In April AliExpress Russia hosted its first Business Update event for investors and analysts, with a Q&A session with Dmitry Sergeev (Co-CEO) and Vladimir Kozlov (Director of IR). During the event the team provided their view on the Russian e-commerce market development, shared latest financial numbers, highlighted AliExpress Russia’s distinctive features as well as achievements since the formation of the JV along with the outlook for AliExpress Russia’s future development. Webcast replay can be found here.
As a follow-up to the given event, below you can find a Q&A covering some of the key facts about the Russian ecommerce market as well as AliExpress Russia.
Please contact our IR team at email@example.com for any clarifications.
Q: What is the size of the Russian ecommerce market and its growth rate?
A: Ecommerce market in Russia delivered one of the fastest growth rates globally, at 35%+ in 2020, exceeding RUB2.7tn, including the cross-border segment (according to INFOLine report as of September 2020)
Q: What is the level of online penetration for the Russian ecommerce market?
A: Penetration rose from ~6% to ~8% in 2020, but remains significantly below not only the leading ecommerce countries like China where penetration is now close to 30%, but also most western countries (18% UK, 15% USA, 12% Germany). This means significant penetration growth potential in the coming years towards the global average of mid-teens
Q: What growth rate do you expect for the market?
A: AER team currently expects Russian e-commerce market to nearly triple by 2025, likely exceeding RUB 7.5tn, with CAGR of ~25%
Q: Does AER have exposure to any markets outside of Russia and do they make much of a contribution to its GMV?
A: AER operates not only in Russia, but also in a number of CIS countries (Belarus, Moldova, Kazakhstan, Georgia, Armenia, Azerbaijan, Uzbekistan, Tajikistan, Kyrgyzstan, Turkmenistan), which are several years behind Russia in terms of ecommerce market development, with penetration in the range of 0.3-2% depending on the country. So, they bring marginal contribution today but are expected to be an important source of additional growth for AER in 3-5 years
Q: What is the current market split between the domestic and cross-border ecommerce segment?
A: ~30/70% in terms of cross-border / local share of total ecommerce GMV (according to INFOLine report as of September 2020)
Q: Which are the largest categories on the market today and which are the fastest-growing?
A: Biggest categories are electronics and fashion (~30% and 20% of the market respectively), but the fastest growing categories will be the ones with relatively low e-commerce penetration (10-15% depending on the category): mother & kids, home & garden, auto parts and accessories (>20% CARG till 2025). Food / FMCG stands out as by far the biggest offline category (>30% of total retail spend) with the lowest ecommerce penetration (~1%) which is thus expected to grow at >50% CAGG in the next 5 years
Q: How high is the market concentration and what is the share of AER?
A: Russian ecommerce market is highly fragmented with top-4 players accounting for 33% of the market in 2020 (including ~10% held by AER). This compares to 60-80% market share of the top players in the more mature e-commerce markets, including in some cases >40% share of a leading player alone vs ~15% for the current local leader. This means that market has potential for significant consolidation in the coming years
Q: Where do you envision the share of the top players in the mid-term?
A: By 2025 AER expects top-4 players to account for ~75% of the market with AER holding ~20% share
Q: What is the size of AER business in terms of GMV and its recent growth trend?
A: AER GMV for the latest financial year (April 1, 2020 – March 31, 2021) stood at RUB 229.3bn. AER GMV for CY20 was RUB 209.6bn, where it ranked #2 on the Russian e-commerce market by total GMV. Local GMV grew 2.5x YoY, reaching RUB55bn for the FY21, accounting for 23% of total GMV on average for FY21 and approaching a quarter of total GMV in March 2021, following just 1.5 years of active investments into local. Cross-border business also expanded in 2020 despite the multiple headwinds including the covid-delated logistics shutdown from China for a period of ~40 days in March-April 2020 as well as two major rounds of FX weakness throughout the year. AER saw gradual recovery of cross-border GMV into the end of the year, with growth exceeding 25% YoY in Q4 and triple digit YoY growth rate during certain says of March 2021. 2021 is expected to be a much better year for cross-border, with a healthy double digit growth rate
Q: What have been the growth drivers of GMV for AER in the past year?
A: Growth in orders from a major buyer audience, with ~300mn orders from more than 26mn buyers in FY21, along with high frequency at >11 orders per buyer per year, which is expected to rise further, driven by the expansion of the local business, including in areas like e-grocery and fintech
Q: What is the main focus of AER given that it offers cross-border as well as domestic marketplace exposure?
A: Local marketplace development, with related GMV rising ~4x YoY in FY21. As the share of the local business rises, given its superior growth rate versus the cross-border business, it is expected to be the growth engine, positioning AER for YoY acceleration of growth in the coming years
Q: What are the largest categories for AER’s cross-border as well as domestic businesses?
A: Top-5 categories by GMV in local include: Consumer Electronics (50%), DIY & Household (28%), Auto parts (8%), Beauty & Health (4%), Sports & Entertainment (3%), while top-5 categories by GMV in cross-border being: Consumer Electronics (33%), DIY & Household (22%), Fashion (19%), Auto parts (8%), Sports & Entertainment (6%)
Q: What is your seller and SKU base?
A: Cross-border business provides the platform with access to the leading seller and SPU (standard product unit, does not count different sizes and colors of particular product) base, with its 220,000+ sellers and ~140mn SPUs. This has been complemented with the rapid rise of local, with the local seller base growing by 4x+ and exceeding 45,000 and with SPU base up 3.5x+ YoY to ~7mn as of March 2021
Q: Who is the typical customer of AER?
A: AER user is an average Russian e-shopper when comes to average age, gender, family status, education, geography and most importantly, income level, with high income customers representing ~20% both in AER as well as average Russian ecommerce buyers
Q: What have been some of the achievements of AER since the formation of AER JV back in October 2019?
Q: What differentiates AER from its competitors?
Q: Do you provide advertising tools to sellers?
A: There are ad tools and corresponding revenue stream in cross-border, with ongoing localization to extend it to the local business
Q: What are some of the FY22 targets for AER?
Q: What are some of the long-term targets of AER?
Q: What are some of the largest long-term growth potential areas?
A: Social commerce, FMCG segment, fintech and CIS markets
Q: What are some of the recent developments around social commerce?
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