Feb 2

Russians Flock to E-Commerce Amid COVID-19 Shutdown

Editorial Staff
Apr 30, 2020

The COVID-19 shutdown has triggered a massive shift to e-commerce — and even as stay-at-home policies begin to recede, new customer preferences for online shopping are likely to stick around.

The latest data from Nielsen states that at the end of this year, the volume of the Russian e-grocery market may increase by 150 percent. This means that despite the economic slump, the e-commerce sector might benefit tremendously from changes in consumer behavior that have been brought on by the pandemic. In March, the number of new vacancies in e-commerce increased 2.27 times compared to last year, and this trend will likely continue into the summer. In effect, surging unemployment rates across the country might also facilitate an influx of talents and further accelerate the development of the online retail segment.

Concerns about safety and social-distancing measures are major triggers of these shifts. As customers have had to stay home in order to avoid close encounters with other people, their trips to brick-and-mortar stores have become less frequent, but their purchase volumes have increased. The same principle might have started working in regards to e-commerce. Feeling intimidated by empty store shelves at the beginning of the outbreak, many shoppers have preferred to buy as much food as possible online in order to avoid disruptions to their lifestyle and minimize their number of trips outside the home.

The pandemic will revamp food retail as an industry, and its digitalization will be one of the most significant outcomes. In Russia, the popularity of ordering food online was growing rapidly even before the COVID-19 pandemic. The share of shoppers who regularly purchased groceries online reached nearly 20 percent in the last 1.5 years, according to a recent study by HSBC.

Current stay-at-home policies promise to further stimulate this trend and increase customer loyalty among those who have grown accustomed to making purchases online. In addition to the major Russian cities — namely Moscow and Saint-Petersburg — the trend will also likely grow across smaller towns. Concerns about safety will draw shoppers to online delivery even among the less affluent categories of the Russian population.  

These shifts are ultimately motivating Russian retailers to go online. M.Video-Eldorado Group, Russia’s main retailer of consuemer electronics, is one of the best examples of this trend. Even before the pandemic, the company started implementing changes to boost its e-commerce business and offline network of stores. Last week, the company announced a partnership with Ozon, the country’s leading e-commerce platform, which will now carry about 80 percent of the Group’s assortment. This step will contribute to M.Video’s revenue flow and diversify its market presence as Russian shoppers increasingly swap offline store visits for online purchases.

Ozon is one of the three largest Russian e-commerce platforms, with a turnover of RUB 80.7 bn and more than 5 million products on offer. The company recently reported that its number of new customers in March had doubled from the previous year. At the same time, the number of new sellers who registered on its marketplace on March 24 alone surpassed 600 individual sellers and small businesses, setting a record for Ozon. These changes ultimately reflect a significant shift in the behavior of Russian consumers, whose new-found appetite for online shopping is encouraging major retailers and individual sellers alike to move online.

The main thing slowing down Russia’s transition to online retail is its size. In this regard, infrastructure is the company’s biggest challenge, according to Ozon CFO Daniil Fedorov.

“We’re showing very dramatic growth rates for now. And the size that we’re going to reach this year is still going to be very small – it should be ten times higher,” Fedorov said. “Russia is a big country and we need to get closer to customers – to put fulfilment centres close to where the customers are.”

X5 Retail Group, Russia’s biggest food retailer, has reported a rise in like-for-like sales by 5.7 percent year-on-year amid the coronavirus outbreak, while its net retail sales rose 15.9 percent year-on-year to RUB 468.5bn ($6.3 billion). The Group likewise accelerated the rollout of its express delivery service and plans to expand the service to 500 stores across 10 Russian cities this year, while the delivery time will be halved. The company has also taken a unique approach to boosting grocery deliveries and covering growing demand in online sales by expanding courier deliveries directly from stores to local residents.

“I think for us, it’s one of the challenges – digital transformation and being faster with our time to market. We’re very focused on that, we’re investing in that and I think we will be very successful in that, but it takes some time,” said Svetlana Demyashkevich, CFO of X5 Retail Group.

This website uses cookies to improve and customize the user experience. To learn more, please see our cookie policy.
Cookie Policy
WP Twitter Auto Publish Powered By :