Struggling Economy Not Affecting Russia’s Online Retail Boom: Report

Despite a stagnant economy weighed down by Western sanctions, e-commerce in Russia is continuing its explosive growth, AFP reports.

While the country’s economic growth stood at just 0.7 percent in the first six months of 2019, the Russian e-commerce market has expanded by 26 percent to 725 billion rubles ($15.45 billion) during the same period, according to a study by Data Insight, a Russian-based research agency.

The sector’s rapid growth is not subsiding despite numerous logistical challenges in the world’s largest country including an often unreliable postal service. Long distances and low population density make e-commerce an appealing – and sometimes even the only – option in Russia.

One of Russia’s biggest online retailers, Ozon, began as an online bookstore – much like the global giant Amazon – and later expanded into other types of merchandise.

On a recent tour of Ozon’s offices in Moscow’s business district, chief executive Alexander Shulgin said the potential for growth in Russia was enormous, pointing to Russia’s high internet penetration, with 95 million online users.

In the first six months of this year, the number of online orders went up by 44 percent reaching 191 million.

Together with Russia’s biggest e-commerce site, Wildberries, and the online pharmacy, the top trio’s business has grown by 107 percent compared to the first half of last year.

Shulgin said that online shopping offered Russians living in remote locations access to millions of products at affordable prices. Besides its huge size, Russia’s harsh climate is also seen as a boon for the business. “When there is rain or snow or it’s cold outside, people prefer to shop online, so (Russia) is an ideal country,” he said.

He added the e-commerce market was fragmented and accounted for just 6 percent of total retail. “So the opportunity for growth is huge,” he added.

The company’s logistics center in the town of Tver “handles over 100,000 packages a day and around 2,000 people work here on a daily basis,” said Ivan Popov, deputy logistics manager at Ozon.

In the cities, the company relies on couriers, automated pick-up lockers and drop-off locations. To ship the packages to remote locations, Ozon has partnered up with the Russian Post. “They have a branch in every possible location, ideal for smaller villages, they can deliver anywhere,” said Shulgin.