Local restrictions, logistics hurdles pose challenges
Thanks to China's cheap but high-quality commodities and proximity, e-commerce giant Alibaba Group Holding has achieved fast growth in its cross-border e-commerce business in Russia despite the challenges of local competitors' opposition and an underdeveloped logistics industry.
Alibaba's AliExpress became the largest e-commerce platform in Russia in 2016, with around 22.56 million users in the country, GQ China reported on Tuesday.
AliExpress, the company's international wing, is a wholesale site that serves 243 countries and regions such as Russia and Brazil.
Russia is a major overseas market for Alibaba, mainly due to the country's reliance on cheap but high-quality Chinese commodities such as daily necessities and clothes, according to Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting.
"For most small and medium-sized Russian retailers who cooperate with Chinese e-commerce platforms, their costs will not drop if they import Chinese products through traditional means. But selling goods on cross-border e-commerce platforms is more convenient and efficient, considering Russia's low population density," he told the Global Times on Tuesday.
Liu Dingding, an independent Internet industry analyst, told the Global Times on Tuesday that China's "One Belt and One Road" initiative, the strategic cooperation between the two countries and geographic proximity are inherent advantages for cross-border e-commerce between China and Russia.
Russia is the second-largest destination for China's cross-border e-commerce exports, Commerce Minister Gao Hucheng said at a press conference in Beijing on Tuesday. Cross-border e-commerce totaled $1.2 billion in the first half of 2016, characterized by rapid growth, various products and diversified selling methods, he said.
In the fourth quarter of 2016, Alibaba's revenue from the international commerce retail business reached 2.45 billion yuan ($353 million), an increase of 288 percent from the same period of 2015. The growth mainly came from the revenue of AliExpress and the consolidation of Singapore e-commerce firm Lazada, according to a statement on the company's website in January.
The number of visitors on AliExpress' website surpassed 15.6 million each month and on average, some 300,000 packages are sent from China to Russia every day, statistics from Fuzhou Customs showed in December 2016.
However, the e-commerce giant's expansion into Russia has not gone smoothly, because it faced the challenges of local e-commerce platforms' opposition and an underdeveloped express delivery system.
Some local platforms asked Russian authorities to lower the duty-free cross-border shopping quota to 33 euros ($34.78) per month from 1,000 euros to protect their interests, GQ China reported on Tuesday.
A well-developed logistics system is very important for e-commerce platforms, but the express delivery industry in Russia is still in its early stages, compared with China, domestic news portal people.com.cn reported in December 2016.
About 95 percent of AliExpress' packages to Russia are sent by ordinary mail, which means that buyers can't track their items during the 15- to 30-day delivery period, according to the report.
"The slow delivery shows that cross-border e-commerce will not be a mainstream choice for commodities exported to Russia. Russians' preference for cheap but high-quality Chinese products instead of high-end brands is another bottleneck for the longer-term development of Alibaba's cross-border business in the country," Lu said.
Alibaba's logistics arm (comprising Cainiao and AliExpress) announced in January plans to upgrade its logistics service to countries including Russia, Belarus and Ukraine starting from February 7, domestic news outlet ce.cn reported. As part of the upgrading, sellers must provide tracking numbers to customers.
"We continue to see opportunities in overseas markets where we bring a unique value proposition to merchants and consumers," Alibaba said in the statement on its website.
AliExpress will develop markets in remote areas of Russia to bring convenience to consumers in these areas, according to the people.com.cn report.
However, Liu said the potential for cross-border e-commerce is limited as physical retailing in Russia is highly developed.