What eBay means to the Russian e-commerce market
By RMStaff
- Image by Getty Images via Daylife
By the end of March, 2010 American Internet giant eBay will launch a Russian version of it’s website and online payment system Paypal. The potential result of this step into the Russian e-commerce market could benefit not only Russian consumers, but drive the growth of online business and e-commerce in Russia.
The eBay Strategy
The eBay strategy in Russia is to offer fixed-price goods instead of auctions. Distribution will be serviced mainly using the Russian postal service. This however, is certainly a problem for all players in the Russian e-commerce market as large delays are common, with wait times up to 3 months. There is certainly a fantastic opportunity for another delivery company to step in to offer more reliable delivery and take advantage of the growing Russian e-commerce market.
The goal of this expansion is to increase cross border transactions, potentially opening the Russian market to a flood of goods from Europe. While this is certainly a benefit to Russian consumers, the question of customs becomes major issue for the efficient, reliable, and cost-effective flow of goods into and out of Russia.
E-commerce Impact
Russia’s e-commerce market is worth $5 billion a year but could grow to $20 billion. The market in the US, by comparison, is estimated at $150 billion. There is certainly room for growth as Russian Internet usage is growing rapidly and consumers are becoming more comfortable making transactions from the Internet.
The entrance of eBay to the Russian market could also cut down on rampant fraud which exists on many websites selling goods through the Internet.
“EBay has a range of advantages that would help it [take market share],” said Boris Kim, chairman on the Committee on Payment systems of the National Association of E-Commerce.
“Its system of controlling deals helps to protect customers from counterfeit and fake listings that are widespread in Russia.”
Competition
The website Molotok.ru will be eBay’s main source of competition in Russia. The company is owned by the Allegro è Mail.ru International Group. The company has approximately 200,000 visitors a day and more than 5 million items for sale. In 2009, the site had a total of 30 million registered users.
Igor Karpachyov, CEO of Molotok.ru, stated that eBay’s entry into the market was an indication of “good prospects” for the sector.
“The appearance of a new international player is always useful for the market as it boosts its development,” Karpachyov said.
Considering the global reach, experience, and immense budget available to eBay for promotion, expect them to be a formidable player on the Russian e-commerce market.
Paypal and payment methods
Credit card payments using Paypal will be offered in Russia, which is already accepted at many Russian banks. Paypal is considered to be one of the safest payment systems in the world and has been offered in Russia since 2007 utilizing wire transfer.
“I can’t see any problem in paying online today,” said Kim, the Russian e-commerce official. “More and more people have credit cards. On registering the credit card in the PayPal system, you can just pay using a password. You can also create an Internet account by paying in cash at a payment terminal on the street or in stores.”
Despite the opportunity, Paypal has been plagued by difficulties in account setup and verification of a clients home address and bank account in order to receive funds. However, this is no different from account setup with Paypal’s competitors in Russia including WebMoney and Yandex Money.
Opportunities for individuals and businesses
The possibility for buyers and sellers to operate safely and efficiently using eBay and the Paypal payment system could bring about a new age in Russian e-commerce and bring notoriously high prices for imported goods to a more reasonable level. The competition and level playing field for buyers and sellers could also bring about a shift in pricing policies for in-store sales, as consumers will now have a much wider choice for their purchases.
Overall, the entrance of eBay to the Russian market should bring major benefits to Russian consumers and businesses, while further connecting Russia to the rest of the global market.
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