E-commerce has widely spread into casual purchasing, with self-isolation and prevention measures propelling the industry development. Yet after the first three weeks of remote work, goods on delivery remain the most popular and robust category in Russia, followed by digital goods.
Grocery stores and paid TV providers have experienced the largest growth in turnover of online payments. Tourism, entertainment ticket sales, and personal services, in turn, demonstrated the most significant decrease.
The number of online orders at cafes and restaurants has increased by 78% in the recent nationalweek off compared with the standard working week of February 24th to March 1st, 2020 (we’ll call it the zero week from now on). Last week, the turnover has increased by 26%, but the average transaction value has dropped by 29%: customers order more frequently yet for smaller amounts. Online payments at grocery stores have increased by 58% in comparison with the zero week, the turnover has increased by 43%, but an average transaction has decreased by 9%. A week before, the turnover for grocery segment has grown by 21% alongside the average transaction growth of 10%. As the delivery services are quite sophisticated in Russia, online grocery shopping might becoming a part of the daily routine faster than was predicted prior to the virus outbreak.
The Covid-19 pandemic has become a stress test for the foodtech industry. It’s worth to mention that brick-and-mortar FMCG retailers were recently boosting online sales in order to increase the frequency of shopping. The market also saw an increase of delivery services promising to bring groceries within 15 minutes, creating a competition for local mini-markets as well as large marketplaces selling groceries online. In these turbulent times, given the user-friendly nature of such initiatives, they have vastly grown in demand.
Health-related services are, surely, of high interest these days. In the last week of March, the number of transactions in medical offices and clinics has increased by 10%, but the turnover only increased by mere 5%, as people turn to doctors more frequently, but for cheaper practices. Turnover at platforms selling health-related products, vitamins, and supplements has increased by a quarter. Cosmetics and beauty sales have grown by 10% and 13% in turnover and number of transactions, respectively.
Last week, online sales for pharmacies were introduced in Russia: medicaments can now be ordered online, paid for in advance, and delivered to the customer.
Worth to note that in 2019, the largest growth by turnover was attributed to beauty and health sector, 56%, which correlates with the general interest in wellness goods and a massive increase of beauty online shops as well as beauty segments at marketplaces. Hopefully, the trend for healthy lifestyle will continue.
Entertainment: Education and TV
Last week, the most significant turnover growth was attributed to paid TV providers: 93% in comparison with the zero week. The number of online payments made in favor of such companies has grown by 69%, while the average transaction has grown by 14%. The number of payments to educational platforms (online courses, training, and masterclasses) within the same period has increased by 64%. However, the turnover has increased only by 5%, while the average transaction has decreased by 36%. The reason behind this is most likely the fact that customers chose either low-cost options or free (or almost free) trial periods. Many online platforms offered 1-ruble subscriptions during the self-isolation period. From March 30th to April 5th, gaming services also demonstrated positive upward dynamics: the number of transactions has increased by 29% and the turnover has grown by 19%.
The demand for personal services such as repairs, cleaning, hairdressing, massage, and manicure at home has decreased. The number of transactions on websites offering such services has decreased by 31%, and the turnover has decreased by 52% in comparison with the zero week. Services for property rent have also suffered the decline: 74% in the number of transactions, 65% in turnover. The turnover for platforms selling concert, cinema, and theater tickets has dropped by 65%. The largest decline was observed in the tourism segment, with 85% decrease in the number of transactions and 83% decrease in turnover.
Generally, the fall and growth of different segments of e-commerce are easily explained given the recent events. Still, there are some curious trends. For example, the number of transactions towards charities has increased by 13%, with a 27% increase in turnover.
How to Pay
Russians have adopted contactless payment methods a while ago, but still prefer to use bank cards for online payments: 94.1% of purchases were conducted this way (via conventional card payment systems or Apple Pay/Google Pay). Contactless payments are most often used by companies selling groceries online: 24% of them accept payments via Apple Pay and Google Pay. Since this segment is the most demanded, the self-isolation period can be a real game-changer in the transformation of e-commerce.
First of all, a real difference can be observed at the customers’ side. These days, the value-added services are benefiting the most, with financial services apps transforming into handy lifestyle services offering purchases, fines and tax payments, discounts and coupons for purchases, investment portfolios, and gamification. Customers create e-wallets and issue virtual cards, choose cashback and discounts options, organize all offers and options in one space—and right now, the behavioral changes are determined by external forces.
Second, as alternative payment methods are on the rise, it’s crucial for merchants to provide all payment methods via one single interface or payment experience. Yandex.Checkout has seen a recent rise of onboarding requests, which proves that payments and payment acceptance processes are a key component of the transformation.
Third, as fintech is at the forefront right now, it’s obvious that the best way to evolve is to collaborate and intersect with other tech segments, such as legaltech, healthtech, regtech, insurtech. This fact also greatly corresponds with the aforementioned ecosystem trend: in order to provide all-in-one solutions, companies have to be equally well-versed in various fields, and that expertise has to be interconnected.
According to an EY report, in 2019, Russia ranked 3rd by the level of adoption of fintech services, outperforming such countries as Sweden, Great Britain, and Singapore. When it comes to most products, Russian e-commerce market is on par with the global one, and for some of them, such as customization for B2B and B2C customers, sometimes even ahead. Hopefully, the quality of fintech products will continue to display growth dynamics, adding to overall financial recovery.