E-Commerce in Russia
Information and communication technologies, commonly referred to as IT, are widely used across the world to broaden access to information, modernize industry and business, stimulate economic growth, improve state government institutions and enhance the quality of life for people. Much like the majority of the world countries, Russia also actively cultivates its emerging IT sector and seeks to use it to secure the increase of profitability and productivity of Russian businesses.
When characterizing the peculiarities of Internet usage in Russia, the following points appear crucial:
- There are 59,700,000 Internet users, of whom the majority is represented by men;
- There are 13,358,000 Internet hosts;
- Although Russia has the largest online audience in Europe, the internet penetration is still relatively low compared to the other countries;
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- The Russian internet penetration is expected to double in the next 15 years;
- Domain: RU (SU being phased out);
- Social networking: Facebook is 4th in like behind Vkontakte, Odnoklassniki, Moimir.
BuckSell.com is a newly emerging e-commerce project that presents the first premier free exchange hub and message center for college students (Indiegogo). This site is created, developed and managed wholly by the students of Bucknell University. This exchange service is free of charge for Bucknell University students and is intended to eliminate shipping expenses, provide unsurpassed convenience and establish a friendly and trustworthy environment for the customers who would form their own integrated community. Such project seems to possess a significant potential for success and might be well implemented and executed on the basis of Russian State University of Humanities. Moreover, it could eventually expand to other Russian schools and evolve into a country-wide network for student, staff, faculty, and alumni retail. It allows the users to purchase and post various items, perform donations to charities, and offer wide range of services including book crossing, tutoring and car rides. Among the unique features of this project are a real-time messaging system and the promotion of sustainable college community by recycling furniture, electronics, and books. Moreover, the site is opened to users with "dot edu" email addresses, which eliminates possible spam and secures a trustworthy community for the users.
When exploring and examining the potentials of launching such project as BuckSell.com on the basis of the Russian State University of Humanities, it becomes apparent that there might be several possible scenarios for this business project. It is important to investigate the pessimistic, optimistic and moderate scenarios in order to understand the possible business risks and benefits of the project.
The BuckSell.com E-Commerce Project is Doomed to Fail
Pessimistic scenario is largely preoccupied with such potential challenges as the lack of student involvement in the project and the risk that such initiative might not resonate with Russian student auditory. This might be triggered by the lack of sufficient marketing and the limited number of products and services offered on the website, which might result from the limited audience. Another risky factor is that as the students that form the group of major entrepreneurs of the BuckSell project eventually graduate from the university, this might lead to consequent management issues.
Another significant challenge confronted by the BuckSell project is the lack of social trust to e-commerce in general. The specific relationship between cultural aspects and trust that cause customers in certain markets, such as Russian, in particular, to have different levels of trust and consumer confidence has been studied by Francis Fukuyama. According to the results of his research, Eastern European consumers feature specific attitudes that differentiate them from the western consumers. Among those attitudes is relative suspiciousness, which can be explained in terms of the authoritarian mentality inherited by the consumers from older regimes, such as the Soviet regime in particular (Fukuyama).
Moreover, there are serious potential competitors on the Russian e-commerce market. Among them is Ulmart, a successful online retailer that reported $1.2 billion in sales last year. Ulmart has adopted an exclusive technique that was never utilized by such powerful retailer as Amazon. According to this sophisticated approach, the customers are offered an alternative to the low-cost home delivery and receive an opportunity to pick up their orders at urban outposts and warehouses doubling as stores. Whereas Amazon executes shipping services with the help of such partners as United Parcel Service (UPS), Ulmart maintains its own fleet of 190 trucks. Brady marks that: St. Petersburg company ships fast-moving items in bulk from suppliers to urban outlets instead of breaking apart the shipment and repackaging it at a mega-hub. Where Amazons Jeff Bezos racked up $3 billion of losses in his early years, Ulmarts chairman and major shareholder, Dmitry Kostygin, says his site has lost around $30 million in its first five years. Moreover, such inventive approach allows Ulmart to secure the turnaround of orders in as quick as seven minutes, bypass Russias invalid postal service, and, what is more important, accept cash in a country where the majority of population seems rather reluctant to use credit cards.
