Logistics first, then consolidation: the future of Russian e-commerce

The first business Oskar Hartmann started was, in his own words, a German copycat of bodybuilder.com. He posted stuff to people and a day later received thank you notes. The delivery rate was 98%. In Russia, by contrast, “you pay three guys from a consultancy 10m euros and you get 30%”.

The fault lies not with the consultants or with the business but with the nature of logistics in Russia. It is hard to get goods around the world’s largest country. A nation of careful shoppers don’t like paying for things until they see them and are happy with them. And there are few systems for online payment. So what do you do?

According to Maelle Gavet, the CEO of ozon.ru, the biggest online retailer in Russia, the first thing is to educate customers about new ways of shopping. Simultaneously, indigenous solutions need to be found for online payments. And retailers need to push mobile shopping applications. It is not that people are unwilling to pay online, she says. Though only 80% of ozon.ru’s transactions are completed in cash, that number is as low as 40% for travel products. That is because people receive their e-tickets instantly, which makes them more trustworthy. The need is to build that trust for everything.

Nonetheless, some 90% of online business will fold in the next few years, thinks Mr Hartmann, now CEO of KupiVIP, an online retailer. “Consolidation is the next major trend,” he says.  

Two more trends can be discerned as consolidation makes companies more stable. Offline retailers will go online by contracting out to the new, stronger players in e-commerce. At the same time, online retailers will increasingly establish a physical presence. These seemingly counter-indicative trends are part of a growing link between the online and offline worlds. Guy Schory, from eBay, points to RedLaser, a product that allows users to scan in a barcode to receive information about the product. Moreover, it also instantly provides options for purchase (with prices listed for comparison). The user can see something and start the process of having it delivered within minutes.

Putting all the trends together, the theme that emerges from this fascinating talk is a convergence in online and offline retailing. The two need no longer be separate, competing ways of doing business. Instead, a marriage between offline and online can produce strong new ways of selling—a cocktail of the best genes from both parents. 

DLD2011 - The Big Picture DLD (Digital-Life-Design) is a global conference network on innovation, digital media, science and culture which connects business, creative and social leaders, opinion-formers and investors for crossover conversation and inspiration. Chairmen of DLD are publisher Hubert Burda and serial digital investor Yossi Vardi. DLD has been founded by Stephanie Czerny and Marcel Reichart in 2005.


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