e-commerce solution Russia Kazakhstan Belarus Set up your Online-Shop in the Eurasian Economic Union e-commerce solution
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1 e-commerce solution e-commerce solution Set up your Online-Shop in the Eurasian Economic Union Russia Kazakhstan Belarus accounting ERP import legal tax
2 Ulf Schneider Managing Partner SCHNEIDER GROUP provides its clients in countries around the world with the back-office services necessary for their business set up and development in Russia, Kazakhstan, Belarus, Ukraine, Poland and Germany. The e-commerce market in the Eurasian Economic Union (EEU) is constantly growing and offers opportunities for both local and international manufacturers and distributors. SCHNEIDER GROUP offers a full package of services for opening your online shop in Russia and the EEU. We can support you with import handling and with the subsequent distribution of goods in the EEU without the need for you to register a company. aktau almaty astana berlin kyiv minsk moscow st. petersburg warsaw
3 e-commerce in russia 4 demand of russian consumers in foreign online-stores 5 methods of distribution 6 cross-border selling 6 distributor sales 7 localization of distribution 8 certificates of conformity 8 logistics, transport costs and payment 8 benefits of localization 10 our e-commerce solution 12 our offices 15 3
4 e-commerce in russia The Russian e-commerce market is relatively young compared to the European one and is going through a stage of growth. Due to the fact that there is a significant demand for foreign products among Russian consumers, the e-commerce market has great potential for foreign producers and distributors. Thus, in this brochure we want to examine thoroughly the Russian e-commerce market and dwell on its advantages, opportunities and difficulties. Additionally, you will be able to get acquainted with our service e-commerce solution, which will allow you to enter the market without setting up a subsidiary company. e-commerce market growth in Russia (in bn RUB) % %F ~ % F
5 demand of russian consumers in foreign online-stores What do people buy in foreign online-shops? Clothes 23% Shoes 12% Spare parts and accessories for cars 7% Other 13% Electronic and household appliances 32% Cosmetics and perfume 7% Other goods for housekeeping 3% Goods for sports 3% Accessories Animal feed Books Construction materials Stationery Gifts Other Electronic and household appliances compile the largest share of orders from Russian end-users. Despite the fact that there are local producers in this segment, customers mostly prefer foreign online-stores focusing on quality products. Clothes and shoes are also popular, and account for 35% of all orders in foreign online-shops. Next by popularity are spare parts for cars, cosmetics, goods for housekeeping and goods for sports. In contrast to local online-stores, goods from foreign platforms are delivered directly from overseas (crossborder selling). Compared to the localized distribution on the territory of Russia such direct supplies have a number of advantages and disadvantages, which are analyzed below.
6 methods of distribution Cross-border selling Almost one third of the total volume of e-commerce in Russia is accounted for by cross-border selling. In addition, goods are ordered in foreign online-stores and supplied to the end-user directly from abroad. For deliveries with a value of less than 1,000 a distributor overseas doesn't pay customs duties on the goods and doesn't have to obtain certificates of conformity for the products. However, there are some exceptions e.g. for alcoholic beverages and bicycles. A significant reduction of this relatively high allowance to 150 or even 22 is currently under discussion. * What is a certificate of conformity (conformation of compliance)? Product certification is executed in order to ascertain if the imported goods are in compliance with the technical requirements of the Eurasian Economic Union. However, not all goods are subject to certification. In order to identify whether your products need certification or not, it is essential to define appropriate Russian code (the Russian HS code (Customs tariff number) is different from the codes of other countries). The HS code reflects the characteristics of a certain product, and every imported or exported product has its own HS code. In relation to all HS codes different rates of import customs duties are applied. Inter alia, the following categories of products must be certified: Perfume and cosmetics Food supply Machinery products, electrical engineering, machine tools Consumer goods (textiles, clothes, shoes) Chemical products Transportation products
7 At the same time there are definite disadvantages connected with the cross-border selling. Delivery time can take up to two months depending on the destination and logistics provider of the company. Many courier companies don't provide delivery services to end consumers in Russia. It may happen that this is not known by the employees of the foreign courier service and after picking up the goods in Western Europe, the goods return to the consignor sometime later for unclear reasons. Often a product is stuck at customs and additional documents, in Russian, are required, for example a technical description of the product. Another drawback of cross-border selling is the limited possibilities of payment for end-customers. A client can just choose credit card payments, and the return (for example of defected goods) is rarely possible under certain conditions and a direct contact address or hotline number in the country