Among the many topics discussed during last week’s RIF+KIB 2012 conference, the biggest yearly event in Russian Internet business, eCommerce was a dominating theme.
On the very first day of the forum, participants of the panel dedicated to online retail were introduced to a document entitled Electronic Commerce Industry Convention. Mikhail Osin, Digital Retail Director at OZON.ru, presented the draft agreement, designed by Russian Association for Electronic Communications (RAEC) Commission for eCommerce.
The treaty’s main aims are to consolidate honest eCommerce market players, promote trust in their industry in government officials and the general public, and speed up further development of the electronic market. The draft has already received support from many major companies, i.e. OZON, Webmoney, Oborot.ru, Utinet.ru, Wikimart, Boutique.ru, Softline, LiveTex, CPANetwork, and others.
The online retail-themed panel, which also discussed electronic and mobile payments market, featured speakers from leading market players, who shared their work experience in the past year and their vision of the industry’s future development.
Fedor Virin of Data Insight, spoke about the trends that his research company believes will dominate the market in the coming three or five years. One of the most important trends is market regionalization, Mr.Virin said, noting that market revenue is growing twice as fast in provincial Russia that in Moscow or St. Petersburg. Another important trend is diversification of investment: there are major projects appearing in all the segments of electronic market, with some companies arriving from offline trade, and some being born out of mergers of smaller players.
Product range and quality will soon become the key factors of an online shop’s success, Virin believes. Stronger market players will bank on improving their product range and their brand image. Retail models that will manage to combine all the benefits of both online and offline trade will gain momentum, as many Russians still have little trust in ‘virtual’ sales. Seeing this, Virin said, more and more online retailers will open customer pickup points.
Mobile commerce is also expected to develop. By ‘mobile commerce’ Data Insight mean not just mobile websites and apps for buying or tracking your order status, but also solutions that help search for the best offers and compare prices while shopping offline. The latter option is already becoming traditional retailers' nightmare: customers come to their shop to see a product, then browse online stores on their gadgets and eventually buy the product they need from a vendor offering the lowest price, usually an online retailer.
Coupons remain one of the market’s main drivers. And, while coupon trade began offering mostly discount on services mostly, more and more offers are now made for discounted products. Thus, coupon services are competing with the usual online stores. The greatest positive effect that coupon sites have on eCommerce in general is that, when people buy coupons, i.e. expensive ones, they are getting used to advance payment.
Mr. Virin predicts that in the coming four years, Russia’s eCommerce market will be 2.3 times bigger. In 2011, market value was 310 billion rubles ($ 10.5 billion). This year’s expected growth is 25 percent. As of today, sales of airline tickets, clothing and footwear, and children’s products are the most dynamic market segments. In the coming years, groceries, other FMCG's, DIY goods and tour packages may start booming.
E-curencies and mobile payments
Research by FOM foundation shows that only 16.7 percent adult Russians, or 9.7 million people, currently buy things online, and as few as 5.8 percent choose to pay for their purchases online. Russians tend to be more relaxed about paying for services via the web, but when it comes to buying goods 65 percent prefer to pay in cash.
Shoppers who make advance payments with their credit cards or e-wallets tend to spend more, spending 5,879 and 4,705 rubles, respectively. People who chose post-payment spend, on average, 3,803 rubles. Russians don't mind making a pre-payment in larger online stores whom they believe they can trust. When buying from smaller and less-known vendors, they like to see the product first and pay cash on delivery.
Another research, carried out by TNS in February and March 2012, about 27 percent Russians (3.9 million people) between the ages of 18 and 45 and living in major cities, use e-currencies at least once every six months. 15 percent of those asked by TNS use Yandex.Money, which remains the country's most popular e-currency system to date.
Payroll debit cads make up to 80 percent of all bank cards in Russia, and 90 percent of all card transactions are cash withdrawal, said Victor Markelov, Product and Business Development Director at Vympelcom. Most people still chose to withdraw their salaries from their cards within a few days after being paid and don’t use their cards to pay for services or anything else. In an attempt to change this, Vympelcom (known under its Beeline brand) was the first operator to offer its customers an alternative option: Beeline subscribers can now use their mobile account to pay for their Internet connection, public utilities, fines, tickets and things they buy in online stores. Beeline’s mobile apps and the special RURU.ru web portal allow users to easily transfer money from their cards to their mobile accounts for no fee, and pay for products and services from their phones. The more money a subscriber has on their mobile account, the more they tend to spend on both third-party and the mobile operator’s services, Mr. Markelov added.
PrivatBank’s Tatiana Ignatenko told participants of a new system that allows entrepreneurs acquire payments from Visa and MasterCard accounts anywhere with a help of iPay app installed on a smartphone and a portable terminal that can be plugged into a phone, laptop or other device.
Mobile terminals are becoming increasingly popular with small and medium businesses. The system now has 3,000 users in Russia, i.e. taxi drivers, web stores, delivery services, and doctors, among others. The era of magnetic stripes is fading out, said Ms. Ignatenko, and the future belongs to Near Field Communication (NFC) technology, enabling no-touch payments.
Google was one of the first major companies to promote NFC in the mass market. According to a forecast made by IMS Research, sales of smartphones that support NFC will reach 80 million items, or even 100 million, if rumours that the new generation iPhone will also support e-wallets are true, analysts say.
Large trading platforms vs. small online shops
More and more larger web portals show a tendency towards protecting their information, Ichiba e-trade platform’s Anton Terekhov said in his presentation. Social networking sites are closing their content from search engine indexing and don’t seem to want to let their traffic out, turning into an ‘Internet inside the Internet’ for their users. In order to view third-party content, VKontakte users now don’t have to actually leave the network’s page, and Facebook has introduced different prices for ads that lead to third-party pages or allow users to view the content via Facebook page.
Thus, powerful segments and clusters are appearing on the global web, and this applies to large trading platforms as well. In this situation, smaller online retail businesses have no choice but to try to be present on all major trading platforms. Ozon.ru, who now has 150 partner merchants, plans to add a few more thousand by the end of 2012. In order to do this, Ozon will open the opportunities of its logistics system to the partners and even introduce its own web-currency.
It is possible, Mr. Terekhov says, that social networking commerce boom will take place in a few years. Mikhail Ukolov of Utinet.Ru agrees: social networking sites have an immense customer base that cannot but interest millions of online sores. What remains to be done is to design an infrastructure and a correct CRM that will help retailers and their customers find each other. And it seems like Facebook has already made the necessary steps in this direction, introducing Open Graph that allows receiving detailed information on any subscriber and segmenting the site’s audience.