MOSCOW: As Russia's invasion of Ukraine and the resulting exodus of Western brands see local consumers switch to Chinese goods and online shopping, Ozone, a Russian e-commerce giant similar to Amazon, is attracting Chinese sellers across the border.
According to Simon Huang, Ozone's head of China business, Russia's business activity has recovered from a bottom hit in February and March at the start of the invasion. Since then, demand for Chinese product has soared and now makes up most of the rebound in imported goods.
According to Huang, the Russian market is one of the few untapped markets that Chinese cross-border sellers are looking for. "Chinese traders have a golden opportunity right now."
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Following the invasion of its neighbor, Russia was subjected to sanctions from Western governments and boycotted by a large number of global companies. It is still embroiled in the conflict in Ukraine.
China's Foreign Ministry announced that normal trade with Russia would continue after the start of hostilities and that US sanctions against Moscow should not infringe on China's legal rights.
This year, Russia and China are developing closer business ties. Chinese customs data show that bilateral trade between China and Russia has increased by 31% in the first eight months of 2022.
Russian purchases of Chinese goods totaled US$6.7 billion in July, returning exports from China to levels similar to those before the invasion.
H&M, Ikea, Apple and Samsung are examples of Western companies that have left Russia. In the fashion industry, online retailers such as Amazon and Farfetch have also halted deliveries in the country.
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Chinese vendors can now enter due to the exodus of westerners. According to Russian electronics retailer M, Chinese brands made up two-thirds of Russia's new handset sales between April and June, with the market share increasing every month. Smartphone makers have been quick to fill the gap left by Apple and Samsung. Video-Eldorado.
In addition to the changing geopolitical landscape, Huang claimed that better e-commerce infrastructure in Russia was a major factor in Chinese sellers' decision to enter the market.
According to Huang, Ozone has set up a logistics network that cuts typical delivery times from 45 days to three weeks. The company plans to launch its "Fulfilled by Ozone" service for Chinese sellers in the first quarter of next year.
The service enables retailers to ship and store their products in Ozone's warehouses ahead of time, which should further reduce average delivery times.
The service is anticipated to reduce the average shipping time by 10 to 12 days, according to Huang, after customers place orders and shipments leave the warehouse.
Huang is currently leading Ozone's effort to add 100,000 Chinese merchants by 2024, which would represent a tenfold increase from the number of Chinese sellers on Ozone today. 55% of Ozone's 180,000 active sellers are currently Chinese business owners.
According to Huang, Ozone is trying to attract Chinese companies with reliable supply chains and high-quality products, as well as factories that produce goods at reasonable prices.
Ozone announced last week that it has opened its first office in China's southern city of Shenzhen, a hub of international e-commerce, to be closer to sellers.
Huang said, declining to say how much money would be invested, "Ozone will continue our investments in the establishment of logistics networks in the China market and the resources of local merchants such as discount incentives and training."
Ozone, often referred to as the Amazon of Russia, began as an online bookstore in 1998 before evolving into a marketplace for various goods in recent years.
Gross merchandise volume (GMV) on the Nasdaq-listed company's market doubled in the third quarter to 147 billion rubles ($2.38 billion) with 32.7 million active buyers.
It faces competition from AliExpress Russia, a joint venture between Alibaba Group Holding and three Russian partners in the e-commerce space that has served as a more comfortable platform for Chinese entrepreneurs entering the Russian market. .
However, a report from Russian media outlet Vedomosti claims that AliExpress Russia has cut positions on business lines that are no longer necessary as a result of Western sanctions against Russia. Post is owned by Alibaba.
Even though the demand for Chinese goods has increased, Chinese companies still face operational risks in Russia. AGM, a Shenzhen-based smartphone maker, is getting ready to join Ozone to "open up a new sales channel," according to business co-founder Austin Ding.
Following the invasion, the maker of rugged phones for harsh weather saw a slight drop in sales in Russia in the first half of 2022 before slowly recovering.
AGM hasn't given up on the Russian market just yet, but Ding said he is still wary given the "instability" of the geopolitical environment. Ding stated, "We don't view it as a priority for our investments.
The fluctuating value of the rouble and Western sanctions, which include Russia's exclusion from the Swift global payment system, have had an effect on China's businesspeople as well.
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Chinese traders can decide on the product's price and settle in either Chinese yuan or US dollars, according to Ozon's Huang. In a previous statement, the business claimed that it "is able to use Swift with a select number of partner banks."