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Betting on E-Commerce: The Winner Takes It All
24 May 2018
11:00—12:15
KEY CONCLUSIONS
The e-commerce market in Russia is actively developing

Last year the turnover of traditional trade in Russia amounted to about 30 trillion roubles. It grew a little more than 1% compared to the previous year. The volume of the e-commerce market amounted to 1.1 trillion roubles, but at the same time it grew 22% since last year, and in 8 years it grew 5 times larger. This segment has been growing at double-digit rates, including the time during the peak of the crisis. Now the share of e-commerce in the total trade turnover in Russia is slightly more than 3%. The task, as stated by the Ministry of Industry and Trade, is to increase it to 20% by 2025. Today in the OECD countries this figure ranges from 10 to 20% — Andrei Sharonov, Dean, Moscow School of Management SKOLKOVO.

Russian e-commerce is characterized by high concentration and predominance of imports

Features of the e-commerce market in Russia are: high concentration — 5% of online stores make about 90% of turnover; significant share of foreign sellers — they account for 37%, which makes 420 billion roubles. There are three countries — suppliers of products that come to us through e-commerce, that dominate. They are: China (52%), the EU (23%), the United States (12%). Moscow and St. Petersburg account for more than 50% of e-commerce. Meanwhile payments by bank cards are quite rare — about 1/3, while in developed countries it is more than 90% — Andrei Sharonov, Dean, Moscow School of Management SKOLKOVO.

Russian Post makes a key contribution to the development of the e-commerce market

There is a noticeable consistent growth of number of deliveries and shipments from online shops that Russian Post manages: from 33% in 2013 to 67% — Andrei Sharonov, Dean, Moscow School of Management SKOLKOVO.

We processed 365 million shipments last year, this is 7 times more than 4 years ago — Nikolai Podguzov, Deputy Minister of Economic Development of the Russian Federation.

This year Russian Post is actively engaged in the development of its logistics system. We have already created 2 modern complexes, we plan to create about 40 logistics centres in the next 2-3 years, which will be a three-level logistics system with 7 large hubs, 10 hubs in cities with over a million citizens and more than 20 small sorting facilities. This will ensure the delivery of items within 3 days for 80% of the territory of our country. If we solve this problem, then we as the Russian Post will provide everything necessary for the development of electronic commerce in the country — Nikolai Podguzov, Deputy Minister of Economic Development of the Russian Federation.

The e-commerce sector is attractive for Russian business

We announced that we will actively cooperate and finance the construction of a three-level logistics system. We have attracted about 340 billion roubles over the past 10 years into the development of various elements of Russia's infrastructure, while only 100 billion were our money, the rest is the money of our partners, including foreign ones — Alexei Yakovitsky, Global Chief Executive Officer, VTB Capital .

ISSUES
Underdevelopment of the logistics infrastructure

Among the constraints, I would first of all mention the imperfection of the logistics infrastructure. It includes fragmentation of the market, and low concentration of players. Low penetration of non-cash payments. 3.5 parcels per person per year — this is much lower than the average indicators that exist in Europe and Asia — Nikolai Podguzov, Deputy Minister of Economic Development of the Russian Federation.

Logistics and delivery time and generally infrastructure in a broader sense — this is probably the main obstacle to the explosive growth of e-commerce, which, we all hope, will continue in Russia — Alexei Yakovitsky, Global Chief Executive Officer, VTB Capital .

Imperfection of foreign trade regulation

If I order something from Helsinki from a Russian company, it's almost impossible to get it. For example, when you need to import these goods, you need to explain to everyone, why does a Finn want to buy something and bring it here. Then there are problems with money transfer — it is impossible to transfer to a rouble account, you need some euro account. For the boom in electronic commerce to take place, Russia needs to work out all these steps — Pekka Viljakainen, Advisor to the President, Skolkovo Foundation; Chairman, Aii Capital.

It is necessary to provide a complete chain. This is not only about delivery. For example, if the return of goods is carried out, then everything should be smooth and efficient. <...> It is necessary to work somehow with the customs. All these payment systems also need to be worked out, including legislation — Pekka Viljakainen, Advisor to the President, Skolkovo Foundation; Chairman, Aii Capital.

There are several problems with export development through e-commerce channels. First and foremost, this is the inability to provide an effective mechanism to ensure zero VAT for legal exporters. Therefore, practically all exports are carried out by private individuals. Speaking about transit, volume of electronic commerce here is very low, although Russia has unique advantages from the point of view of location. We provide the shortest path from China to Europe — Pekka Viljakainen, Advisor to the President, Skolkovo Foundation; Chairman, Aii Capital.

Problem of quality of goods and consumer protection

Barriers are really obvious. <...> The quality of services, the quality of the goods and the guarantee that if a failure occurs, the site immediately fixes it and takes the side of the buyer — Maxim Grishakov, Chief Executive Officer, Yandex.Market.

Low level of small business involvement

We use very few our own suppliers. It is easier for our online stores to buy abroad and deliver a ready-made product to Russia, than to work with a large number of small players, invest in logistics, create a chain, ornate it with services, etc. — Oleg Fomichev, State Secretary, Deputy Minister of Economic Development of the Russian Federation.

SOLUTIONS
Creating partnerships

The system of electronic commerce in the country and the digital economy in general is a system of partnerships. <...>Someone has a financial resource, someone has expertise in logistics, someone has a strong understanding of how to develop IT-systems, but the integral picture should be created in a partnership mode — Nikolai Podguzov, Deputy Minister of Economic Development of the Russian Federation.

We do not believe in the organic development of the e-commerce platform from within one institution located in the same sector, even if it is a very large banking institution like ours. It is the path of partnerships that is the path that we have chosen for ourselves. Why? Because the consumer wants a single window — Alexei Yakovitsky, Global Chief Executive Officer, VTB Capital .

Formation of the ecosystem

AliExpress did a great thing — they became one of the main drivers of expanding the market boundaries for small businesses in China. Our e-commerce should do the same, but for this we must create an ecosystem. To coordinate the activities of a large number of players there should be one player to consolidate already existing logistic services in Russia, invest in new ones where there are not enough of them — Oleg Fomichev, State Secretary, Deputy Minister of Economic Development of the Russian Federation.

Who will become a global player, at least in the country level, is still a big question. We have many players who claim this role. This is Sberbank with its huge number of customers, and Yandex with advanced information technologies, and Russian Post with a huge logistics network, which has a clear advantage. It could be commercial networks — offline traditional ones, which can move in this direction. For example, X5, Magnit. Each of them has its own separate advantages, they can become such a global player by creating an ecosystem — Konstantin Noskov, Minister of Digital Development, Communications and Mass Media of the Russian Federation.

Using foreign experience

According to the World Economic Forum, in 2016, Japan Post Service for the fourth time in a row was recognized as the best in the world. <...> Delivery to the door of the recipient is carried out without additional charges. In addition, the recipient can choose the time at which they can receive the delivery with an accuracy of 2 hours. <...> To reduce the number of repeated deliveries, we have two solutions. First is the use of convenience stores as points for reception and sending of mail. Second is close cooperation with Japan's largest marketplace, Rakuten — Kunio Tanigaki, Executive Vice President, Japan Post Co., Ltd.

Reduction of administrative restrictions

We hope that by the end of 2018 the law will be enacted, and in Russia, as in most countries of the world, online trade in alcohol will be allowed. We advocate that this channel should be absolutely transparent and with absolutely the same age and time restrictions which exist for offline alcohol trade — Dmitry Shpakov, Chief Executive Officer, AB InBev Efes.

The material was prepared by the Russian news agency TASS