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Evaluating Emerging eCommerce Markets – Russia and India

Indian Prime Minister Manmohan Singh with Russian President Dmitry Medvedev

The world is constantly changing. With the evolution of the internet and the ability to easily connect people halfway across the world, products and information once unavailable can now be acquired with the click of a mouse.

The internet has been present for almost two decades in many countries, but in some areas of the world many people are actually going online for the very first time. While eCommerce in some countries is still in its infancy, many entrepreneurs view foreign lands as a place to take their proven eCommerce solutions and tactics and implement them from the ground up. While we have briefly discussed the emergence of eCommerce in China previously, there are a few other countries, including Russia and India, which are viewed as rapidly emerging eCommerce opportunities.

Russia

Panoramic photo of Moscow, the capital of Russia

Unlike many emerging eCommerce markets, the ninth most populated country in the world and the most populated country in Europe has been declining in population over the past decade. With that said, a country with a population of over 130 million people and ties to both Europe and Asia is still an attractive endeavor to some investors.

According to a report recently commissioned by Google, Russia is the second largest eCommerce market in Europe after Germany and online spending is expected to increase by 26% annually in Russia until 2015. Additionally, popular payment services have opened their doors to Russia and a popular Russian eCommerce hub received $100 million in funding from Japan-based Rakuten, who also owns Buy.com.

The eCommerce growth in Russia looks promising, so promising that some Russian consumers can’t wait and are “cheating” eCommerce systems to get goods from the U.S and Canada. While the enthusiasm for eCommerce in Russia may seem promising there are population, geographic and climate concerns which are just a few of the major issues hindering the growth of eCommerce in Russia.

India

Scenic view of New Delhi, the capital of India

While Russia is a country with a declining population, the population in India is booming as the country’s population has increase by over 181 million people in the past 10 years. India is now the second largest country in the world with over 1.21 billion people, trailing only China. However, with such a substantial population, India only recently reached 100 million internet users just last year. While 100 million internet users makes India the third largest internet market in the world, eCommerce revenue is miniscule with only $5 billion spent online – although this figure is projected to reach $40 billion by 2014. To compare, J.P. Morgan has forecasted eCommerce revenues in the U.S. alone will reach $963 billion by 2013. The U.S. eCommerce market will be over 25 times the size of the Indian eCommerce market in the next few years.

A huge barrier to eCommerce in India is payment accessibility – fewer than 18 million Indian residents own a credit or debit card. As amazing as it may sound, to remove payment obstacles and increase revenues online book retailer Flipkart offers a “cash-on-delivery” service for their products, similar to how we would pay for pizza delivery here in the U.S., with more than 50% of their customers opting to use this payment method.

eCommerce in India has huge potential given its population, but with a literacy rate of only 74% in India it may take many years for eCommerce to fully come to fruition here.

The differences between eCommerce in Russia and India are night and day, yet both countries are viewed as unique opportunities for eCommerce growth. However, both countries face unique barriers and obstacles they must first overcome before eCommerce can thrive in their country. While Russia is the more developed of the two, it must deal with intense geographic obstacles given the size of its country (Russia only has 22 people per square mile despite its large population) and the current transportation infrastructure is insufficient. India, on the other hand, is running out of space for their enormous population (India has 954 people per square mile) and faces technological and socio-economic barriers which prohibit eCommerce. Both countries have the potential to be players in the eCommerce space, but both will need time to develop and improve their respective weaknesses.