Russians learn the art of online shopping

Padlock and a credit card on a computer keyboard Credit and debit card penetration is much lower in Russia than in the West

For a Western person, the default meaning of "online shopping" includes paying for goods or services via the internet, but in Russia this is far from being the case.

For example, some 80% of transactions at Ozon.ru, a leading Russian online megastore, are in cash, says its director general Maelle Gavet.

"The Russian customers don't feel very comfortable with online transactions," she explains.

They prefer to place an order online, then go to a pick-up point, touch the goods, make sure everything is in order and then pay, says Ms Gavet.

Another extremely popular way of shopping online in Russia is to find a website, give them a phone call, have the goods you need (including fridges) delivered by a courier and then pay in cash.

"This is also linked to the fact that credit [and debit] card penetration is much lower in Russia than in the West, and they tend to naturally prefer to pay by cash," says Ms Gavet.

So, how do you teach a nation to shop online properly and without fear?

Bad memories

Data Insight, a Russian research agency, estimates that the size of Russia's e-commerce market reached 240bn roubles ($8.5bn, £5.2bn) in 2010, or 1.6% of the country's gross domestic product.

According to the researchers, up to seven million Russians were ordering something via the internet at least once a month last year.

Ms Gavet says that while there are 50 million internet users in Russia, with the number growing by 15-20% every year, only some 20% of them have shopped online at least once.

"It takes years [after you start using the internet] before you start shopping online," she explains.

Data Insight researchers agree: the longer you have been an internet user, the more you earn and the bigger the city you live in (preferably Moscow or St Petersburg), the higher chances are that you will opt for online shopping.

Top 5 Russian online retailers in 2010

  • Utkonos.ru (food)
  • Ozon.ru (megastore, no food)
  • Kupivip.ru (clothes, shoes)
  • Holodilnik.ru (electronic goods)
  • Pleer.ru (electronic goods)

Source: InSales

Apart from low penetration of credit and debit cards in Russia, there are other factors that put many Russians off shopping via internet: one of them being bad memories.

When online retail started in Russia several years ago, there were a lot of companies appearing and disappearing overnight, says Ms Gavet.

As a result, "first courageous customers", as she calls them, did not always receive their orders, or the goods were broken, or they were sent the wrong ones.

Incentives

That is why Ozon.ru - ranked second biggest online shop in Russia after food retailer Utkonos.ru by Russian internet company InSales - and others have been working hard to make potential customers believe that they can be trusted.

Among other things, Ozon.ru set up 24/7 call centres "to make people understand that we are real people", says Ms Gavet.

Some companies also resorted to offering discounts to those brave enough to try paying for goods and services via the internet.

For example, to make Russians buy e-tickets, national carrier Aeroflot offered a 3% discount, compared with a several per cent surcharge for those buying tickets in person.

M-Video, a huge high street electronics retailer, went for a 5% discount for people paying for their online orders by card.

Ms Gavet says that Ozon.ru welcomes offline retailer's attempts to establish their solid online presence.

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"Competition is good, because we need to educate customers, and Ozon.ru itself will not be able to do it," she says.

Delivery network

While Ozon.ru introduces itself as "The Amazon of Russia", the company admits that there are some huge differences between the two due to the specifics of the Russian market.

For example, the Russian online megastore has been busy setting up its own delivery network - "unlike Amazon who had an amazing chance to have UPS when they started, and the American post", explains Ms Gavet.

Currently, Ozon.ru covers 84 cities directly, and the rest through the Russian Post (Pochta Rossii).

"We are thinking about pushing it further and increasing our own network to be able to reach those regions directly," says Ms Gavet.

No surprise that the move to create the delivery network "was hugely capital intensive".

The company reported that its turnover increased by 34% to $150m (£93m) in 2010, but Ms Gavet says she cannot comment on whether Ozon.com is making any money.

Despite a number of obstacles, the future seems bright for the Russian online retail market.

According to Data Insight's forecast, the number of online shoppers in Russia will increase by 120% over the next five years, with the size of the market jumping 145%.

The researchers add that if some steps are taken to boost the market, rather than it being left to expand on its own, the growth figures will be even higher.

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