Introduction
E-business enables organizations to align themselves to the use of information technology for successful transformation and adaptation of standardized business practices. Electronic commerce is a business service that that makes use of electronic devices to allow customers and clients of an organization to conduct transactions (Arnold, 2000). Russia has adopted the use of E-commerce in streamlining business transactions. This has led to increase of efficiency and productivity in business operations. There are various opportunities and constraints that exist in growing E-commerce in Russia.
Current State of E-commerce in Russia
The development of E-commerce in Russia is rising steadily. The use of internet is conducting business operations in the country rose to 61.5 million users by 2011 (Darbyshire, 2008). This was a 23% percent increase in the market. It is projected that by the end of 2014, Russia will have more than 80 million users in the E-commerce industry, and this will make it the second largest market in Europe after Germany. Availability of wealthy and lucrative business opportunities for online business operators are the major causes of the growth in E-commerce (Walsh, 2013).
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Most of the business entities that are enhancing growth and emergency of E-commerce in Russia are concentrated in strategic locations. The biggest E-commerce concentrations are experienced in St. Petersburg and Moscow (Stephan, 2011). This makes some of the regional cities to lag behind. These cities present sizeable consumer markets and this attracts ambitious e-commerce concerns that may be interested to expand the business (Darbyshire, 2008).
E-commerce in Russia is dominated by several multinational companies. The companies are headed by Otto Group (Marson, 2013). This is a Germany-based trading company that leads in the major online retail market in Russia. This has led to the emergency of multi-channel banners which are subsidiary to Otto Group Russia. The dominance of this company in the Russian E-commerce industry is attributed to the strategic business ideologies that were employed in penetration into the market. Some of the companies that are taking advantage of the growing industry in Russia include Amazon.com Inc., e-Bay and other companies from China.
In order to get sufficient and relevant information and competency in a foreign country, Otto Group has strategic local partners who are familiar to the local market conditions (Walsh, 2013). The business strategy that drives Otto group is behind partnership with grocery e-commerce retailer Utkonos and general merchandise e-commerce player Ozon. The development of E-commerce industry in Russia has seen rapid concentration in the development of robust pick-up and delivery points in the network and enhancement of the regional information Technology infrastructure. Most of the multinational companies targeting the Russian E-commerce industry are targeting possible mergers with local retailers and distributors who lie in strategic locations.
Opportunities for Growing E-commerce in Russia
Russia provides enormous opportunities for E-commerce companies that are eyeing possible international growth. The complex nature of the Russian market cannot be underestimated. The Russian E-commerce market is very thriving and chaotic at the same time. This is because of very many logistical and locational aspects in the market. As one of the fastest growing retail market in the world, Russia presents a unique online ecosystem with numerous growth and expansion opportunities. Certain aspects of E-commerce in Russia are worth noting for companies, investors and interested investors (Walsh, 2013).
For instance opportunities like clothing and luxury goods that are used for expensive lifestyles are on a high demand. The demand is highly concentrated in strategic big cities like Moscow. The sales that are made in these cities are very high and they are experiencing upward growth trends annually. This is an opportunity that is yet to be exploited. This is because as these sales are taking place, there are no rapid marketing and distribution strategies that have taken course.
Another business opportunity that needs to be exploited lies between the use of internet and sites (Gineika, 2013). The most common one is the use of search engines and social media sites. Most of the Russians only know of local companies like Yandex as their search engine. This is used among over 40% of the Russians. The social media sites that are more common in the Russian include Vkontakte and Odnoklassniki. These examples show that the companies that are used in Russia are not known outside the borders of Russia. This makes the market very open to more investment and exploitation.
Online payments and money transfer services have not reached full potential in Russia. Electronic transfer of money leaves an open opportunity and market because it has not been adopted in most of the Russian firms and organizations. PayPal has some links over there but the Russian market and the infrastructure is so wide and open to any companies and organizations that may need to invest (Gineika, 2013).
Constraints for Growing E-commerce in Russia
The logistical infrastructure in Russia needs to be improved in order for it to achieve full potential. Most of the retail companies investing in E-commerce try to develop their own infrastructure so as to enhance their distribution capabilities. This leaves the general condition of the public infrastructure very poor. There is also a big problem for these retail companies getting their clients outside St. Petersburg and Moscow because of the poor development in the communication and infrastructure. Consumers in the local areas are provided with the services at very high prices (Schenker, 2013).
The mode of financial transactions in Russia is also a prohibiting factor towards growth of E-commerce. Cash payments are the most dominant modes of payment. Only one out of three households holds credit cards in Russia. Where there are many people with these credit cards, they do not trust the security of online transactions. The business retailers also do not offer electronic payment options. They prefer cash on delivery as the best mode of payment (Tan, 2009).
In Russia, most of the people have been completely localized (Gineika, 2013). This condition remains a major threat as most of the Russians remain inwardly focused and do not value exploration. Less than ten percent of Russian can speak a foreign language fluently. There is a lot of nationalism that is prevalent among the native Russians. These factors make the people of Russia be against foreign influence. Most of the companies and organizations that need to succeed in Russia need to localize their operations by looking for suitable distributors or retailers in order to succeed in Russia (Arnold, 2000).
In Russia, there is a general attitude that people have towards new products. They only use services or products that have already been proved to be effective (Gandy, 2007). This is because they do not have complete trust for any product that is new. Besides, you have to disguise as one of them to acquire their confidence. This perception puts away most of the companies that may have interest in investing in Russia (Arnold, 2000).
Conclusion
In conclusion, there may be several conspicuous differences between the countries that have advanced in E-commerce and Russia. It is notable that Russia is one of the fastest developing markets in E-commerce. This is subject to the opportunities and business strategies that are open to exploitation in Russia. With very many companies adopting the best entrance strategies, Russia’s E-commerce will expand to be among the best in the world.
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- Schenker, J. (2013). Russia’s E-Commerce Market. The Moscow News. (December 2013)
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- Tan, M. (2009). Factors affecting Internet banking. Journal of the Association for Information Systems, 1 (5), pp. 1–42.
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