In Russia, e-commerce demonstrates rapid growth, with and increasing role of social media and mobile devices

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Quadrupling of the share of e-commerce in retail will have a disruptive effect on the retail sector, according to PwC Russia

MOSCOW – February 25, 2014 - Internet and e-commerce are having a large and lasting impact on retail globally, disrupting the traditional way of conducting retail business. At the same time, social media and mobile come of age with shoppers. In Russia we observe similar trends, according to the new report titled Achieving Total Retail: Consumer Expectations Driving the Next Retail Business Model, presented today by PwC Russia. The report is based on a survey of more than 15,000 online shoppers in 15 countries and regions, including 1,074 online customers from Russia..

In Russia, e-commerce is growing rapidly. Among the 1,074 Internet users in Russia PwC interviewed, 1,006 have already made an online purchase, with around 600 doing so at least monthly. Over 40% of respondents reported using their mobile devices for shopping.

«We expect that sales through online channels will grow to 12% of total retail sales within a few years – a level seen in the UK already, against currently 3%» says Natalia Kozlova, PwC Russia TLS Partner, retail & consumer practice leader.

Quadrupling the share of e-commerce in retail will have a disruptive effect on the retail sector in Russia as we know it. Competition for consumers is increasing while retailers need to operate both online and off-line. In fact, this process has already begun with for example consumer electronics and home appliances already being severely affected with the challenge of losing in-store customers.

“No retailer can afford to neglect the relevance of interacting with its customers through multiple channels and, thus, must provide for a seamless transition among them. While consumers now view multichannel shopping as a given, retailers need to find the right balance between offering a superior customer experience while managing the costs and complexities of a multichannel model which are significant,” says Martijn Peeters, Partner at PwC Russia, Consulting leader for the Retail & Consumer practice “Today’s non-stop shoppers have taken things into their own hands, becoming more tech-savvy than retailers. Consumers have the tools at their fingertips to immerse themselves into the retail brand. Our research finds that consumers have strict expectations that challenge today’s shopping experience and, in response, retailers should embrace what we at PwC are calling Total Retail.”

A solid base for the further spread of e-commerce is provided by constantly growing Internet penetration across the country, both fixed line and mobile Internet. In 2013, for the first time more than half of Russian households had broadband Internet access. Penetration is projected to grow further to 68% by 2017, reaching 38 million households.

Mobile Internet penetration is expected to exceed fixed broadband Internet. Currently, 61 million people in Russia have mobile Internet, which is 43% of population. “Penetration of mobile internet is projected to explode in the next several years to reach 100 million users by 2017, or 70% of the total population. This will have an enormous effect on e-commerce.

Based on the key learnings of the report, PwC outlines eight consumer expectations and provides business implications for retailers:

  • In Moscow, retailers that can provide a consistent value proposition are rewarded with a high degree of customer loyalty. In contrast, for retailers in Russia’s regions the focus is more on winning new customers, who previously had fewer choices and are now open to experimentation in their shopping behaviour. When asked what they would do if their favourite retailer closed its local store, over 60% of shoppers in Moscow and St Petersburg responded that they would look for the next closest store of the same retailer, while in the Far East only 42% chose this response.
  • Personalized shopping offers through social media or smartphones are same important for Russian customers as for shoppers around the world; while Russian shoppers are less worried about the security of personal data. Whereas 43% of respondents globally don’t shop online because of security concerns, only 22% of Russians chose this answer in 2013. Technical factors (such as low trust in online payment methods, concerns about personal data, lack of credit or debit cards), are not perceived as a barrier anymore, 62% of shoppers who visit physical stores do it just because they prefer this type of shopping experience
  • More and more Russian consumers like to use both smartphones and tablets for shopping. In 2012, 28% of Russian respondents shopped via smartphone; in 2013 this figure was already 41%. Similar trends can be seen in tablet usage: 31% shopped via tablet in 2012 and 44% did so in 2013. Globally, 43% purchased products through a smartphone, compared with 30% in 2012 and 41% of customers bought products through a tablet, compared with 28% in 2012. Chinese shoppers are ahead of the curve in terms of shopping over multiple devices, with 49% shopping on a tablet and 51% on a smartphone
  • Russians shoppers embrace the use of in-store technology to a higher degree than their global peers, on average, and especially when compared to shoppers in mature markets. Looking at the percentage of respondents who don’t think any of the listed in-store technologies would make their shopping experience better, we see that only 10% of Russians chose this answer, compared to the global average of 20%.
  • Russian shoppers are still avid visitors of physical stores, with 80% doing so at least monthly. By comparison, in the Netherlands only 57% of respondents answered that they do so, and in France 56% do so. Regarding delivery, Russian consumers, similar to their global peers, on average, value free shipping the most, with 71% of respondents choosing this answer when asked about the most relevant delivery options when shopping online. The second most relevant delivery option is the ability to pick up goods at a convenient location, for example a local convenience store, which is much more preferable to picking up goods at a post office or courier service office.
  • Russian Internet users tend to make less frequent use of both apps and mobile browsers for shopping than the global average. Another divergence from the global average is Russian shoppers’ clear preference for mobile browsers over apps. This is probably a result of the fact that many Russian retailers do not have dedicated apps for shopping. But, of those that do use apps for shopping, 51% state convenience as the main reason for doing so, which differs significantly from the global average, among which mobile browsers were seen as more convenient.
  • Social media is becoming crucial at all stages of the purchase journey; no retailer can afford to ignore it. In 2013, 51% of Russian Internet users followed their favourite brands or retailers on social media, up from 37% in 2012. Around half of them also used social media for interacting with brands and commenting on their brand experiences, as well as buying the brand’s products – a significant increase over the year before. Globally, 59% of internet shoppers said they followed favorite brands or retailers via social media
  • Russian Internet users are in line with the global average in terms of buying directly from brand websites, with only 22% saying they don’t do so. This is a highly significant change compared to last year, when 70% of Russian respondents claimed they never buy directly. So, it is clear that “direct-to-customer” is a very significant trend. Among the reasons Russian shoppers give for buying directly, a full product range or greater choice are almost equally as important as low prices. Smart inventory management should help retailers in this area.

To download an electronic English-language copy of Achieving Total Retail: Consumer Expectations Driving the Next Retail Business Model, visit www.pwc.ru/totalretail

PwC Russia (www.pwc.ru) provides industry-focused assurance, tax, legal and advisory services. Over 2,400 professionals working in PwC offices in Moscow, St Petersburg, Ekaterinburg, Kazan, Novosibirsk, Krasnodar, Voronezh, Yuzhno-Sakhalinsk and Vladikavkaz share their thinking, experience and solutions to develop fresh perspectives and practical advice for our clients. The global network of PwC firms brings together more than 184,000 people in 157 countries.

*PwC refers to PricewaterhouseCoopers Russia B.V. or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate legal entity.

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