The past couple of years have presented notable challenges for e-merchants catering to internet users in the developed online markets of Western Europe and North America.
For starters, the far majority of these markets appear to have reached maturity, with internet penetration growth either slowing down significantly or, in some cases, stagnating completely.
Secondly, severe economic turmoil in especially the Eurozone has proven to be a plague that’s more difficult to get rid of than initially anticipated.
When coupling these factors with fierce competition in most of these online markets, the inevitable net result for a great many businesses has been sluggish performances that generally leave a lot to wish for.
So what do you as an online merchant faced with stagnating revenues and slow growth in your current markets? Do you merely weather out the storm and hope for better times to return eventually? Or do you grab the bull by the horns and take on online markets characterised by high growth and significant economic potential to offset those somewhat disappointing results?
If you belong to the latter group, Russia is one market you might want to keep an eye on.
Here are four reasons why:
With a monthly internet audience that now exceeds 64 million, Russia continues to distance itself as Europe’s largest internet market after having surpassed Germany in 2011. In fact, a whopping 15% of Europe’s 408 million internet users are now in Russia, according to comScore’s Europe Digital Future in Focus Report.
It’s Growing Exponentially
Although Russia has already become Europe’s largest internet market by user count, what’s most intriguing about the market is its exponential growth potential.
First of all, internet penetration still sits at a modest 55% of the overall population (way below the averages of Western Europe and North America) and as such is destined for continued high uptake for years to come. This growth will primarily be driven by ‘Rural Russia’ where internet usage is still lagging notably behind that witnessed in the larger cities of Moscow and Saint Petersburg.
Moreover, ecommerce is booming. According to a comprehensive report on the Russian digital landscape by reputable East-West Digital News, e-tail grew by an astonishing 30% in 2013 to reach $16 billion. However, should you find these figures enticing (which you ought to), take a look at the ecommerce growth forecasts in the graph below.
Yandex, Russia’s leading search engine with a 62% market share, reached a quite impressive milestone in 2012, when it surpassed Russia’s largest TV station, Pervy Kanal, by number of monthly visitors. Not only is this sound testament to the exponential rise of the ‘Runet’ (the Russian internet), it serves as a loud wake-up call to advertisers to shift a much larger proportion of their budgets to online.
However, while advertisers are increasingly finding value in the digital medium, online advertising as a whole is still largely underserved compared to the actual value it represents (see below). What this presents, in turn, are huge opportunities for those businesses who get in while competition is still modest.
It’s not as difficult to enter as conventional wisdom suggests
Russia, whether offline or online, has been a notoriously difficult nut to crack for foreign businesses. The vast country, however, is undergoing rapid transformation these days and is increasingly opening up for international trade, most noticeably demonstrated by the 2012 accession into the WTO. Moreover, the country’s leading internet players, with Yandex being the most prominent example, are now providing foreign advertisers with English interfaces and dedicated English-speaking support teams in an effort to mitigate the barriers to entry.
With the barriers to entry lowering and the financial opportunities significantly increasing, the wise international marketer will recognise that online Russia is may not merely be a space to watch out for but one to get involved in – ASAP.