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E-commerce in Russia: Challenges and Opportunities

28.11.2018

Companies in Russia have been facing a number of challenges and questions when it comes to a successful implementation of e-commerce. 

First of all, even though digitalization (“the use of digital technologies to change a business model and provide new revenue and value-producing opportunities”, as Gartner puts it) and e-commerce are being addressed by companies’ global HQ as topics of major importance, there seems to be a lack of clear guidelines on how to approach a successful e-commerce implementation. This adds to the general need for orientation among local business leaders on how to start e-commerce activities and what digitalization really entails. For many, the challenge lies in translating the concept into feasible operations.

Then, there is the question if adding e-commerce channels to existing, traditional business models can ensure success, or whether such companies are doomed to be outpaced by pure e-commerce players. Some believe that e-commerce channels are not enough to supplement a “traditional” company and that firms may need a dedicated “e-commerce entity” within their organization, run according to different plans and targets. This, in turn, raises the question of how to fill key positions for traditional and e-commerce activities – whether the responsibility should be assigned to one person or divided between two incumbents dedicated to each of the businesses. 

There are many voices advocating the need for start-up approaches and a digital-focused mindset across organizations in order to ensure a successful e-commerce implementation. 

This certainly represents a steep learning curve for many traditional businesses, along with the need to identify and attract professionals from a talent pool which is quite limited and involves high personnel costs. While some companies choose to go for local talent, others opt for expatriates – obviously there is always an issue of whether an executive with experience gained in a different business culture can understand and bring value to a Russian environment. 

Meanwhile, there is no doubt that digitalization is already a game changer in the Russian market and that it will continue to do so, as some companies in Russia are reporting double- or triple-digit growth rates in e-commerce sales per year. For some, e-commerce has started to drive the whole business model while regular retail is growing only marginally – a transformation (or revolution) that has taken place only over the last few years. 

Looking at other geographies and the pace at which they keep embracing the e-commerce ecosystem, the disruption of traditional business models seems inevitable. On a global stage, the share of e-commerce in total Russian retail is still 3-4 times smaller than in the leading digital economies, out of which China holds the top position. However, Russia keeps growing in scale and importance – especially in Moscow, which is way ahead of other regions in the country. Regardless of the challenges that digital transformation and its successful implementation entails, it seems that embracing it in a well-planned and comprehensive manner would be essential for Russia in order to be a globally-competitive market and stay so in an ever faster changing world.