Dmitry Sergeev, AliExpess Russia - about marketplaces and post-like e-commerce shock

"We lost a lot during the pandemic"

During the pandemic, we at AliExpess Russia lost a lot, because

the Chinese sellers were physically unable to operate. But I managed to acquire a lot - this traffic washanded over to Russian sellers. As for the market as a whole, the online share in it has fundamentally increased: according to various estimates, from 50%. Russia has historically lagged behind most Western markets in terms of the share of e-commerce. But this year its share has grown: according to various analysts, if before COVID-19 it was 4-5% of the total total retail, now it has grown to 8-10%. A more accurate estimate will appear at the end of the year. If growth continues, then the lowest, not aggressive estimate - 15% of the total turnover will be online. Secondly, due to the pandemic, the market has certainly consolidated. The Russian market has historically been poorly consolidated, there were no clear leaders on it and there was a long tail of platforms - vertical stores, stores of a specific category of goods, or multi-players as an extension of offline networks. There were no clear leaders, and this is also the difference between Russia and other market countries.

The share of the three largest players in Russia amounted to 24% of the entire online market. But the crisis hit not only e-com, but alsoall branches of retail. Usually, the principle “big companies grow faster because they have more resources” works. In fact, while online has received a large influx of customers, it has experienced many challenges. Logistics immediately began to maintain fundamentally different turnovers, and this is an increasing investment that only big players can afford. Therefore, the pace of market consolidation has accelerated. By 2024, the share of online trading will be over 19%. For example, in China the share of top players is 84% ​​of the total market, in the USA - 63%, even in Brazil there is a leader, Mercado Libre - 49% of this market is controlled by top players. In Russia the market was very fragmented, but now it will be highly consolidated. According to our estimates, the share of top players, including us, will be well over 50% by 2024.

Russia lagged behind other markets, which is why it has huge growth potential... At the beginning of the pandemic, our country was at the levelSpain and Italy with a much more developed Internet. In China, this share was already 20%, and after COVID-19 - more than 30%. The growth of the Russian market will definitely continue after 2024, and at a very high rate.

"Marketplace is not only a buzzword"

Small and medium-sized businesses have experienced all the complexities of the pandemic, but, on the other hand, they recognized such a word as “marketplace”. Historically, all sites in Russia operated onto a greater extent, that retail model, when the site buys goods and resells it itself. Today, the dominant model around the world is the marketplace, when the site serves as a showcase connecting the seller and the buyer. The growth of marketplaces is largely due to the entry of small businesses to them, which at some point could not sell in any way except online. The marketplace turned out to be the place where there is an audience and where you can offer them your products.

Marketplace is not only a buzzword, but also a model that allows a business to reach the consumer very quickly. The entire e-com market is developing according to this model. If we continue the logic of offline in online, then the store should be placed in a place where there are many people. The marketplace market is in many ways similar to entering a mall. We, as the administration of a marketplace or the administration of a physical shopping center, are responsible for ensuring that it functions, people come to it, so that it is clean, convenient, and traffic in it is correctly distributed. It's the same online. We or, for example, OZON, are developing a marketplace, creating an infrastructure, enabling businesses to use it, while, more importantly, for small and medium-sized businesses, this is a unique opportunity to reach a large audience immediately. Since the beginning of the pandemic, the number of local sellers has more than tripled.

"Why does a business need its own platform if there is Instagram?"

Another trend is social commerce, where purchases are made directly on social media platforms. And this is not only a powerful direction in China, in the USAthere is a Shopify company. In this sense, we have the advantage of being part of the Mail.ru ecosystem, which includes the largest Russian social networks and has extensive experience in China, where top livestream bloggers sell more than the largest Russian e- com site. When COVID-19 began, there was such a discussion: how long this trend will last, people will return back to physical stores. Answer: no, they will not return. But, of course, there are categories of products that are difficult or impossible to buy online. My favorite example is the sofa. Anyone understands that ordering five sofas home, bringing them and sitting on all of them to compare is a rather strange story. Although there are already technologies here that allow arranging furniture at home, but this is a rather specific case. But if you buy a brand you understand or a product of daily use, then you understand that the time spent on the trip to the store was not spent in the most optimal way. Such people have remained online since the lockdown was lifted, when we more or less lived without restriction. But there certainly remains one more offline story - about socialization. We are ultimately all social beings, and we go to the mall not only to buy something, but just to pass the time. This will continue, so I believe that we are not talking about tough opposition online and offline, but about the channel where the transaction is carried out, where the turnover is generated. This is a kind of multi-environment in which an order can be made online and received at the point of issue. And, conversely, a person can see the product offline, take a photo of it, download and buy it on the Internet. But if we talk about the exact place where the transaction took place, then we see that since the restrictions were lifted, people continued to buy online, because it is convenient. And the effect will only grow: this is the arrival of new users, and the creation of new habits, and new categories of goods, first of all, food.

Thanks to social commerce, many businesses don't even need their own platform, Instagram is enough. We are actively working on this area together.with VKontakte and Odnoklassniki, the largest social networks in Russia. We recently talked about the fact that through the live streams that we launched into the pandemic, we sold goods for almost a billion rubles. It seems to us that this is a very important area. You don't need to ignore it, you need to watch and be there, because people spend a lot of time streaming - this is a kind of mix of entertainment and consumption, which has become very large.

We even started buying products online, and even those who had not done this before... I, for example, was a traditional person and notbought groceries online, went grocery shopping. But having ordered once, I realized that it was a wrong time spent. Today there are several models of grocery shopping: for a week, quick (in 15 minutes). But one way or another, people are switching to online grocery shopping.

Hybrid model of the postvoid era

We were better prepared for the pandemic. Because we use Alibaba Group processes,which almost doubled on SARS-CoV-2. We had systems and a workflow ready, which at first seemed boring and too formalized to many, but then many understood why it was necessary. When everyone is working from home, there is a need, for example, for weekly reports.

At a time when people spent 100% of their time in the office, we will never return. Until now, our employees practically did not go to the office - we work according to the hybrid model. Most people work from home, so it is importantorganize the setting of tasks. People, of course, have to spend fundamentally more time synchronizing with each other. Although I totally agree that everything related to online creativity or brainstorming is difficult to build. For this we are going to the office - for the last time we did a strategic session. Everyone voluntarily passed the tests and went to communicate, because it is still difficult to build a creative process online.

From a business standpoint, we were the first to experience the COVID shock ourselves because our Chinese sellers weren't technically working. Or they simply turned off their factories so that for thesefactories could not come people. At its peak, 70% of salespeople simply weren't working. Since we are the most leading e-com platform in terms of traffic in Russia, we tried to do everything to present Russian products to all buyers, zeroed the commission for Russian sellers, introduced support measures for especially small and medium-sized businesses - we ourselves paid for fulfillment for them ... If earlier our share of purely Russian business was 10%, now it is already approaching 25%. COVID-19 helped us a lot in localization, because it was perceived as a very painful but important challenge.

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