Among the significant challenges confronted by the BuckSell e-commerce project is the inconvenience of the corresponding legal infrastructure in Russia. For such modern trade as e-commerce, the legal infrastructure is yet uncertain and rudimentary. If an event in cyberspace occurs at once everywhere and nowhere, what law applies? How can consumers be protected when engaging with e-commerce companies? Such issues reveal existing significant difficulties of regulating internet trade and accentuate the necessity to develop a framework for possible future policies, investigating how Russia can impair barriers while securing continuous protection of consumer interests. Meanwhile, Russian government starts to collect tax on on-line shopping. Lawsuits from customers on the quality of products present another significant issue that might have a marked negative influence on the project. And last, but not least, such university-based e-commerce project as BuckSell heavily relies on educational institutions and cannot function without full support of the latter.
The Moderate Approach to the Realization of the BuckSell.com E-Commerce Project
The Moderate scenario adopts an opinion that the most pressing of the challenges outlined in the pessimistic can be successfully avoided. Initially launched at one school only, BuckSell project is likely to feature an efficient content to support this single school. Eventually, it may be complimented and reinforced by the nearest schools interested in joining the initiative. Moreover, the project might also be supported by the local business that is most likely to express interest in posting sales info on the website popular with student auditory. Hence, the BuckSell project does not necessarily have to be limited to retail customers; it can also offer services to businesses and business partners. The tax problem can also be addressed and a way around it may be found by means of adapting to different legal and shipping requirements.
Generally, the major trends regarding Russian e-commerce are as follows:
- Russia is one of the few countries that do not use such global services as Amazon, Ebay or Google;
- Instead, they have their own websites like Ozon.ru that substitutes Amazon, Molotok.ru that is analogous to Ebay and Yandex.ru that is a powerful search engine similar to Google;
- Typically, internet users from larger cities make more online purchases;
- Most new shoppers are expected to come from other regions besides Moscow and St. Petersburg;
- E-commerce markets are growing by 26% every year.
- In 2011, the Russian online retail markets made approximately 10 billion;
- Electronics and Appliances have the most sales followed by apparel and clothing, and then books;
- 80% of on-line purchases are paid by cash;
- First time online shoppers prefer communication in person through call centers and they also use live chats or online voice calls (Henni et al.).
Having familiarized with these major trends, it becomes apparent that such e-commerce project as BuckSell.com is perfectly capable of catering for the majority of factors outlined above. Taking into consideration the accentuated Russian tendency to create and cultivate national analogs rather than utilize global services such as Amazon, Ebay or Google, it seems probable that developing an e-commerce project presenting the first premier free exchange hub and message center for college students exclusively on the basis of Russian educational institutions might have quite reasonable perspectives. This initiative might also be eligible for receiving support of the Russian government as an on-line platform aimed at improving an effective internet community for Russian educational institutions. The government might be interested in winning the sympathies of the generation of young educated Russian citizens.
The tendency, according to which internet users from larger cities make more online purchases, also seems to be favorable for the BuckSell project. Being aimed at the student auditory, the project aims to engage members of the student community coming from a number of Russian territories outside Moscow and St. Petersburg. The increasing development and expansion of e-commerce markets in Russia also seems to be an encouraging sign which proves the apparent potential effectiveness of such projects as BuckSell.com.
As to the assortment of goods popular with e-commerce customers, the range of possible services offered to the users of BuckSell.com also appears quite versatile. By means of this e-commerce project, the members of Russian student community might explore the advantages of book crossing, promotion of sustainable college community by recycling furniture and electronics, etc.
The Promising Potential of the BuckSell.com E-Commerce Project
Optimistic scenario heavily relies on the fact that Russia actively cultivates its emerging IT sector and seeks to use it to secure the increase of profitability and productivity of national business. According to Diane Brady: Even amid a slowing economy, [Russian] online shopping increased 26 percent last year, to 510 billion rubles (about $14 billion), according to Moscows Data Insight, and could double by 2015. That has made the country an intriguing target for foreign players such asAmazon.com (AMZN), EBay (EBAY), Asos (ASC:LN), and Chinas Alibaba Group, while boosting the fortunes of such local companies as search engine Yandex(YNDX) and Amazon-like Ozon. As to the experience of BuckSell.com, it proved to be nothing but positive. In six months, the project has expanded to ten schools, and another twenty in another six months. In ten years, it has developed to ten states of Russia and has grown to control the college ecommerce niche market.
