E-commerce in the new economic sector is expanding at an astonishing double-digit rate despite the slow growth of Russia’s traditional economy. Alexander Shulgin, CEO of Ozon, one of Russia’s e-commerce giants, said the e-commerce industry is ready for rapid growth and is expected to maintain rapid growth for the next decade.
Currently, online retail in Russia accounts for 4.5% of total retail sales, growing at a rate of 25% per year, with some e-commerce giants even growing at more than 70%. Last year, Ozon’s year-on-year growth rate was close to 80%, and it is expected to continue to achieve triple-digit growth in the future.
Shulgin believes that although Russia’s e-commerce penetration rate is low, the market demand is huge and consumers’ demand for online shopping is far from saturated. With the development of logistics channels, people are increasingly willing to buy all kinds of goods online.
Founded in the 1990s, Ozon initially started out selling books and can almost be seen as the Russian version of “Amazon”. In fact, in the early 1990s, typing in the URL “amazon.ru” would directly jump to Ozon’s website.
Ozon has many similarities with other large e-commerce companies. It not only has an online e-commerce platform, but also a physical retail business. Sellers can put the goods in Ozon’s logistics center and Ozon will be responsible for the delivery, or they can store the goods in their own warehouses and Ozon will be responsible for the delivery.
Although Ozon’s group purchase discount service has only been launched for a year, it has accounted for 20% of the company’s turnover. Currently, Ozon’s sellers are mainly from Moscow, but they plan to open up to the whole of Russia. For producers in places such as Novosibirsk, this is a good opportunity to enter the entire Russian market.
Although Moscow is an important market, Russian e-commerce is also booming in other regions. Ozon’s growth rate has reached three digits in small urban areas and is expected to maintain this growth rate in the next three to four years.
Logistics is one of the main obstacles to the development of Russian e-commerce due to the lack of investment in the distribution network. Shulgin believes that Russia needs to have six to seven logistics centers to achieve 24-hour to 48-hour delivery.
Ozon offers three delivery methods: couriers, lockers and self-pickup points. Among them, the growth rate of lockers is extremely fast, accounting for 15%-20% of total sales. As a large locker operator in Russia, Ozon currently has 4,000 lockers and plans to increase to 7,000 by the end of this year.
Regarding the impact of Chinese e-commerce on the Russian market, Shulgin believes that it is more like Ozon and Alibaba jointly developing the market than a competitive relationship. Due to delivery time and other reasons, Chinese products take several weeks to arrive, and if Ozon has a logistics center locally, faster delivery can be achieved.
In addition to lightweight Chinese goods (such as clothing), Ozon also provides large items that cannot be transported from China. Locals will understand what products Alibaba sells, and then import them from China to Russia and sell them through the Ozon platform, shortening delivery time and making prices more competitive. Ozon’s advantages lie in local customers and infrastructure.
Ozon covers almost all categories, and the current popular ones include clothing, fast-moving consumer goods, home decoration and long-shelf-life food.
In terms of procurement, Ozon currently adopts a mixed model, depending on different categories. Most electronics are imported, textiles are mixed, and most food and decorative items are locally made.