The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
MOSCOW, Russia — Russia's plunging currency hasn't weened consumers off foreign goods. Instead, cash-strapped shoppers are turning to online retailers for imported smartphones, jewellery and clothes, giving an unexpected boost to Chinese e-commerce giants Alibaba Group Holding Ltd. and JD.com Inc.
Alibaba's AliExpress site posted a 40 percent increase in Russian visitors to 22 million in July compared with a year earlier, according to researcher TNS. JD.com, which gets more than half its sales from electronics and home appliances, started its first international site in June in Russia, exclusively offering devices such as Xiaomi Corp. smartphones for about $214. That's less than half of what an IPhone or Samsung Electronics Co. model with similar technical specifications costs locally.
“Amid the recession, Russian shoppers are increasingly turning to the Web to seek the best possible bargains,” said Maria Gracheva, head of online-payments operator Yandex.Money, which works with both AliExpress and JD.com. “Chinese online- stores can offer them affordable prices.”
Millions of Russians are sinking into poverty as the collapse in crude prices drags down the economy of the world’s biggest energy exporter, sends the ruble into a tailspin and cuts government revenue. In August, wages fell 9.8 percent in real terms and Russians now face significantly lower disposable income than a year ago.
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"The consumer’s purse has shrunk by about half, but still Russians want good-quality products at affordable prices," Victor Xu, head of international business at JD.com, said in an interview. “We expect some strong growth in the fourth quarter, before that we’ve had more of a trial period.” He declined to discuss sales numbers.
While the economy may be in recession, Russians are embracing deliveries from China. Some 80 million people go online in Russia, making it Europe’s largest Internet market by users, according to East-West Digital News. However, the number of Web shoppers is still about a third of that, compared with 70 percent to 90 percent in the U.S. and western Europe.
“In China, we have 3 million orders every day,” said JD.com’s Xu. “Russia is roughly 10 percent of the Chinese market, so potentially we could have as many as 300,000 daily orders here.”
This year, the number of shipments from abroad may exceed the number of domestic e-commerce packages in Russia, according to the National Association of Mail Order and Distance Selling, with the growth driven by China. In 2014, 235 million parcels were delivered, including 75 million cross-border orders. This year, NAMO forecasts 220 million parcels with 120 million imports.
AliExpress has seen a rise in consumers shopping for everyday household items in the past few months, in addition to a continued demand for fashionable clothing, accessories and electronics, the company said in an e-mailed response to questions.
While business is growing in Russia, Alibaba’s reliance on consumer spending in China has left the company vulnerable to the domestic slowdown. Alibaba surrendered the title of Asia’s largest Internet company to Tencent Holdings Ltd. last month, capping a 10-month slide for the e-commerce giant that wiped $140 billion from its market value.
Price-Sensitive
While Chinese suppliers including Alibaba, TinyDeal and JD.com are doing well in Russia, EBay Inc. lost 16 percent of its Russian visitors from in July, to 6.9 million, according to TNS. Many Chinese retailers use EBay to sell to Russian consumers, according to East-West Digital News, while the company also offers wares from the U.S. and Europe. An EBay spokeswoman in Russia declined to comment.
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The U.S. dollar has gained 55 percent against the ruble over the last year. An additional effect of the depreciation is that Russian-made goods are cheaper and more attractive abroad. Alibaba plans to start offering Russian food such as chocolate and condensed milk to Chinese customers from November, while JD.com is considering selling Russian seafood, vodka, jewelry and furs to China, Xu said.
While many Russians in Moscow or St Petersburg cities shop online, in the country’s far east, e-commerce has been slower to take off. In Blagoveshchensk, across the Amur river from China’s Heihe, tourism flows have changed direction with the depreciating ruble. A yuan that buys 10 rubles, compared with 5.4 at the start of 2014, has made Chinese visitors wealthy.
Gold, Sweets
"We used to go Heihe to walk, eat out and shop," said Maria Kobysh, director of a jewelry store in the city. "Now we can’t afford this anymore, while crowds of Chinese shoppers have started coming to Blagoveshchensk.” Gold, gems and sweets and among the most sought after products, she said.
Even this bricks-and-mortar commerce may soon move to the Web. Bank of China-backed TradeEase started a Russian website last month to bring near-border trade online after Russian shoppers stopped traveling across the border.
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