Changes Under the Epidemic of Russian Retailers Expanding Online Business and Ushering in the Post-epidemic era

Under the new coronavirus epidemic, companies must cater to the needs of the post-epidemic era in order to retain consumers and investors. Many traditional retailers in Russia are struggling to diversify their businesses and move to the online market under the epidemic. Among them, shoe giant Obuv Rossii has become the vanguard of this change.

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Russian companies strive to transform and expand online networks

The Russian footwear company Obuv Rossii, headquartered in Novosibirsk, is one of the pioneers of this change. The company changed its name to OR Group earlier, moving from the fashion industry to other fields. The group has achieved good results in the distribution of goods provided by third parties, including household products, electronic products, food and appliances, and it is believed that it intends to develop into an all-round commerce platform to pursue its success. Currently, this type of business accounts for about 30% of the group’s sales revenue. In view of the group’s determination to transform into an integrated online trading platform, this proportion is expected to expand to 60% by 2025.

Novosibirsk is Russia’s third largest city and a rapidly developing commercial hub. It is located in the vast southern region of Siberia, where there are a large number of logistics service providers handling rail and air cargo. Obuv Rossii currently operates 840 retail stores under the Westfalika, Peshehod and Obuv Rossii brands, and has two shoe factories near Novosibirsk, as well as sportswear brands such as S‑tep, all.go and Snow Guard. The group is listed on the Moscow Stock Exchange with a market value of 45 million euros (equivalent to 348 million yuan). It is currently applying for the business classification to be changed from “OBUV” (ie footwear) to the comprehensive “ORGG”.

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Obuv Rossii went through a difficult period before transforming. Due to the severe epidemic in Russia, the group’s revenue in the first nine months of last year plummeted by more than 20% year-on-year to 100 million euros (equivalent to 774 million yuan). In view of the downturn in the market, the group decided to move towards diversified development, including providing small loans through its existing retail network, selling third-party products on its online platform, and cooperating with Wildberries, a leading Russian online retailer, and using its retail stores as The location where the customer picks up the goods purchased online.

Foreign businessmen focus on e-commerce opportunities

Overall, Obuv Rossii’s transformation can be described as a timely move. According to Russian industry estimates, the local clothing, footwear and accessories market shrank by more than 30% last year. Many major retailers in the country are facing severe challenges as a result, and the average debt of companies in the industry has increased by 20% during the same period. However, compared with these traditional players, the fate of local online retailers is quite different. Among them, the Moscow-based online retail giant has just completed its initial public offering and is very successful. Detsky Mir, the country’s famous toy retailer, has also recently changed its strategy while developing physical stores and online businesses, with impressive results.

Given that Russia’s retail industry is currently undergoing various changes, Hong Kong’s suppliers and distributors will inevitably have to find different ways to enter the country’s market. Many methods that have been used for 30 years are now outdated or too troublesome. On the bright side, compared with traditional retail models, these new channels focusing on e-commerce have lower risks, but sellers need to have a deeper understanding of Russian brand characteristics and consumer preferences. Fortunately, most of these expertise are available online. The country’s e-commerce platforms are increasing day by day. The real challenge is how to choose suitable partners and trade with them in a cost-effective manner.

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