Thursday, February 07, 2013

Russia’s e-commerce is thriving. Russia is already the largest online market in Europe with daily audience of approximately 50 million people. And though Russia’s online retail market constitutes only 2% of the retail market, online sales are growing at a staggering rate of 35% per year according to the McKinsey &Co report “Russian Digital Consumer” published last week. In 2011, the size of online retail market in Russia amounted to $13 billion. By 2014 it is expected to increase to $25 billion. The top three categories in the online market are: 1) railway and air tickets (18% of total revenue); 2) portable electronic devices (11%); and 3) durables (10%).


In 2012, MTS contributed to Russia’s e-commerce rise through its own growth of online sales (, which grew 2.5 times to RUR 1 billion. Phones accounted for 89% of online sales, while tablets, notebooks, cameras and consumer electronics devices accounted for the remaining 11%. Every second phone sold online was a smartphone, the share of which in the sales mix reached 82%. The average online retail price of a handset was RUR 8,200, which is two times higher than the average price of a phone purchased through a traditional store.


Alexander Pyatigorskiy, Head of the E-Commerce Department at MTS, is confident that most of the growth in Russian online commerce has yet to come, and MTS is uniquely positioned to capture this growth. Alexander joined MTS in March 2012 from Yandex where he was responsible for social services. He oversees a team of 120, including web-site developers, logistics professionals, and a dedicated call-center in the city of Ryazan, about 200 km from Moscow.


Alexander sees the mission of his team as creating the best customer experience beyond online/offline boundaries rather than in developing separate online and offline channels. “It is not uncommon to see customers in our stores searching for the best price of a handset on the Internet, having found the model they like in the shop. It’s just one example of shifting boundaries between traditional and online retail. So our focus is on building an integrated sales channel with the best quality of service.”


According to Alexander, flight to quality has been the recent trend in the online handset market in Russia.  Customers are moving away from grey-market re-sellers to online stores associated with brand names. “Our target audience is older and has a higher disposable income than average online shoppers. They are more demanding than typical customers and expect a higher level of customer service associated with the MTS brand, the most trusted telecom brand in Russia,” says Alexander. Currently, MTS delivers purchases to more than one thousand cities in Russia. Door-to-door delivery is available in 40 cities. Alexander was surprised to learn that many customers prefer to pick up their purchases at one of the MTS retail locations rather than at their home or office. In order to accommodate these needs, MTS had to adjust its logistics chain, for example extending the number of retail stores capable of servicing online operations.


The McKinsey report cites a growing penetration of smartphones as one of the factors driving online sales. MTS’ experience substantiates this trend. “Six to eight percent of website visits are currently from mobile, and this number is growing steadily, so we are constantly focused on increasing the usability of our mobile website.”


We asked Alexander if there are differences about how Russians purchase products online versus other countries. “Certainly,” he replied, “in Russia many customers contact call centers to place their orders. Sometimes, customers would choose a phone they need, find it at our website, even add to the basket and then contact call center to discuss details of their order with the operators. That makes them feel they have made the right choice and makes them confident that their order has been placed. In order to make our customers feel better about their purchases, we, at MTS, have invested to create a professional and knowledgeable team, which is at their service 24/7.” 



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