22 Oct 2019
E-commerce Set to Dominate Russia's Electronics and Jewellery Sales
With dedicated portals and soaring orders, Hong Kong companies would do well to befriend the new O2O behemoths.
With the big online players active in the country – led by Hangzhou-headquartered AliExpress – setting out to dominate sectors seen as of core interest to many Russian consumers, Hong Kong businesses would be well-advised to get on board with these new lead channels at the earliest opportunity. In particular, it is expected that e-commerce operators will soon be the purchase routes of choice in two of Russia's best-loved consumer categories – jewellery and electronics.
Pretty much making the running here is AliExpress, China's first globally oriented e-commerce business, which entered the Russian market in 2014. In the intervening five years it has ushered in fundamental changes for the whole of the country's online shopping sector, while also paving the way for the arrival of other mainland giants, most notably Beijing-headquartered JD.com. This year, again looking to take a lead, it introduced a Russian-language version of Tmall, the online market also owned by the Alibaba Group, its ultimate parent company.
This new take on Tmall – a site that currently accounts for nearly 50% of the mainland's B2C online market – is Russia's first large-scale O2O platform, launched with an inventory of some 10,000 items and a particular focus on the jewellery sector. This latter specialisation comes courtesy of a tie-up with two of Russia's leading jewellery chains – Moscow-headquartered Sunlight and Sokolov.
Both companies offer an extensive range of gold and silver items, as well as many precious stone-incorporating accessories and a wide selection of costume jewellery. Their partnership with Tmall – as well as their ongoing relationship with a number of Russia's leading logistic and courier service providers – is considered to have given the two a considerable sales boost.
This focus on jewellery has been seen as an astute move by many in the industry. In early 2018, a report by the Russian Association of Online Trade (AKIT) noted that Russian consumers were particularly open to buying such items online. Tracking the growth of the sector, the AKIT report also highlighted just how fast this particular purchase preference was developing. While in 2016, only 1% of all Russian jewellery sales were made online, the following year it was up to 3%, before reaching 5.6% last year. For 2019, it is expected to exceed 7%, valuing such sales in excess of US$2 billion.
The sector's potential has not been lost on Russia's other key e-commerce players, with Wildberries, Lamoda and Ozon also now offering an extensive online selection of costume jewellery, precious-metal items and gemstone trinkets. Testifying to the success of such initiatives, a spokesperson for Ozon – one of Russia's largest and longest-established online platforms – said the site now offered more than 15,000 jewellery items and had seen a 70% year-on-year increase in related purchases as of July this year.
Despite the widespread focus on jewellery across nearly all of the major e-commerce players active in Russia, it is not actually the lead category among the country's consumers. Indeed, the best-selling segment for all such vendors – including AliExpress – is actually electronics.
Recognising this, AliExpress has been one of the first to establish a bespoke online electronics store – Molnia. This dedicated e-commerce sub-brand – with its name meaning “lightning” in Russian – will offer only mainland-made electronics items unavailable from other suppliers in Russia. The site will also have its own landing page, allowing it to function as an apparently separate entity to the primary AliExpress / Tmall portal.
One of Molnia's first challenges will be re-introducing Toshiba TV sets to the Russian market some four years after the brand pulled out the country. Responsibility for all of this will fall to a third party – the mainland based Zundao Group, a company that has specialised in the distribution of its own consumer-electronics items, as well as those of other manufacturers, since its launch in 2006. With its annual sales said to exceed $3.3 billion, the company's brand portfolio includes Toshiba, Meizu, Romoss and DJI. Between them, Zundao and its Russian partners will also take on responsibility for handling all relevant customs clearance and certification issues.
Given the expected success of this latest AliExpress initiative in the electronics sector, as well as the head of steam already built up by the many existing online jewellery vendors, it is only a matter of time before other market players migrate into these particular spaces. Given the expected dominance of the online channel in these two sectors – with others, notably fashion, tipped to be similarly annexed – any Hong Kong suppliers / distributors likely to be hit by this disruption of the established sales channels should consider building bridges with the O2O market leaders as a way of ringfencing their own future revenue streams.
Leonid Orlov, Moscow Consultant