of the end-customer is not specified. In connection to these shortcomings, the number of potential clients of foreign online-stores in Russia is decreasing noticeably. On September 1, 2015 amendments to the law 152- FZ entered into force, under which state and municipal authorities, as well as individual and legal entities, are obliged to store the personal data of Russian nationals only on local servers in Russia. The scope of actions related to data processing applies to all persons present on the territory of Russia and persons acting as a subject of relations that are covered by this legal act. Therefore, online-shops have to take into account the target audience of their product (especially if they are aimed at Russian customers). This regulation also covers foreign enterprises (including online-shops) if they process the personal data of Russian consumers. Distributor sales There is another method the sale of goods to Russian distributors. One of the largest platforms in Russia is OZON.ru. As a rule, when you use this method of sales there is no need to worry about logistics or customs clearance, which is a great advantage. These processes are carried out by the distributor on terms of EXW delivery (EXW or Ex Works means that a buyer/distributor takes the goods directly from the warehouse of the manufacturer or dealer overseas). Concerns about obtaining certificates of conformity and further coordination are also taken over by the distributor. Most often, distributors offer products of all counterparties on the same online-platform, which is a drawback for foreign producers and distributors as their goods are sold along with competitor products. Moreover, beneficial conditions may be provided to certain competing companies, for example via priority in the promotion of certain goods while consulting via the distributor's hotline. Gray import (improper and doubtful customs clearance) is also very popular with Russian distributors. In such an import process, the documents (for example, invoices) for the goods (which will be imported to Russia) are replaced on intermediate warehouses in Russian neighboring countries to lower the customs value in order to reduce the customs duties and save costs. Thus, for foreign producers there is a risk of failure to prove the actual export of goods in case of inspection and a risk of being accused of tax evasion.
8 localization of distribution In accordance with the abovementioned reasons, many producers and distributors choose to localize their online-trade enterprises. Thus, they utilize the full potential of the market and benefit from local distribution. In order to enter the Russian e-commerce market, it is necessary for foreign companies to take various aspects into account, including the necessity of obtaining certificates of conformity, compliance with the customs rules and consumer protection regulations, requirements to Russian conditions of transactions and many other legal and tax legal aspects. Certificates of conformity It is vital to obtain certificates in advance as their issuance, depending on the type of a document, may take up to 3 months. The type of the certificate depends on the Russian customs tariff number (HS Code) which differs from foreign codes and consists of 10 symbols (while in most countries it consists of 6 8 symbols). In contrast to other countries, in Russia an additional distinction between the field of application and the precise percentage composition of the material is often made. If you want to obtain a certificate of conformation it is necessary to fill out an application and prepare technical documentation for the product (its description, technical details, field of application, etc.) in Russian. Besides this, in some cases it is necessary to send product samples for lab tests to certifying authorities. The testing protocol is based on these tests, and serves as proof of adequately conducted lab test, the results of which are required in case of inspection by the customs authorities. Logistics, transport costs and payment options Compared to most countries, transportation costs in Russia vary considerably depending on the region. In Moscow they, as a rule, the costs don't exceed 4 (if the local warehouse is situated in the Moscow Region) but for deliveries to other regions, the costs can reach up to 20. This is why the calculation of transportation costs must be also programmed into the ordering process of online-shops. In order to minimize risks, local onlinestores offer the possibility to pay with cash or bank card through mobile terminals on delivery only in Moscow, St. Petersburg and some other large cities. In other regions you can only pay by credit card (prepayment). Another standard in the ordering process is the choice of time for delivery (in the morning or in the afternoon or with two-hour intervals). This possibility to select the time also facilitates a successful delivery to the endclient (on the last mile stage). Advantages of localization If you want to use the full potential of this growing Russian market, we can recommend you to opt for your own online shop with a local warehouse and local subsidiary. First of all, you will be the owner of a local online-store that is focused only on your own products. This will make individual client consultation possible, especially since there are many hotline providers in this sphere in Russia who can provide specially trained staff for your hotline needs. What is more, this will help to analyze the behavior of your customers and implement an appropriate marketing strategy, hence increasing your client base.
