AliExpress ranks third in market share; Russian e-commerce growth rate exceeds that of European and American countries

However, as the country with the largest land area in the world, the snowy climate in winter will hinder Russia's inland transportation. In order to achieve product delivery in such environmental conditions, many e-commerce companies have invested a lot of money in the construction of logistics centers and distribution networks.

Wildberries, a Russian local e-commerce company, is one example. Although the city of Samara is 860 kilometers away from the company's headquarters in Moscow, Wildberries can still deliver goods to local distribution points within two days.

Alina Lunina, an English teacher living in Samara, now buys clothes, books and cosmetics online, and sometimes buys some daily groceries. She thinks online shopping is very convenient in Samara. She told Reuters: "There are many pick-up points here, and I can reach them in five minutes on foot."

Some economists believe that the prosperity of e-commerce is also a positive signal for the Russian economy. They believe that Russia is currently too dependent on the oil and gas industry. After the implementation of the lockdown measures, Russia's domestic retail sales (an important indicator of domestic consumer demand) have dropped sharply, which has severely hit the country's economic situation.

In addition, Russia's e-commerce industry was in its infancy before the pandemic. According to data from research firm Data Insight, in 2019, the e-commerce industry accounted for only 1.4% of Russia's total economic size, while in the United States and China, this proportion was 2.6% and 5.1%, respectively.

However, Boris Ovchinnikov, co-founder of Data Insight, also said that due to the low penetration rate of the industry before the epidemic, the current growth rate of Russia's e-commerce business is also significantly faster than that of the United States and many EU countries. He estimated that the total size of the Russian e-commerce market in the first half of 2020 was about 1.16 trillion rubles (about 15.2 billion US dollars).

Analysts at market research firm Euromonitor also predicted that total e-commerce sales in Russia this year will grow by more than 40% to around 2.5 trillion rubles (about $31.7 billion). Analysts said the figure will grow at an annual rate of 10-15% over the next five years.

Marija Milasevic of Euromonitor said that Russia's e-commerce penetration rate has increased from 7% in 2019 to 11%, but the figure is still lower than the 19% in the United States.

One thing to note is that the current Russian domestic e-commerce market is very fragmented. According to Data Insight, private e-commerce platform Wildberries currently leads with a 15% share, while Ozon, which recently filed for an IPO in the United States, ranks second with a market share of 7%.

In third place is AliExpress Russia, a joint venture between Alibaba and Russian companies. Other major players in the Russian e-commerce market include local companies M.Video, Sbermarket (co-founded by Sberbank, Russia's largest bank, and Internet group Mail.Ru), and Internet company Yandex.

The absence of leading multinational companies has also accelerated the development of local Russian e-commerce companies. So far, Amazon has not entered the Russian market. Russia is vast, has 11 time zones, and the domestic IT industry is extremely competitive, which has brought challenges to the entry of international platforms.

Sergey Belyaev, head of trading at investment firm Sova Capital, said: "If Amazon wants to cover at least two first-tier cities, it will have to invest a lot of money in logistics and warehousing facilities to maintain normal supply."

Chukotka, one of many remote regions in Russia across the sea from Alaska that experiences polar nights in winter with temperatures dropping below -50 degrees Celsius, saw a 490 percent increase in online shopping orders between April and October.

Wildberries said it attracted more than 12 million new customers to its platform in the first nine months of 2020. Between April and October this year, Wildberries saw a 385% increase in orders in the Ingushetia region of the North Caucasus and a 239% increase in orders in Buryatia in eastern Siberia.

This article is translated from COVID-19 crisis: a shot in the arm for Russian e-commerce.