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Cross Border E-commerce Accounts for 55% of All Russian Online Sales

Rouble rally, piracy crackdown and credit-card incentives all playing a role in surge in overseas e-commerce.

Photo: Russia’s love affair with online shopping transcends all national boundaries. (Shutterstock.com/Pavel Shlykov)
Russia’s love affair with online shopping transcends all national boundaries.
Photo: Russia’s love affair with online shopping transcends all national boundaries. (Shutterstock.com/Pavel Shlykov)
Russia’s love affair with online shopping transcends all national boundaries.

More than 50% of all Russian consumers' online purchases are now made via overseas e-commerce platforms, according to new figures released by the Moscow-headquartered Home Credit & Finance Bank. The figures, which have been endorsed by several of Russia's other leading retail banks, including BIN Bank, VTB 24, Moscow Credit Bank and Russian Capital Bank, also show that the number of online purchases made across the country is continuing to show significant growth.

According to Yandex.Market, Russia's leading price-comparison site, some 55% of all 2017 online transactions conducted to date by the country's consumers related to overseas platforms. This is a significant increase on 2013, when only 36% of purchases were made via non-domestic e-commerce sites. In something of an oddity, Yandex's figures also indicate that, at present, some 10.5% of Russian online purchasers solely interact with overseas platforms.

In terms of the actual items being purchased from non-Russian sites, clothing and footwear lead the way (51.6%), followed by consumer electronics and household electric appliances (38.1%), and smartphones and tablet computers (15.8 %). Of these overseas sites, China-based e-commerce players, by far, account for the largest number of transactions (87.9%), followed by the US (19.2%), Germany (10.7%) and the UK (7.1%).

When payment processing is factored in, however, a different geographical landscape emerges. This sees the UK handling all AliExpress, Google and PlayStation Network transactions, with Amazon processed via the US and iTunes via Luxembourg.

At least part of the growth in overseas transactions, however, can be accounted for by the crackdown on digital piracy and counterfeiting that was initiated across Russia some 15 years ago. This led to a substantial reduction in the trade in unlicensed digital video and audio content, as well as curtailing the circulation of pirated computer games. Inevitably, this has driven the sales of official content via iTunes, Amazon and Google Play.

At the same time, many Russian consumers have been incentivised to make credit payments via the cash-back schemes introduced by a number of Russian banks, a development that has further boosted the level of online purchasing across the country. Overall, the combined effect of these factors saw the value of online transactions conducted by Russian consumers grow by 25-30% year-on-year in the first half of 2017, with each individual sale averaging about US$30.

Another factor in this increased level of spending has been a rally on the part of the Russian rouble, which enjoyed a 10% rise from 65.3 to 58.5 against the US dollar between 1 September 2016 and 31 August 2017. This saw Russian consumers gain in confidence with regard to making non-rouble transactions and even allowed for some savings to be made compared with domestic purchases. The downside of this, however, is that there are now moves afoot to impose a VAT charge of 18% on overseas e-commerce transactions, the first time such purchases would be taxed in Russia.

Such moves, however, should not overly concern the overseas e-commerce sites in question. It is unlikely that the imposition of the tax will deter Russian bargain hunters, while it will also have little impact on the level of purchases made by the connoisseurs of certain premium brands. It is also expected that the duty-free limit will be somewhat higher than the average $30 spend per transaction. This is despite the fact that Russian legislators are likely to consider any delivery charge as part of the taxable total.

Leonid Orlov, Moscow Consultant

Content provided by Picture: HKTDC Research
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