KupiVip, Otto Group, and Ozon turn into e-commerce service providers in a more and more competitive market
Three leading e-commerce companies – KupiVip, Ozon, and the Otto Group – have started sharing the fulfillment and other service capacities that they had initially built for themselves.
Coming in addition to those of such players as Arvato and Beta Production (warehousing), as well as B2C-PL, CDEK, DHL Global Mail, DPD, and SPSR (delivery), these offers contribute to improving fulfillment conditions in this huge country. Meanwhile, the Russian Post’s performance has remained poor or even deteriorated over the past year.
KupiVip, the fashion private sales site that has triumphantly conquered its market segment since its launch five years ago – notably attracting nearly $140 million in venture investment – was the first among major players to open its capacities to third party companies as early as 2010.
Its offer remains to date the most diverse on the market, from website development to fulfillment to marketing services. Corporate clients benefit from KupiVip’s own 20,000 square meter warehouse, shipping service, and 400-operator customer support team. KupiVip’s support also includes text and multimedia production, SEO and SMM, PR support, etc.
“If a project is more or less standard and does not demand rebuilding our own platform, it takes about 2 months to launch,” said KupiVIP E-commerce Services CEO Miroslav Zubachevskiy in an exchange with East-West Digital News.
Corporate clients are charged with variable fees based on the net income generated by the online store, in addition to a flat launch fee. Zubachevskiy, however, declined to disclose precise pricing conditions.
Among KupiVip’s clients are such clothing and accessories companies as Snow Queen, Adidas, Mexx, and Tom Tailor.
“So far we have focused mainly on women premium/luxury fashion, but we could deal with other product categories as well. We choose our partners depending on their brand awareness in Russia, potential order volume, and average order value,” Zubachevskiy said.
The company claims that the stores working on its platform generated 30 million visits in 2012 and represent 25% of the total sales volume of the KupiVip group.
The Otto Group’s offer, launched in November 2012 under the name of eTraction, aims to leverage the huge capacities that have been built or acquired by the company since the late 2000s. “Otto has the most developed infrastructure (warehouse, call center, ERP systems), as we are the largest distance selling retailer in Russia, with more than €500 million in net sales,” eTraction’s director Evgeniy Schepelin underscored when interviewed by EWDN.
The offer, which has been developed specifically for clothing and accessories, consists of several modules, including web e-commerce platform development, warehousing and operations management, customer service center, content production, and marketing.
For the IT platform, the Otto Group has partnered with 1C-Bitrix, a Russian content management system (CMS), as well as with InSales, another CMS provider for small and midsize clients. Direct integration with the German Hermes NexTec solution is possible for multinational e-commerce projects.
Website development usually takes up to six weeks. eTraction charges corporate clients a flat fee of 500,000 rubles (approximately $15,000) with a recurring fee for hosting and maintenance which equals 3% of the client’s net sales.
eTraction allows its clients access to its 50,000 square meter warehouse, its logistics and fulfillment solutions, as well as to its call center infrastructure.
eTraction clients may also take advantage of payment solutions offered with specialized providers like PayU, Robokassa, and Assist, as well as the group’s partnerships with all leading delivery companies, such as Russian Post, DHL, SPSR, O-Courier, DPD, Hermes-DPD, and Logibox.
“All clients can use any delivery company that is integrated with Otto Group, and they benefit from the group’s low rates,” indicated Jan Kegelberg, the group’s Ecommerce Development Director.
Prices for fulfillment services including inbound, storage, packing with branded materials, returns with quality control, range between 16% and 25% of net sales volume, excluding shipping fees and call center services.
The marketing team is positioned as an internal agency and charges 10% on top of monthly marketing budgets.
eTraction has enrolled such clients as Canoe and BeautyRoom, with five additional projects with fashion brands to be launched before the end of the year, according to Kegelberg.
Launched in January of this year, Ozon’s eSolutions is the only of the three offers that targets the mass market without any focus on the fashion or luxury segment. As is the case with the other two, eSolutions consists of several modules, including web development, order processing, delivery, call center services, payments, and strategic consulting services for foreign brands considering expansion into the Russian market.
“First of all, however, we are talking about fulfillment and delivery,” explained Ozon Holdings Head of PR Maria Nazamutdinova in an exchange with EWDN.
Operating since the late 1990s – the prehistory of Russian e-commerce – Ozon probably offers the most developed fulfillment and delivery network across Russia and Kazakhstan. Its in-house delivery service, named O’Courier, serves more than 350 cities with 2,100 pick-up points.
eSolutions has its own criteria when agreeing to work with a new corporate client. “We are open to dialogue with all companies. We prefer long-term relationships with companies that handle from a few dozen to several hundred orders per day,” Nazamutdinova said.
Nazamutdinova declined to name any of eSolutions’ clients. She did not disclose the fees these clients are charged, but she said that two different approaches can be taken – a flat fee or a recurring charge based on net income.
Nationwide fulfillment now less of a challenge
These moves come as an economic necessity after the considerable amounts invested over the past years by e-commerce players to build their own fulfillment capacities. At the time, these investments were regarded as indispensible to develop operations at a massive scale across the country since traditional infrastructure – in particular that of the Russian Post – was deficient.
KupiVip, for example, invested “dozens of million dollars” in a new warehouse, CEO Oskar Hartmann said last year.
On the other hand, some other large Russian e-commerce players – from Lamoda.ru to Wildberries.ru – do not share their fulfillment capacities with third parties, even though they also invested considerable amounts to develop them.
While the Otto Group and Ozon were still hesitating last year about whether or not to open their capacities to third parties, their recent move might come a bit late in a more and more competitive market. As analyzed in EWDN’s Russian E-Commerce report, specialized providers like B2C-PL, CDEK, DHL Global Mail, DPD, SPSR, and others, have developed their offer considerably over the last years, making their coverage and pricing conditions more and more attractive.
Recently, a subsidiary of one of the above-mentioned e-commerce giants opted for a third-party delivery provider, having refused to deal with the in-house service judged to be too expensive, an industry source told EWDN.
Among other companies sharing their fulfillment capacities with third-party e-commerce companies are Sotmarket, an online retailer with a diversified assortment, and Web Trading, a property of the Media3 media holding.
- RUSSIAN E-COMMERCE REPORT – The total volume of Russian online retail reached approximately $13 billion in 2012, up 27% from the previous year, not including cross border sales. In partnership leading universities and consultancies, EWDN has published an in-depth research on this industry, including a detailed analysis of fulfilment issues. To receive free insights or to order the full version (2013 edition), please contact us at firstname.lastname@example.org.