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Russian shoppers atChinese online stores

Fedor Virin

Data Insightresearch agency

China-Russia E-commerce Summit. October 5, 2015

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E-COMMERCE MARKET:KEY NUMBERS

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Market volume 2014

Online sales* in Russia, 2014:

645 bn rubles / €14.5 bn

Domestic online sales* in Russia, 2014:

560 bn rubles / €12.6 bn

195 mln orders

average order value

3300 rubles (~$85 by 2014 rate)

* Here and below (unless otherwise Estimate doesn’t include: (a) food delivery, (b)

airplane and train tickets, (c) event tickets, (d) digital goods, (e) C2C, MLM and group

shopping, (f) purchases for corporate consumption or for resale

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Breakdown by market categories

50%

20%

6%

5%

5% 4%8%

Share by online sales volume(incl. cross-border)

electronics

fashion

toys & goods for kids

cosmetics & pharmacy

home & DIY

presents, jewelry, hobbies

other

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2014: 1st year of the real growth <20%

2011 2012 2013 20140

150

300

450

600

0%

5%

10%

15%

20%

25%

30%

35%

40%

235 315 415 560

31%34%

32% 35%

28% 28%25%

17%

online sales (domestic) nominal growth inflation contribution inflation-adjusted growth

Rub bn

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2015 dynamicsNew wave of growth slowdown - after short influx in the end

of 2014. Key factors:

• Decrease in consumer’s income

average income, June 2015, y-o-y +9%

same, inflation adjusted, June 2015, y-o-y -3%

average income, USD, June 2015, y-o-y -

31%

• No money and no need for large purchases

after shopping boom in December 2014

• Decline in offline retail

non-food retail, May 2015, y-o-y , rubles -

10%

non-food retail, May 2015, y-o-y , USD -

29%

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Slowdown

2014 - Q1

2014 - Q2

2014 - Q3

2014 - Q4

2015 - Q1

2015 - Q2

0%

5%

10%

15%

20%

25%

30%

35%

40%Online salesgrowth y-o-y(N of orders, domesticonline sales only)

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Growth drivers1. Low – and quickly growing - share of online shoppers

in Internet audience

2. More online experience and confidence

(this helps to try e-commerce or to use it more often)

3. Successful experience in ‘neighboring’ online

segments (e-travel, food delivery, digital goods, e-

payments, cross-border shopping)

4. Faster, cheaper and more reliable delivery

5. Perception shift: online shopping as routine practice

6. Mobile Internet as enabler for shopping online from

everywhere at any moment

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Growth in crossborder sales is concentrated in Chinese segment AOV is reducing due to real income decline – but numbers for orders and parcels are growing fasterDI estimates that online retail sales from China will grow~1.5 times in 2015

Crossborder purchases

[online retail market only]2014 2015

H12015

H2 FC2015

FC2015/

2014 FC

Crossborder parcels, m 75 52 78 130 +73%parcels from China, m 61,1 45,0 70,7 115,7 +89%

other directions, m 13,5 7,0 7,3 14,3 +6%Orders, m 47,5 33,5 48,9 82,4 +74%

orders from China, m 34,0 26,5 41,6 68,0 +100%orders from China, % of total 72% 79% 85% 83% +15%

Average order value for orders from China, USD 35 26 26 26 -26%Sales volume, orders from China, USD m 1198 698 1063 1761 +47%

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ONLINE SHOPPERS

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E-commerce audienceNumber of online shoppers* 25 mln

(1/3 of Internet audience)

* Online shoppers – those who made at least 1 purchase of physical goods in Russian or foreign online store in last 12 months

26%

7%

43%

24%

Russian population, 18-64∑ 97 mln

online shoppers

had experience of online shopping in the past

had no experience of online shopping

don't use Internet

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Share of online shoppers

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Online buyers

Online users

Despite saturation of Internet userbase, Russian

e-commerce still has a lot of space to grow

Only 34% of Internet users

shopped online in 2014

(vs. 26% in 2013 and

9% in 2009)

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Number of shoppers

Do you have experience of purchases at % of all online

shoppers

number, m(2014)

Russian online stores 54% 13,6

Foreign online stores 10% 2,5

Both 36% 9,1

16 million people with experience of online crossborder

shopping (for end of 2014)

More than 5/6 of them shops online in Russia as well

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Online shoppers dynamics

million people Russia China Both

2014 13,6 2,5 9,3

2013 10,5 2,8 5,2

2012 7,9 3,1 2,8

2011 5,0 2,4 1,4

2009 2,2 1,1 0,5

2007 0,9 0,5 0,1

2004 0,3 0,2 0,1

New shoppers often make their first online order in foreign store but quickly they begin to buy in Russian online shops too

In 2014 7m people made their first online purchase –and 4m of them make their first order in foreign online store

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Geography of online shoppers

Moscow

Central

SPB

North

VolgaSo

uth Ural

Siberia

Far E

ast

0%

5%

10%

15%

20%

25%

30%

35%

Both China & Russia

Only Crossborder buyers

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Age & sex

18-24 25-34 35-44 45-54 55-64 female male0%

10%

20%

30%

40%

50%

60%

70%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%Both China & Russia

Only Crossborder buyers

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ORDERS

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Categories

auto

farma

beauty

computers

phones

electron...

home DIY

sports kid

s

fashion

shoes

gifts

books0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Russian storesCninese storesboth

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How people choose where to buy

44%

426%

27

knew in advance where will buy

hadn’t plan the purchase - retailer rec-ommend/offer the product

knew in advance few retailers to choose between

hadn't knew where to buy - looked for place with best conditions

area of competition

loyalpurchase

[data for all online purchases]

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58%

5

22%

15

knew in advance where will buy

hadn’t plan the purchase - retailer rec-ommend/offer the product

knew in advance few retailers to choose between

hadn't knew where to buy - looked for place with best conditions

area of competition

loyalpurchase

[data for crossborder purchases]

How people choose where to buy

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Choice between online and offline

The reason

Russian stores

only

Chinese stores

only Both price was lower online than offline 47,7 42,3 62,2it's convenient to look online for place with best price 30,5 26,2 32,6it's easier and more convenient to choose and compare goods online 32,5 31,2 27,3there is no such goods in regular stores of my city/town 20,7 19,9 26,3It’s not convenient to go to offline store 24,9 25,2 15,9it was convenient to order right with delivery 24,1 25,6 15,7

there are more information online about goods 15,6 15,1 8,1don’t know where it's possible to buy this product offline 8,5 9,2 6,8no time/opportunity to go to regular stores 10,5 9,6 6,8don’t like to go to stores 8,7 7,9 5,9I use to order almost everything online 5,8 3,3 3,7

Why we made recent purchase online?

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What is good online store?

39%

37%

32%

28%

26%

convenient structure of the catalogue

availability of different payment options

availability of detailed and clear info on delivery conditions

availability of product reviews

good descriptions of products

Among listed, what is the most important for online store? What is necessary to form your opinion that this is convenient

website and good online store? (top 5 answers are shown)

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