Framework on E-Growth Strategy

Today, Russia still lags behind most other European countries in terms of penetration, with roughly half of the adult population connected. Russia is catching up quickly however, with average annual growth in Internet users exceeding 10% over the last few years. In September 2011, Russia overtook Germany as the market with the largest number of unique Internet users in Europe.

 

Russian E-Commerce Industry is very nascent. Country with strong mobile base has been successfully been able to penetrate the E-Commerce business. Russia with a mobile base close to 122 million in 2017 from 105 million in 2011 has seen a growth of hardly only 20% in six years. Where as country like India has seen a got a mobile user base of more than a Billion.

 

According to Moscow’s Data Insight, Russia has a 10.4 billion euro ecommerce market in 2013, up 27 percent from 2012. This represented a mere 2% of the total retail market. The largest player of this been Ulmart with $1.5 billion revenue. The GDP of Russia is $2 trilion. The Ecommerce business is not even contributing is less than 5%. In an economy like US the E-Commerce business is close to $304 billion in 2014 with an annual 7.7% growth. So to achieve that level there needs to further investment. As of 2013 there are more than 39000 e-commerce sites, which are actively involve in trading of products.

Investment in E-commerce:

From 2010 to 2013, according to research studies by Fast Lane Ventures, PwC and RVC, e-commerce in the broad sense was the major destination for venture investment in Russia. During these four years – if counting only publicly disclosed transactions – the Russian online retail industry attracted nearly $1.3 billion in venture investment, including more than $360 million for 2012 alone. In India the E-Commerce as of 2015 it is expected to be $16 billion.

 

Venture investment in Russian e-commerce fell to $235 million in 2013, reflecting the contraction of the local venture market as a whole. No major deal in Russian e-commerce was announced in Q1 2015.

E-Growth Frame work

This framework is considered to bring a collaboration effort to create entrepreneurship growth and majorly strengthen the e-commerce market enabling FDI and valuation growth in Russian market. The current level of ecommerce market shows that the growth rate and potential to grow can be increased with a little of impetus through policy and good structure.

 

The framework has two major agenda. It is called E-Growth framework, it is targeted towards creating a new E-Commerce ecosystem. The objective is to create and tap existing value chain.

 

Two levels:

 

1.       Level one: Collaborative efforts to create synergy between Industry-Govt-Academia (Creation of Trans-Ecommerce Hub)

 

2.       Level two: Mechanism creator for churning in more entrepreneurs

 

Policy level: online sales as one of the strategy to promote sales and liquidity of retail products. The sector to be focused is Consumer goods, grocery, Electronics etc.

 

Establish a policy, which can facilitate a minimum level of sale for example 20% of all sales should be online. Where government should also facilitate by reducing taxes and the government should identify companies through a structured process of hub.

 

Four components of this process are:

 

a. Policy Creation

 

b. Govt- Academic Institution tie-up

 

c. Identification of Entrepreneurs

 

d. Investment/ SeedFunding for this Hub

 

Under the E-Growth framework the first step is to set up a Trans-Ecommerce Hub where in it creates a framework of selecting high potential entrepreneurs in this hub. Indian government deploys a task force to train these entrepreneurs. The task force is also responsible for scaling it up and getting the company access to both India and Russian market. This provides a huge scope of market penetration to the entrepreneurs as it gives them an access of combined 2 billion population and total market size exceeding

Role of India:

In the Hub both Russian & Indian E-Commerce experts will be brought in, who will be jointly responsible for mentoring and nurturing this ecosystem and bring it to a mature level. Indian Government has already created a task-force, this can be further enhanced with a specific role of developing Russian E-Commerce Industry as a focus.

 

This special task force can have members from Academia and companies from E-Commerce space. In the Past there has been efforts to create such task force, but this time if this task force is made of academia and industry stalwarts its effectiveness will be increased.

 

India in last two decades has successfully created two major industries IT, for which India is globally a leader and second is Telecom with more than a billion subscribers. India is now gradually entering and successfully creating a E-Commerce space

 

The Hub can also have a financing mechanism in a structured manner with initial cap for one company max to US $500,000. Indian government through task force can plan to set up IT training campus in Moscow to start with; this training campus will involve nuances of E-commerce to be done by both Indian Academia and E-Commerce Company.

 

Through this mechanism it will be ideal for Indian government to train up to 100 Entrepreneur annually in the first year, 250 by second year and 500 by third year.

 

Russian International Council can be the facilitator to set up this hub to promote entrepreneurs.

Frame Work Next Step:

A policy note on the above framework can be detailed out on the functioning of Trans Ecommerce-Hub and how to get it kick started. This can be called as “Indo-Russia Trans E-Commerce Hub”. The objective of this Hub is to create businesses, which can generate combined business and valuation of more than US $50 billion. This will be successful with a joint effort by all the concerned stakeholders.

 

Note: The next article will look at feasibility and working of the Hub along with Key policy as well as functioning.