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10 Advantages of localization Other benefits include transparent cost structures and transparent import processes, which are carried out in full compliance with local law. Having a local warehouse can significantly decrease delivery times. Besides this, visitors of the online-shop will be able to pay not only by credit card but also in cash upon receiving their order, or pay through PayPal or Yandex Money. The abovementioned benefits will positively affect customer behavior and boost sales. At the same time, the presence of the local subsidiary is rather costly (company setup costs, labor costs, etc.). For this reason, such a step for foreign companies is justified if they already have experience of cross-border sales or cooperation with distributors and if they already have a certain level of monthly sales. Nowadays, there is a less costly option that allows companies to localize distribution through signing a contract with an agent acting on the Russian e- commerce market and test the market with all its benefits, without the establishment of local enterprise. This solution will let you save on the costs of setting up a company and other such expenditures. The agent also takes over local management of orders made via the online-shop, their redirection to the local warehouse and transport company and even control over payments. Based on the agency structure, SCHNEIDER GROUP developed the e-commerce solution, which gives clients the opportunity to test the market whilst avoiding the registration of a company. Please see further details below.
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12 our e-commerce solution SCHNEIDER GROUP offers an ALL-IN-ONE service for setting up an online store in Russia and the entire Eurasian Economic Union (EEU). We support our clients with import, customs clearance and the distribution of your products in the EEU, without the need of registering a company or recruiting staff, which helps to avoid the related costs. A foreign producer or distributor receives an entire and transparent distribution infrastructure, in which SCHNEIDER GROUP manages the orders as well as client payments in cooperation with a local warehouse and hotline, and takes care of all logistic processes including delivery to the client. Transport Order Customs clearance Russia Kazakhstan Belarus ERP System Online-Shop Customer abroad Manufacturer / Dealer Customs Warehouse PICK&PACK Transportation company
13 Overview of SCHNEIDER GROUP services: Hosting of your online-shop on our server in accordance with Russian legislation Import including customs clearance Certification of products Automatic processing of orders and client payments Warehousing and preparation of goods for delivery Delivery to clients and handling of returns Hotline service incl. client consultation Reporting to foreign producer or trader Development of general terms and conditions for the online-shop in accordance with local legislation Accounting and necessary tax reports Compared to distributor sales, a foreign producer or distributor will get the following benefits from the e-commerce solution : Their own online-shop without competitor products Direct contact with the client, giving the opportunity of developing individual marketing strategies A comprehensive and transparent infrastructure of distribution Individual clients consultation via their own hotline Import process organized 100% in compliance with the legislation Full logistics and import handling from a-z (including warehousing and delivery) If you have any questions, we will be happy to answer them and give detailed information about the opportunities and benefits of our e-commerce service.
14 This brochure is a summary and partly schematic overview of the rules and requirements provided by the legislation in Russia, Kazakhstan and Belarus. It is for information purposes only and does not offer any legal advice. It is recommended to receive an individual consultation on the matter before making a transaction. Copying or distribution of this brochure in any form whatsoever is possible only after a prior approval of the copyright owner. SCHNEIDER GROUP
15 our offices Aktau Business Centre Grand Nur Plaza, Office 46 Microdistrict 29 A Aktau,Kazakhstan T +7 / 7292 / aktau@schneider-group.com Almaty Tole Bi Straße 101, Block 9 B Almaty,Kazakhstan T +7 / 727 / almaty@schneider-group.com Astana Business Center St. Petersburg Dostyk Pr. 20, 14. Etage, Büro Astana,Kazakhstan T +7 / 7172 / astana@schneider-group.com Berlin Ritterstraße 2 B Berlin, Germany T +49 / 30 / berlin@schneider-group.com Hamburg Alstertor Hamburg, Germany T +49 / 40 / hamburg@schneider-group.com Kyiv Horizon Office Towers vul. Shovkovychna Kyiv, Ukraine T +380 / 44 / kyiv@schneider-group.com Minsk ul. Surganova Minsk, Belarus T +375 / 17 / minsk@schneider-group.com Moscow ul. Bakhrushina 32/ Moscow,Russia T +7 / 495 / moscow@schneider-group.com St. Petersburg Business Center Petrovskiy Fort 8th floor, Finlyandskiy pr. 4 A St. Petersburg, Russia T +7 / 812 / spb@schneider-group.com Warsaw ORCO Tower, Office Al. Jerozolimskie Warsaw, Poland T +48 / 22 / warsaw@schneider-group.com 15 39
16 e-commerce solution
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