A leading stockbroker in Stockholm recently arranged a seminar on Russia where representatives from nine Swedish-Russian companies presented their businesses. The primary participant was Tinkoff Credit Systems (TCS), a Western influenced credit card company. TCS sells loans through credit cards and is controlled by Vostok Nafta, an investment company with the Lundin family as its leading shareholder. In the last five years, the number of credit card transactions has more than doubled. As a result of safer payment systems, growth in Russian e-commerce will increase further. For a long time, Russia has been a “face-to-face” society and an increased use of credit cards will lead the way for a stronger growth in e-commerce companies.
KontaktEast is another consumer oriented company introduced at the seminar. The company has its entire business in Russia and is also owned by Vostok Nafta. KontaktEast owns Avito, a company similar to Swedish Blocket and Tradera. The difference with Avito is that payment and delivery is done physically between buyers and sellers. Other successful concepts are price comparison sites and communities.
Participating commodity-based companies is declining in seminars on Russia while focus is increasing on consumer related companies. In 2007, Russia ranked the tenth largest retail market in the world. Today, Russia is the largest European market in a number of areas and industries, e.g. mobile phones, washing machines and juice. In two years, Russia will most likely become the second largest car market and the third largest advertising market in Europe.
The e-commerce market is still a virgin market and there are a number of reasons why e-commerce and on-line transactions are few in comparison with similar markets. First and foremost, the Russians don’t trust the mailing system and the e-commerce companies. Uncertainty in the delivery and payment systems is similar to the e-commerce debate in Sweden ten years ago. E-commerce equals to less than 1 percent of the total retail market. In Sweden, the number is 5 percent. In addition, there are many other areas where you could make money in Russia and e-commerce has not been recognized as a business opportunity. Swedish companies have great opportunities in succeeding in the international retail market, an area where we are very strong. From a European perspective, Sweden has a well developed e-commerce market and many strong e-commerce companies with export potential. We need to create better conditions for Swedish e-commerce companies that are willing to expand abroad.