2015 HSE & GAMMA Joint Symposium
E-COMMERCE MARKET IN RUSSIA: BARRIERS AND OPPORTUNITIES
OF FUTURE DEVELOPMENT
Daviy Anna, National Research University “Higher School of Economics”, Russia1)
ABSTRACT
Differences between the conventional physical markets and e-commerce question the
validity of the established models used for e-commerce. Investigating marketing in
the emerging markets on the example of Russia can broaden the view of marketing;
however the e-commerce development in the Russian markets is now well examined
in the existing literature. The Internet audience in Russia is 66.5 million people and
the Russian market has the biggest online audience in Europe. The main objective of
this paper is to analyze the barriers and perspectives for e-commerce market
development in Russia. The paper gives an overview of the current Russian Internet
market development and trends. To identify barriers and opportunities of Russian ecommerce market 29 in-depth interviews with representatives of Russian internet
businesses and 6 interviews with experts were conducted.
Keywords: E-commerce, Emerging markets, Russia
INTRODUCTION
The dot.com crisis in 2000 resulted in a first critical academic reflection of the success
drivers in the e-commerce marketplace. On the one hand, academics focused on
strategic issues of e-commerce development. Christensen (2000) identifies the nonexistent understanding of e-commerce industry competition as well as the
incompetence to exploit new technologies on a sustainable basis as main reasons for
failure. A general lack of strategic direction and subsequently a poor definition of
objectives are also criticized by Porter (2001). On the other hand, e-commerce
theoretical framework shows the inability of the traditional Marketing Mix to be
applied to the context of e-commerce (Constantinides, 2002).
In addition to the above mentioned critiques of the existing marketing instruments, the
severe differences between the conventional physical markets and e-commerce
markets question the validity of the established models used for e-commerce. As the
culmination point of the shift from the mass markets of the 1960s to more segmented,
customized, interactive and global markets, e-commerce requires different marketing
efforts. Individual, rather than collective needs have to be served and customer
retention achieves greater importance than customer acquisition. Thus, considering
online markets from marketing perspective is quite important topic for the research.
Moreover, according to Sheth (2011), emerging markets, to which Russia belongs to,
have some specific features that differ them from advanced market. Investigating and
understanding marketing on the emerging markets can broaden our view of marketing
in general and understanding of the e-commerce market development in particular.
However, e-commerce development in the Russian markets is now well examined in
the existing literature.
1
adaviy@hse.ru
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2015 HSE & GAMMA Joint Symposium
In this paper we examine e-commerce market in Russia. As for now, the Russian
market has the biggest online audience in Europe. The Internet audience in Russia is
66.5 million people – so many Russians over the age of 18 use the Internet at least
once a month. 80% of users that is 53 million people go online daily (Yandex, 2014).
Modern consumers are increasingly engaged in activity on the Internet and join to
online shopping vigorously.
The main objective of this paper is to analyze the barriers and perspectives for ecommerce market development in Russia. The paper gives an overview of the current
Russian Internet market development and trends.
MARKETING FRAMEWORK FOR E-COMMERCE
The concept of the marketing mix was developed by Neil Borden (1964) as a set of
twelve controllable marketing parameters which would secure the profitability of a
business. The model became rapidly embraced by practitioners after it was reduced to
the four parameters product, price, placement and promotion by McCarthy (1964).
Since then, the 4 Ps remained the sole fundamental marketing tool for decades. In
light of the undisputed dominance of the 4 Ps as the main marketing instrument, as
underlined by Grönroos (1997) and Goldsmith (1999), the assumption that this
framework represents also the main tool for e-commerce marketing is valid.
However, the 4 Ps framework is already subject to critique with reference to physical
mass-market environments, being questioned with regard to its ability to scope with
contemporary business environments. Among them, first of all, Ohmae (1982)
focused his critique on the lack of strategic elements. Therefore, the previous research
suggested building the marketing strategy around the cornerstones customers,
competitors and cooperation – the tool was presented as the 3 Cs. Second, Robins
(1991 as cited in Kalyanam and McIntyre, 2002) introduced the 4 Cs, short version
for customers, competitors, capabilities and companies, in order to stress the external
relevance of marketing efforts. Another variation, with focus on customers, are the 4
Cs which are defined as convenience, cost to the customer, communication and
consumer needs and wants. Third, Bennet (1997) developed the 5 Vs, an approach to
overcome the overemphasis on internal variables when using the 4 Ps. The 5 Vs stand
for value, viability, variety, volume and virtue and are regarded as the main criteria
for customer disposition. Others, such as Lauterborn (1990), Grönroos (1997) or
Godin (2001) consider the 4 Ps as not enough customer oriented, as restraining the
company as well as the customer and finally as an obsolete management tool
(Constantinides, 2002).
In addition to this shift of focus, several aspects require a new marketing framework
for e-commerce:
 Interactivity. The classical model of 4 Ps does not specifically include interactive
elements. However, interactivity is regarded as a major characteristic e-marketing
(Evans and Wurster, 2000). With respect to the latest fundamental development of the
Internet, the shift towards the so-called Web 2.0, interactive elements appear to have
become even more important. The internet as an information-rich, a “market-space in
which buyers and sellers can meet, discuss and negotiate” (Robins, 2000, p.255). This
characteristic distinguishes the internet from other electronic mass market media and
simultaneously offers an alternative to personal selling.
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2015 HSE & GAMMA Joint Symposium

