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Russian e-commerce booms despite economic doldrums

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Russian online retailer Ozon's logistics centre outside the town of Tver. Online shopping offers Russians living in remote locations access to millions of products at affordable prices, says Ozon's chief executive Alexander Shulgin.

Moscow

RUSSIA may be a latecomer to the world of online shopping but e-commerce is experiencing explosive growth in the country despite a stagnant economy weighed down by Western sanctions.

Russia's economic growth stood at just 0.7 per cent in the first six months of 2019.

Over the same period, the Russian e-commerce market has expanded by 26 per cent to 725 billion rubles (S$15.45 billion), according to a study by Data Insight, a Russian-based research agency.

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The sector is developing rapidly despite numerous logistical challenges in the world's largest country including an often unreliable postal service. Long distances and low population density make e-commerce an appealing - and sometimes even the only - option in Russia.

Even in affluent Moscow, where shopping malls offer a huge variety of consumer goods, many prefer to shop online to avoid the ubiquitous traffic jams.

One of Russia's biggest online retailers, Ozon, began as an online bookstore - much like the global giant Amazon - and later expanded into other types of merchandise.

On a recent tour of Ozon's offices in Moscow's business district, chief executive Alexander Shulgin said the potential for growth in Russia was enormous, pointing to Russia's high internet penetration, with 95 million online users.

In the first six months of this year, the number of online orders went up by 44 per cent reaching 191 million.

Together with Russia's biggest e-commerce site, Wildberries, and the online pharmacy Apteka.ru, the top trio's business has grown by 107 per cent compared to the first half of last year.

Mr Shulgin said that online shopping offered Russians living in remote locations access to millions of products at affordable prices. Besides its huge size, Russia's harsh climate is also seen as a boon for the business. "When there is rain or snow or it's cold outside, people prefer to shop online, so (Russia) is an ideal country," he said.

Mr Shulgin said the e-commerce market was fragmented and accounted for just 6 per cent of total retail. "So the opportunity for growth is huge," he added.

In a logistics centre in the town of Tver, located around 180 kilometres (111 miles) northwest of Moscow, Ozon employees are busy pushing carts around aisles as they prepare to ship goods to customers across Russia.

"The centre handles over 100,000 packages a day and around 2,000 people work here on a daily basis," said Ivan Popov, deputy logistics manager at Ozon.

In the cities, the company relies on couriers, automated pick-up lockers and drop-off locations.

To ship the packages to remote locations, Ozon has partnered up with the Russian Post. "They have a branch in every possible location, ideal for smaller villages, they can deliver anywhere," said Mr Shulgin.

Ozon's competitor Wildberries has also been growing at breakneck speed in recent years, making its founder one of the country's richest women.

This year its founder, Tatyana Bakalchuk, a 44-year-old mother of four, became the second female billionaire in Russia, according to Forbes. Ms Bakalchuk, a former English teacher, founded the company in 2004, at the age of 28, in her Moscow apartment while on maternity leave.

She came up with an e-commerce business idea after trying to shop at traditional stores with a newborn. Initially focusing on shoes and clothing, her business has now expanded into food, books, electronics and health products, offering 15,000 brands.

In March, it became the third most visited e-commerce fashion website in the world, trailing behind H&M and Macy's, according to a study by SEMrush marketing analytics firm. AFP