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Pandemic impact: how covid made e-commerce grow in Russia

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Pandemic impact: how covid made e-commerce grow in Russia

During the pandemic, there has been a boom in online shopping in all Russian cities and especially in the "million-strong" cities. Now people have begun to add not only clothes, footwear or appliances to the electronic shopping basket, as before, but more and more often elementary food or household chemicals have begun to appear there.

For relatively new services, this has become an opportunity to gain a foothold in the market, and major players have managed to scale up their operations, significantly expand the delivery zone and enter international markets.

The editors of Made in Russia asked some of the country's largest online marketplaces to find out how the pandemic has helped them, how much the figures have grown and whether they are managing to maintain them.

HOW DEMAND HAS CHANGED

The multi-category marketplace Ozon told the Made in Russia project that while new users' first orders mostly consisted of basic necessities under self-isolation, repeat customers were already expanding their purchases by selecting new product categories.

"In summer, after quarantine restrictions were lifted, every second order of users who came to Ozon in April-May already contained everyday goods and food products, but, for example, additionally, such customers' share of clothing increased significantly," the company said and added that users also started choosing everything they needed in one place at once, for example, when packing a child for school in September or when preparing for the country season in spring.

The habit of buying online did not go anywhere and by the end of the year, it proved a rush in demand during the November sales and New Year's Eve.

Overall, at year-end, the number of orders on Ozon has increased by 132% year on year to almost 74 million, while the number of shoppers has increased by 75% to 13.8 million unique customers. At the same time, order frequency per customer increased by a third.

THE UPTURN CONTINUES

Overall, the volume of Russian e-commerce market in 2020 grew by 1.6 times. This is evidenced by the data of the Association of e-commerce companies.

According to Ozon, the company's growth rate last year outpaced the market and at the end of the year sales turnover increased by 2.4 times year-on-year.

The environment played a key role in the demand for online shopping in the first half of last year.

"During this time, orders and sales increased strongly. Online shopping for food, children's and pet products has largely formed the habit of buying online, even among those users who previously opted for traditional offline," the company said, adding that during the toughest months of isolation (from April to May last year) the number of new Ozon customers increased by 84% year-on-year in 2019.

Another major player in the online shopping market in Russia, Wildberries, which continued to implement its strategy of digitalizing business processes and developing international expansion in the pandemic year, recorded a significant increase in orders.

"At the end of the year, the company's total turnover grew by 96% year-on-year to 437.2 billion rubles, sales of Russian goods on Wildberries in 2020 increased by 111% to 169.8 billion rubles, growth in units was 189%," shared the press service of the marketplace.

The online marketplace's customer base also continued to grow, reaching 40 million people by the end of last year versus 22 million at the beginning of the year. Although the growth rate of the audience decreased slightly in 2021, it did not stop altogether and the number of clients grew to 45 million in the first five months of the current year.

BUSINESS OPPORTUNITIES

This increase in the number of customers naturally requires the expansion of the number of points of order pickup (PoPZ) and makes the marketplace even more open for entrepreneurs.

"In 2020, the number of such outlets grew fivefold to 31 thousand, and in May-June 2021 reached more than 116 thousand outlets. This became possible thanks to the launch of a partner program for small and medium-sized businesses to open a PVZ", - noted the company.

Today anyone who wants to open its own CPZ and start earning by issuing orders Wildberries due to the high traffic - every day users of the online platform make out more than 1.9 million orders.

In general, the marketplace last year made an emphasis on the development of cooperation with Russian entrepreneurs, and by the end of the year the number of sellers has already grown by several times - from 19 thousand to 91 thousand, and at the end of May this figure exceeded 200 thousand.

In addition, in 2020 Wildberries simplified the very procedure of registering new sellers on the platform to 5 minutes. The company also automated document flow and lowered its own trade commission to 5%. A new model for selling goods from suppliers' warehouses was implemented on the platform; with its help, businesses can expand their range of goods on Wildberries and not "freeze" inventory balances in warehouses.

INVESTMENT IN GROWTH

Increasing the number of customers and orders requires investment in infrastructure improvements, Ozon said.

"Growth in the e-commerce market is impossible without infrastructure development. Now the area of Ozon logistics hubs exceeds 250 thousand square meters, although at the end of 2018 it was less than 100 thousand square meters," the company said, noting that with the development of the "last mile" (order delivery points and courier service) and the launch of the logistics hub, the delivery speed and, consequently, the attractiveness of online shopping understandably grows.

However, the share of e-commerce in Russia today is not yet so large in the total volume of retail, and so the whole industry is now facing the task of developing this area. This requires investment in logistics, IT and marketing, according to Ozon. Therefore, the online platform intends to invest 20-25 billion rubles as early as this year, thus increasing the volume of investments by three times. Funding will be directed, among other things, to the development of logistics infrastructure in the regions.

"Already in 2021 we have launched a branch office center in Novosibirsk, and in early June, a test reception of goods from local sellers began to implement a new logistics hub in Khabarovsk - a total of 8 Ozon branch offices carry out operations across the country", - shared the results in the company.

Last year Wildberries continued to develop infrastructure: a total of 18 new sorting centers in the Russian regions and several large distribution centers were opened during the year. This helped to reduce the operating costs of local entrepreneurs for logistics of goods.

In addition, the company has expanded its geographical presence and entered foreign markets. "In 2020, the company debuted in 4 new countries, and today Wildberries already operates in 14 countries: Russia, USA, Poland, Slovakia, Germany, France, Spain, Italy, Israel and many others," concluded the marketplace.

Made in Russia // Made in Russia

Author: Ksenia Gustova

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