The Russian public appears initially estranged from the ambiguous e-commerce projects, and this tendency presents a significant challenge to the development of this business in the country. In order to surpass this challenge, the newly emerging e-commerce projects in Russian need to cater for such issues and strive to provide the customers with opportunities to communicate with qualified call center operators capable of answering their questions and providing them with the necessary instructions. Russian customers demand more thorough approach in order to appreciate and respond positively to the newly emerging e-commerce business projects.
Among the most significant trends that are likely to have a noticeable impact on the BuckSell e-commerce project in the following years is the continued rise of multi-channeled selling. Essentially, an on-line store alone is no longer going to be enough. Given the number and versatility of potential customers, it proves necessary to explore third-party sales channels, expand the projects presence on the market and improve the search engine results to ensure that the potential customers can find BuckSell project easily. Moreover, it is necessary to keep the details of each item in the product management system and consider the wide variety of existing possibilities to handle orders and all the different payment methods utilized by customers. It is always increasingly important to improve the value of services and inspire the customers to return.
Another trend is the increased dependence on data. It is important to pay specific attention to the content of the website, continuously monitor and optimize it as often as possible. Also, it is crucial to pay close attention to the emergence of new mobile devices, tablets, etc. Search engine marketing present one more sufficient avenue that needs to be explored. Also, it is necessary to understand how the customers use the store. Such thorough approach might allow developing dedicated stores across different areas, improving customer service and using such effective tools as social media to market the products even more efficiently. Moreover, it is necessary to regularly analyze the website and learn how customers respond to different contents and campaigns in order to be able to adapt the most effective marketing strategies.
Promotion and development of such progressive and accessible e-commerce project as BuckSell.com is necessary to ensure the adoption of a fully integrated Russian online market. Taking into consideration this undeniable fact, the optimistic scenario for the development of the BuckSell.com e-commerce project appears the most likely to happen. This might be explained by the fact that Russian government is very likely to show an increasing interest in supporting such promising e-commerce project as BuckSell.com, winning the sympathies of the generation of young educated Russian citizens and supporting the Russian tendency to create and cultivate national analogs rather than utilize global services such as Amazon, Ebay or Google. Moreover, the e-commerce markets in Russia are growing significantly every year, and this shapes favorable preconditions for the execution of an optimistic scenario for BuckSell.com.
In order to encourage this project and establish it in the most effective manner, it is necessary to investigate the patterns of potential customers and the peculiarities of public consumption behavior. It is highly important to pay specific attention to the trust issue and make sure that the customers find the services offered by the BuckSell project convenient, trustworthy and safe to use. This issue may be catered for by means of developing a professional and qualified network of call centers and quality support services capable of communicating with the customers and providing them with the necessary instructions on how to use the website properly and get the most positive experience from cooperation with the BuckSell project.
In order to increase the involvement of student auditory, it is necessary to utilize the most effective and appropriate marketing techniques. Taking into consideration the increasing interest and participation of young people in such popular social networks as Vkontakte, Odnoklassniki, and Moimir, it might be reasonable to place some adverts on those websites. Also, effective marketing might be performed through the network of friends and by means of distributing appealing and informative flyers and drawing attention to the Bucksell project by means of engaging posters located in the places popular with university students, staff, faculty and alumni. Moreover, the accent on addressing the needs of the student community features great potential. Students living on and off the university campuses share common demands for books and other study materials, finding and renting apartments, furnishing those apartments at a reasonable price, searching for roommates, finding rides to their home towns, etc. A well-structured and optimized community capable of supporting students and catering for their most fundamental and pressing needs appears highly reasonable and admittedly significant. The relativity of such project within the context of contemporary social situation in which the student audience rapidly assimilates the full range of possibilities offered by versatile internet services is hard to be overvalued.
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