Opportunities and Challenges of E-Marketing in Russia

Nick Wilsdon, CTO E3internet-Marketing

E-marketing is an essential channel for businesses to promote their brands and increase sales. According to Forrester Research, U.S. online retail sales for 2009 were $156 billion and will grow to $329 billion by 2010. This growth has been at the expense of bricks and mortar stores. Russian consumers spent 110 billion rubles (approx. $3.5 billion) online in 2008 according to the National Association of Members of E-commerce.

The 19th release of “The Internet in Russia” by The Public Opinion Foundation estimated that there are 28.7 million Internet users in Russia or 25 percent of the population. That places Russia above Spain or Italy. In a report released this week, ComScore ranked Russia as the fastest growing Internet audience in Europe, with June figures up by 27 percent, compared to 21 percent growth in France and 15 percent growth in Spain.

However the amount spent on advertising online in Russia is small compared to other countries. Figures released in March this year stated that $590-$600m was spent in 2008 with an estimated 22 percent rise for 2009. Internet advertising only accounts for 3 percent to 4 percent of the total expenditure in the Russian advertising market but this is growing despite tough economic conditions. While the global credit crisis has hit advertising costs across the sector, it has also forced companies to look for the most effective ways to spend their reduced budgets. The Internet as a promotional channel fits these requirements by giving companies exact targeting and measurable results. Many Russian companies have yet to adopt these western practices in tracking e-marketing campaigns.

Russia is one of the few countries where Google has failed to dominate the search engine market. According to LiveInternet.ru the U.S.-based search company commands a 33 percent market share compared to the 51 percent held by local search giant Yandex. This figure rises to 60 percent when including Mail.ru, who use Yandex results to power their portal.

Both Yandex and Google run systems that allow companies to place adverts next to the search results returned to the user. This form of advertising is known as Pay-Per-Click. Professional agencies will work to optimize these campaigns, tracking the user from their initial search through to the purchase. This constant optimization is essential to bring companies the maximum return on their investment.

Companies can also invest in Search Engine Optimization services that help their web site rank higher in the standard search results. A good agency will not only help increase the web site position but examine the customer experience through out the purchase process. The success of online shopping is put down to three key factors; trust, convenience and price. The research group ROMIR, released a survey in August that investigated why Russians are reluctant to make online purchases. These included a lack of information on the products (48 percent), delivery problems (34 percent), the process was too complicated (24 percent) and insufficient payment methods (23 percent).

When asked what would make them to buy online, 58 percent said lower prices than in conventional shops, 50 percent said a quicker and more organized delivery system, 58 percent a guarantee of products’ quality and opportunity to replace bought products and 42 percent wanted a more convenient and secure system of payment. While companies should look to boost their brand visibility they should also seek to address these concerns by users.

These trends from developed e-commerce markets and feedback from their own consumers should give Russian retailers food for thought. If they fail to establish their position within this developing market they risk loosing out to foreign brands with advanced approaches to e-marketing. As the Internet sector in Russia matures it will become harder for newcomers to break the hold of established brands. The opportunities for Russian companies online have never been greater than today.