Distinctiveness of parameters. The application of the 4 Ps always signifies that the
four parameters are distinguishable and not interrelated. In physical markets,
customers usually experience the implications of decisions concerning the four Ps in
different occasions, times and places. In contrast, in the virtual marketplace, the four
parameters of the marketing mix are strongly interdependent. Moreover, they are
simultaneously experienced by the customer during the visit of the homepage
(Constantinides, 2002). Within the scope of this customer experience, the so-called
Web Experience, all 4 Ps are strongly concentrated on the homepage.
 Strategic and operational level. The 4 Ps have always been regarded and applied as
an operational tool. Strategic considerations, in terms of corporate strategy as well as
the subsequent marketing strategy, are seen as an exogenous variable which is
determined by the strategy-making processes. However, when the 4 Ps are used as the
only planning tool for E-commerce, the concerned enterprise runs the risk to neglect
the relevance of strategy-making. A possibility to solve this issue is the application of
conventional strategy-making procedures parallel to whatever chosen marketing
planning tool. This approach possesses two shortcomings. First, strategic planning
systems are time-consuming which is not applicable in E-commerce. Second, the
constantly changing online marketplaces lead to the expiration of ratified strategies far
quicker than physical market.
 Speed of response. This aspect does not only refer to the technical capability to
communicate quickly, but also to the flexibility to respond rapidly to changing
customer behaviors and competitors’ actions (Robins, 2000). Instant price changes,
the application of yield maximization pricing tools by airlines and “à-la-carte pricing”
(Cortese and Stephanek, 1998) underline the need of a far more flexible understanding
of marketing than in the 4 Ps model.
 Intermediaries. In physical markets, the value chain included intermediaries such
as wholesalers, retailers or agents. In contrast, online marketplaces are characterized
by the existence of a new form of intermediaries, in the form of portals, comparison
tools and tracking agents (Peterson, Balasubramanian and Bronnenberg, 1997). This
setting allows sellers to have more direct access to buyers whereas new players
emerge between them.

