Russian Roulette? Why expanding into Russia need not be a gamble

While France and Germany have traditionally represented the most popular expansion destinations for the UK’s ecommerce retailers, only a handful have looked to Russia to grow sales. Entering this massive market comes with delivery challenges but according to Gary Tervitt, International Sales Director at P2P Mailing, these shouldn’t deter businesses from tapping into the potential of the region.

In 2018 Russia hosts football’s World Cup with all the attendant hype and scrutiny that this global event attracts. Whether or not the tournament will have a lasting positive economic impact on the country is a moot point but there is little doubt that the spotlight will wake a few UK retailers up to the potential of the marketplace.

But why wait? According to the latest data, Russia has the highest number of internet users in Europe – some 84 million people[1]– and the number of online shoppers is growing steadily to now exceed 30 million according to a report released by the Ecommerce Foundation. The effect on Russia’s economy of a low oil price, Western sanctions and a cheap ruble have impacted domestic behaviours but the market remains one of huge opportunity.

Despite the market benefits on offer, only a handful of foreign online retailers, such as ASOS, have looked to the East to expand their online consumer base. If press reports and market commentary are to be believed, entering the Russian market is beset with problems, but this needn’t be the case.

In fact, pioneering companies are seeing the value of partnering with distribution experts to gain a foothold and drive growth.

Third-party experts can prove invaluable in helping businesses to grasp the nuances of selling online to Russia. This means not only understanding purchasing and delivery options and processes but also gaining a holistic view of the bigger picture. For example, Yandex is a search engine that is almost unique to the Russian market with over 60% of the market share, it also accounts for 45% of the country’s total online advertising market share. Remaining unaware of such differences leaves businesses open to failure.

One particular complexity associated with setting up commercial solutions into Russia centres on the collection of consumer name and ID in Cyrillic language. It is unlikely that (commercial delivery companies?) will have country-specific check out formats with the necessary fields incorporated to capture this data. Some will offer the retailer a solution to collect the data on their behalf as a value add, but this means an additional layer of process that can result in delays whilst the information is gathered.

In fact, postal based solutions into Russia, such as Express Mail Service (EMS), remain relatively simple and do not require many of the hurdles to be overcome that exist with commercial (?) entry solutions. Both Registered Mail and EMS options are available into Russia providing delivery times of between 7 and 9 days end to end. These options remain a viable and relevant choice for Retailers, especially with standard delivery, rather than express. Both options provide tracking and delivery confirmation to the retailer and the consumer.

Our own experience shows the growing commercial interest in this arena amongst UK ecommerce businesses. P2P Mailing is averaging more than 30,000 items per week going into Russia – an uplift of some 25% on the previous year. Our total volume to Russia in 2016 was running at over 10 tonnes per week on average with some periods in peak recording up to 7 tonnes in one day. Most of this volume is lightweight parcels and packages under 2 kgs, but items weighing up to 7 or 8 kilos are also regularly handled.

Given Brexit uncertainty and a fluctuating pound the UK is an attractive place to buy from. However, international expansion should not be rushed into. Ensuring that the processes are in place to distribute goods promptly and cost effectively across the globe is a key consideration. Customers – wherever they are in the world – don’t like delayed or unsuccessful deliveries, and will soon defect if they are unimpressed with the service they receive. Similarly, if businesses don’t have an early appreciation for the costs of such expansion, they could easily find the expense higher than anticipated. While the opportunity is an exciting one, retailers must ensure they are fully prepared before they attempt to seize it.

For many online retailers, engaging with a third party expert will be the most fail-safe and cost-effective way of managing distribution to Russia. The expert should have a thorough and up-to-date knowledge of the market and strong relationships with postal operators in the region. An expert consultant should not only be able to negotiate competitive prices, but should also be able to ensure that any fulfilment and distribution infrastructure keeps pace with business expansion.

Our own experience shows that Russia is far from being a closed market. Yes challenges exist, but the rewards for seeking expert advice can be significant.

[1] GfK – 2016

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