba and Russian partners. Other rivals include Russian electronics firm M.Video; Sbermarket, which is controlled by a venture between Russia’s largest bank Sberbank and Internet group Mail.Ru; and Internet company Yandex.
Amazon has not entered Russia, where the country’s size — it has 11 time zones — and its competitive information technology market pose challenges.
“To cover at least two major cities in Russia, the company needs to invest heavily not only in delivery, but in warehousing, to have enough goods to maintain the current quality level,” Sergey Belyaev of Sova Capital said.
Amazon did not respond to a request for comment.
Wildberries, which said that it attracted more than 12 million new customers to its Web site in the first nine months of this year, has enjoyed spectacular growth.
Orders in the second quarter rose 490 percent in Chukotka, a remote region located across the Bering Strait from Alaska, where winters bring endless nights and temperatures are minus-50°C.
Wildberries said that second-quarter orders also soared by 385 percent in Ingushetia, in the North Caucasus, and by 239 percent in Buryatia, a region in eastern Siberia.
The retailer, which says it has more than 34 million customers, has 13 warehouses, and dozens of sorting and distribution centers across Russia, which reduce delivery times in the easternmost region of Russia and Siberia.
Logistics and poor infrastructure are big challenges, but door-to-door couriers have boomed in big cities, with low labor costs helping companies keep prices down.
Wildberries’ customers can order items to try on at small sites dotted across cities. Ozon operates a network of drop-off boxes for clients to pick up packages.
Ozon in March said that it was spending US$300 million on logistics improvements and has opened a logistics center in Rostov-on-Don, close to Ukraine, for same-day delivery.
In April to May, Ozon recorded an 84 percent increase in new active buyers year-on-year, and regions outside Moscow account for more than 55 percent of its gross merchandise value, company data showed.
As in other countries, online grocery orders have soared during the pandemic and the race is on to cut delivery times.
Yandex last year launched a service, Yandex.Lavka, for grocery delivery in 15 minutes.
This followed its success with a food delivery service, Yandex.Eda.
Yandex.Lavka has small warehouses across Moscow and uses couriers on bicycles, electric bicycles and motorbikes.
Its monthly orders have risen to more than 1 million from about 50,000 a year earlier, the company said.
Sbermaket said that its orders in cities such as St Petersburg, Yekaterinburg and Nizhny Novgorod were 15 to 17 percent higher in the third quarter than in the first three months of this year.
Sbermarket expects the e-grocery sector to keep rapidly expanding in Russia for years to come, CEO Michael Loyko said.
Online grocer Utkonos, which reported a 65 percent increase in sales year-on-year in the third quarter, also said that demand for delivery services was likely to keep growing now that consumers have a taste for the convenience of online shopping.
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