In April 2013, online fashion retailer ASOS performed something spectacular: it successfully launched its business in Russia. Recently made a winner at the 2014 Oracle Retail Week Awards for the success of the Russian website, this bold move by ASOS has been hailed as a “blueprint” for businesses looking to expand into a notoriously difficult market. With a national population of over 140 million and 70% of the fashion spend going on ‘value clothing’, Russia represents a potentially lucrative market for affordable online retailers – so why are high street clothing retailers reluctant to take on the challenge?
Traditional shopping habits in decline?
Online shopping is gaining momentum in Russia, with clothing, shoes and accessories gaining the biggest increase in online sales. In Moscow and St. Petersburg especially, online sales are booming – a trend reflecting the increasingly busy lives of the city populace. However, according to a 2013 consumer behavior survey, the overall number of Russians using the internet to shop still hovers at around 20%, compared with 70% of people in the UK, Germany and Sweden. For 55% of Russians surveyed, the ability to touch and view products before buying them online is “extremely important” and visiting stores is still the most popular option for shoppers.
Urban populace vs. regions
The time-saving benefits of online shopping enjoyed in major cities do not extend across Russia’s far-flung regions, which lag far behind Moscow and St Petersburg. Postal delivery can be unreliable and internet penetration is lower, at around 50% among adults. Only a reported 24% of Russian families have a bank account (2011) and many people living in outside regions are distrustful of sharing credit card details online. For most online shoppers, Payment on Delivery is still the principal way of paying for orders. One of Russia’s largest online retailers, Ozon Group, operates a site-to-store solution by which shoppers can order items to be delivered and paid for at one of its urban outposts. As a result, around three quarters of all sales from the site are paid for in cash, face-to-face.
The rise of the fashion outlet
The outlet market has boomed in the UK and Western Europe over the last two decades, offering shoppers discounts of up to 70% on high-end designer fashion brands. Russians’ love of luxury is famous and, as disposable income increases, spending patterns are shifting towards those typically found in Western Europe. 2012 witnessed the opening of Russia’s first true outlet centers, with further openings taking place in 2013. A new phenomenon for Russia, fashion outlet stores could be the most likely way for businesses to reconcile Russians’ distrust of online retail and their desire to own good quality everyday clothing and shoes at an affordable price.
However, with the average household disposable income in Russia steadily rising and internet usage growing 75% in the last 5 years, the potential audience for online retail could be a tempting proposition for businesses. The success found by luxury international fashion brands such as Yves Saint Laurent and Prada in cross-border sales, and now by high street retailer ASOS, forges the way for affordable fashion to become a real online phenomenon in Russia over the next few years.