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Consumer Attitudes and Online Retail Dynamics in Russia

Russia online retail market: Increased infrastructure investment helps bring down broadband price


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2014-04-25 10:56:02 - Consumer Attitudes and Online Retail Dynamics in Russia - a new market research report on companiesandmarkets.com

While the online shopping markets in Moscow and St. Petersburg are strong, key to the future of online shopping attitudes and behaviors in Russia are the developing cities of the country´s Southern and Eastern regions, which have rapidly growing populations, whilst infrastructure investment is bringing down the price of broadband connections.

Population growth in urban areas, increasingly affordable internet connections and growing computer literacy, will combine to make Russia one of the most valuable e-commerce opportunities in the world; however, security issues with online payments and the complex logistics of delivering goods across such a vast country may stunt the growth of online markets.

While online retail sales in Russia will grow much faster than sales in traditional retailers, growth patterns across

 

 

both channels mirror each other. Annual growth rates declined rapidly during 2007–2009 as the Russian economy was hit by the global financial crisis. The Russian economy recovered in 2010, after which, growth rates will increase in both traditional and online retail to 2016.

Growing internet penetration in the regions outside of Moscow and St. Petersburg will be the key driver of future growth in the number of internet users. Penetration rates in most of Russia´s regions lag far behind those in Moscow and St. Petersburg as a lack of infrastructure investment means high connection costs; however new investment is driving these costs down, resulting in a rise in penetration rates.

Approximately one-fifth of mobile phones in Russia in 2011 were smartphones, and this relatively low penetration will limit the potential for mobile commerce (m-commerce). Unlike in Western Europe, Russian mobile operators tend not to subsidize the cost of handsets, which means that consumers have to purchase smartphones at full price; making them too expensive for many.

The sheer size of Russia, coupled with an unreliable postal service, has created logistical difficulties for many online retailers. To get around this, leading retailers such as Ozon have launched their own courier services, and operate pick-up points around the country.

Online retailers are targeting key regional cities, whose populations are growing rapidly and are benefiting from extensive infrastructure investment, which is driving down connection costs and increasing connection speeds. However, the novelty of online shopping means that many consumers use the internet to look for products that are difficult to find locally, as opposed to in Moscow and St. Petersburg, where online retailers compete directly with local retailers on the basis of price, range, and service.

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