To sum up, the 4 Ps model is not appropriate, too time consuming, inflexible for the
dynamic and unpredictable e-commerce market.
RUSSIAN E-COMMERCE MARKET OVERVIEW
That’s why the Russian e-commerce market is expected to grow quickly over the next
years (Table 1). In 2013 the market growth was 31% and in 2014 it’s expected it will
be 30% (The economy of Runet 2013-2014, 2014).
Table 1 and Table 2
However, some obstacles have a strong impact on the positive dynamics of the ecommerce market. Firstly, stagnation is reported as a result of the first 9 months in
2014 (Virin, 2014). There is some negative dynamics of searching for “online shop”,
for example (from 51% growth in November 2013 to 2% growth in July 2014). Also,
number of purchases in online stores Aug 2014/Aug 2013 has grown by 15%,
however 50% of these stores had less orders than year ago (Virin, 2014). Secondly,
reconsidering the total forecasts will be done because of shrinking consumer income
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2015 HSE & GAMMA Joint Symposium
and cutting down marketing budgets. Thirdly, dynamics of exchange rate have
increased the price of imported goods by almost 25% (in USD). Finally, increased
complexity in shipping due to new import laws may affect electronics and luxury
goods markers, because new limits for cross-border online purchases are 150 EUR
maximum.
That’s why it’s obvious that the Russian e-commerce market has the huge potential
but because of some obstacles can’t reach it. Thus, the aim of this research is to
identify specific factors that retard and encourage development of Russian ecommerce market and evaluate their effect on the market.
THE RESEARCH METHODOLOGY
For answering the first research question (identifying barriers and opportunities for
Russian e-commerce market development), we will use secondary data. Further
secondary data will be supplement with the in-depth interview that extends our
understanding of existing barriers and potential opportunities for the market from the
business and customer perspective. For investigating the second research question and
evaluate the impact of specific barriers on the e-commerce market in Russia and
analyze the possibilities of future development, we will use a quantitative research in
order to obtain primary data.
The first part of the qualitative phase was held in the September, 2014. To identify
barriers and opportunities of Russian e-commerce market from the business side 29
interviews with representatives of Russian businesses in the field of e-commerce (9
interviews) and online sales (14 interviews) were conducted. Also, 6 experts’
interviews with experts in the field of business, e-commerce and direct sales were
done. Respondents were selected based on their knowledge and experience in the field
of direct sales and online trading. In-depth interview were conducted with the
respondents from Moscow, St. Petersburg and some other large cities in Russia.
Interviews with the respondents were done personally or by Skype, interviews with
experts were conducted in person. A protocol for conducting interviews included
questions for three groups of respondents: respondents from the business field,
respondents from the field of direct sales, experts from the field of online trading
and/or direct sales.
The second part of the qualitative phase that is required for understanding the
customer point of view is in process now.
BARRIERS OF E-COMMERCE MARKET GROWTH IN RUSSIA AND
OPPORTUNITIES FOR THE MARKET DEVELOPMENT
Consideration of the market should be carried out from two sides: from the business
position and from the customer position, because all these two forces can influence
significantly. Based on the analysis of the secondary data, quite a lot factors hindering
the development of e-Commerce in Russia can be identified; among them should be
mentioned:
Table 3 and Table 4
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2015 HSE & GAMMA Joint Symposium
MAIN RESULTS OF THE STUDY AND DIRECTION FOR THE FUTURE
RESEARCH
Barriers to business development in the Internet mentioned by the respondents can be
divided into two main categories: the pressure of the market environment (competitors
and suppliers) and infrastructure (logistics and payment systems) and institutional
issues (distrust of e-commerce, the low level of state support and the lack of
preferential loans). The most significant is the second category - infrastructural and
institutional challenges. They reduce the overall motivation for this type of business,
and also weaken the competitive position of small companies compared to large
contractors (suppliers and major competitors).
The greatest number of growth opportunities in the respondents opinion is associated
with the development of the intangible assets of the business like partnerships and
increasing consumer loyalty and the differentiation of their proposals. If we consider
the opportunities for the marker development in general, institutional and
infrastructural areas have the greatest potential to become the basis for the effective
implementation of other possibilities.
Findings from the in-depth interview with respondents representing business
perspective contribute to the deeper understanding factors that have a negative and
positive impact on development e-commerce market in Russia. But without any
doubts it’s necessary to make the similar research with the customers who use goods
and services on e-commerce market. After this quantitative step the qualitative step is
required to evaluate obtained factors by using statistical data.
REFERENCES
Bennet, A.R. (1997). The five Vs – a buyer’s perspective of the marketing mix.
Marketing Intelligence and Planning, 15(3), 151-156.
Borden, N.H. (1964). The concept of the Marketing Mix. Journal of Advertising
Research, 4(2), 2-7.
Christensen, C.M. (2000). After the Gold Rush: Patterns of Success and Failure on the
Internet. www.inosight.com.
Constantinides, E. (2002). The 4S Web-Marketing Mix model. Electronic Commerce
Research and Applications, 1(1), 57-76.
E-commerce in Russia (November, 2014). Retrieved from http://www.ewdn.com/ecommerce/insights.pdf (Last accessed: December 1, 2014).
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Evans, P., Wurster, T.S. (2000). Blown to Bits. Cambridge, MA: Harvard Business
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Goldsmith, R.E. (1999). The personalised marketplace: Beyond the 4Ps. Marketing
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Grönroos, C. (1997). From Marketing Mix to Relationship Marketing – Towards a
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Kulikov, Andrey (March, 2014). Russian internet Deal Book 2012-2013 Fastlane
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http://www.nielseninsights.eu/articles/za-tovarami-v-onlajn
(Last
accessed:
December 1, 2014).
McCarthy, J.E. (1964). Basic Marketing. A Managerial Apporach. Homewood, IL:
Richard D. Erwin.
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Peterson R., Balasubramanian S., Bronnenberg B. (1997). Exploring the implications
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Porter, M. E. (2001). Strategy and the Internet. Harvard Business Review, 79(1), 6378.
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Yandex (Spring, 2014). The development of the Internet in Russia's regions.
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INDEX
Table 1. The growth of the market during 3 years
Billion roubles
320
405
544
2011
2012
2013
Source: E-commerce market, 2014
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Table 2. Planned online purchasing of Russians
Sport goods
12%
26%
Goods for children
15%
Tickets for events
15%
Tours and hotels
25%
Electronics
25%
Fashion items
39%
19%
Travel
Health & beauty
24%
18%
35%
38%
35%
26%
26%
38%
2010
2014
Source: Lukina, 2014
Table 3. Barriers of e-commerce market growth in Russia
Barriers from the business perspective
Barriers from the customer perspective

Weak saturation of the market of 
Unpopularity and mistrust of nonInternet services in the Russian regions;
cash payments and prepaid schemes;

The underdevelopment of the 
Low public confidence in the
Russian logistics system;
Internet as a sales channel;

Shortage of staff and lack of 
Fear of sharing the confidential
qualified management;
information;

Lack of optimal and coherent 
Low perceived quality of products
legislative framework for the regulation and shops;
of the industry;

The complexity of the product

Low margin business on the return and exchange.
Internet and the prevalence of price
competition;

Saving schemes of taxation, grey
import and parallel importation of goods,
fraud.
Sourse: [Virin, 2014; Lukina, 2014; Kulikov, 2014; E-commerce in Russia, 2014;
Yandex, 2014]
Table 4. The factors stimulating the development of e-commerce
Factors stimulating business
Factors stimulating customers

Low costs of market entry;

Welfare;

Investment in the industry;

Cost

Involvement of the regions in the the 
Convenience
online trading;

Reviews

Using multi-channel sales by business 
Saves time
Sourse: [Virin, 2014; Lukina, 2014; Kulikov, 2014; E-commerce in Russia, 2014;
Yandex, 2014]
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