Internet retailers look to the Future

Added: 03/22/2006

Constantly growing business of trading networks stipulates a search for new sales channels. However, possibilities of internet in this sphere are not used by russian retailers in full. Trade shops are still causious to practise on-line trading on a large scale as they do not have favourable expectations to get a proper income, using on-line system. In spite of dynamic development, e-commerce is still not considered to be a perspective way of sales for Russian retailers as compared to the western market participants. Plurality of trading networks limit themselves to opening virtual visiting-cards in sites only. A visible interest to develop internet representatives is displayed by nonfoods sector. Thus, nonfoods sector accounts for more then 90% of total internet retailer market. More than 50% of turnover of internet retailers accounts for sales of computer ecquipment. So, what prevents internet retailers from developing in Russia and what helps them to flourish in the West?

American experts consider that the main problem of russian B2C sector is in lack of development of e-payment systems. In Russia e-commerce, as it is, doesn't exist - most of payments are effected in cash at delivery. Russian experts stick to the opinion, that this is not the only reason preventing internet retailers from developing on-line system. Such trade shops as IKEA and AUCHAN successfully maintain on-line services at native market, while in Russia internet services are not promoted by these same retailers.
At the whole variety of supermarkets in Russia, internet trading was implemented only in RAMSTOR and SEDMOJ CONTINENT. The latter, however, had to cease its on-line services in 2004 for uncertain period of time. The same year, one of the most popular internet shops of foodstuffs was closed. Experts explain this tendency was a natural phenomenon. In Russia internet services cannot compete with ordinary ways of trading.
The main showing of both internet and off-line trading results is revenue. Notwithstanding a high turnover and growing number of clients, profit of internet retailers can leave much to be desired. Delivery cost is the main problem in organizing on-line sales of foodstuffs on-line. Delivery cost, included into the prime cost, noticeably decreases retailers' profit, thus influencing profitability.
In Moscow the number of potential clients of foodstuffs internet retailers is estimated at 100,000 people. In the future, acccording to experts' forecast, internet foodstuffs sales will account for 15% of total turnover.

Domestic electronic on-line

On-line sales of nonfoods sector demonstrate annual increase. Anyway, among the plurality of internet shops, a few of them represent interests of electronics retailers. In spite of electronic ecquipment, computers and mobile phones make up the most of B2C turnover, only M.VIDEO , as one of the biggest electronic market representatives, is developing on-line sales, considering this system to be of primary importance. The main factor, stimulating on-line sales, is the strategy of low prices - the price in internet is lower than in shops. Representatives of the company explain that they are able to provide lower prices on-line due to reduction of expenses of off-line trading.

Russian retail networks do not hurry with their projects of promotion in internet. Even in case new internet shops appear, their share in total turnover will not be big enough so soon. Actually, the whole internet retail accounted for less than 1% of total turnover in 2004. However, by the time competition becomes tougher, companies will have to master new sales channels this way or another.

The situation with internet retailers proves to be quite different in the west. Experts forecasts there are much more optimistic. Today the web accounts for about 5% of total annual U.S. retail sales. But respondents to the survey indicate that Internet sales as a part of all retail sales will become much larger. Nearly a quarter-23.8%-expect the web will account for 20% or more of all retail sales in five years. Another 25.3% expect e-commerce will account for 15% to 20% of total retail sales within five years and nearly a third-31%-forecast 10-15%. Those expecting the web's influence to be more modest are in the minority-17.6% expect the web to account for 5-10% of all retail sales in five years and a mere 2.3% expect the proportion to stay the same as today.Overall, the survey indicates that web retailers are anticipating that their customers will be spending considerably more time and money shopping online. Yet the future landscape of web retailing is also undergoing dramatic change and merchants will have to respond to a number of market trends to keep up with shoppers and their ever more demanding expectations.

A key fact that helped to establish web retailing as a new merchandising channel-and a trend that will continue to drive growth-is the time savings and convenience that shoppers expect from e-retailing. That will continue to drive sales, retailers expect. 38.2% of respondents to the survey rate the continued growth in demand for time-saving convenient services as the biggest reason customers will keep shopping online. Asked which shopping category holds the best potential for sales growth, a plurality of respondents in every category chose apparel: 23.1% of all respondents, 20.6% of chain retailers, 40% of catalogers, 18.9% of web-only merchants and 32.3% of consumer brand manufacturers.The Internet Retailer survey demonstrates the rapid forthcoming advance of ways to shop online. 40.6% of chain retailers indicate that interactive TV will be a part industry strategies for online merchants within 5 years, compared to 42.3% of catalogers, 40% of web-only merchants and 50% of consumer brand manufacturers.

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