Morgan Stanley expects Russian online retail volume to triple by 2015

Today’s Kommersant.ru refers to a report developed by an investment bank Morgan Stanley, forecasting a tripling of the Russian online retail volumes between 2012 and 2015 – from USD 12 billion to USD 36 billion. According to Morgan Stanley, this year will represent a turning point for the business. The forecast is based on an observation of the Russian consumers’ behavior and preferences, which roughly follow the respective trends in the West, although with a certain delay: as many as 48 percent of Russian consumers that have used e-commerce made their first online purchases no sooner than two years ago.

Online retail in Russia generated USD 12 billion in sales in 2012, or approximately 1.9 percent of the total retail trade in the country (USD 670 billion). This percentage is very low in comparison to the western markets, where online retail reached the respective percentage of total retail trade already in the early 2000s. Online retail in China and Brazil reached approximately 5 percent of the total retail trade in respective countries. Morgan Stanley quotes lagging high-bandwidth Internet penetration, low average household income, rare usage of bank cards for purchases, consumers’ wariness of online stores and apprehensions regarding quality of products, and less than optimal postal infrastructure as factors negatively affecting the development of online retail in Russia. However, Morgan Stanley’s experts expect that Russia could become one of the most dynamic online markets in the world, as indicated by the development of specialized online retail companies such as Avito (online classified ads), KupiVIP and Lamoda (clothes, shoes and accessories), Biglion (collective shopping), Oktogo.ru (online hotel booking), Game Insight (mobile games), Wikimart (online retailer) and AnywayAnyday (flight booking). Should the volume of the Russian retail market increase to USD 36 billion in 2015, it will represent approximately 4.5 percent of the total retail market in the country. Experts estimate that such explosive growth could increase the respective volume to USD 72 billion by 2020, or approximately 7 percent of the total retail market. Such optimistic estimates are supported by the expected growth of Internet users from 53 million in 2012 to 87 million in 2015 and an increase in number of bank card holders. According to a research performed by MasterCard, only 27 percent of online buyers in Russia used their bank cards to make purchases over the Internet in 2011; in 2012, their share increased to 40 percent.

Morgan Stanley named Ozon.ru as the absolute leader of the Russian online business. Its turnover in the first half of 2012 was USD 232 million and is expected to reach USD 1 billion in 2014. The number one Russian search engine, Yandex.ru, will also benefit from the developments in the online retail business, as approximately 61 percent of regular online shoppers use Yandex.ru when searching for their online shops. Yandex’s marketing service Yandex.Market attracted 14 million visitors in November 2012, while Ozon.ru attracted 6.8 million visitors in the same period. Yandex’s annual revenues are expected to grow by 25 percent annually until 2015 as the efficiency of its ads increases – contextual ads placed on Yandex.ru currently attract approximately 2 percent of the visitors using the search engine, but their efficiency is expected to rise significantly and justify a price of above USD 50 per 1,000 ad clicks. Yandex.ru confirmed that the online retail is one of the fastest-growing markets in Russia and noted that regional retailers increasingly turn their attention to this business segment, specifically targeting individual regions in Russia and organizing respective logistics.

 

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