THE CHINA-RUSSIA ELECTRONIC COMMERCE OF CONSUMER ELECTRONIC
THE CHINA-RUSSIA ELECTRONIC COMMERCE OF CONSUMER ELECTRONIC
Pinigin Igor
Master of International Trade College of Economics and Management, NorthEast Forestry University,
China, Harbin
Hu Yan Ying
Corresponding author, Professor of International trade and Economics, College of Economics and Management, NorthEast Forestry University,
China, Harbin
ABSTRACT
International e-commerce as a new step in the development of bilateral relations between Russia and China in economics and trade relations. In this research paper we analysed data from Chinese companies that produce and sell electronics products to Russia through business to clients (B2C) segment, their interaction, way of detecting problems and implementing solutions for unhindered entry into the Russia e-commerce market.
Keywords: e-commerce, consumer electronics, China, Russia.
Introduction. E-commerce has recently become a rapidly developing industry within the framework of Russian-Chinese relations. The development of joint projects concluded between China and Russia shows the interest of the parties in this. Cooperation Russia and China in the field of cross-border e-commerce is characterized by a late start and rapid development, from January to September, the volume of e-commerce between China and Russia reached almost 4 billion dollars in 2018 year. [1]
We will consider the full process of interaction between Chinese electronics companies and Russian costumers. The steps that companies need to take their place in this market. To develop the number of sales, quality and image of the company, and what needs to be paid attention to when making these sales. The main focus of this paper will be on Chinese made electronics aimed at consumers, because the production of electronics in Russia is at a very low level, the sale of electronics will always be relevant, and the demand for products will only increase every year.
In this article, the object of research is the B2C (business-to-consumer) e-commerce sector, i.e. electronic retail trade in Russia and China. The subject of the research was its prospects and development trends in the world market. During the research, the method of comparative analysis of statistical data was used. The research was based on the data of the independent non-profit organization Ecommerce Foundation, the research company Data Insight, and the commercial organization Statista. The data was collected as part of an expert assessments and via analysis of internal data of companies - participants in the Internet market. Most of the information on the Internet is presented in the form of statistics from the above organizations, but a large number of materials with a deeper analysis of this industry are almost absent.
Main part. The development and popularization of Internet technologies has recently brought cross-border trade between China and Russia to a new level. In April 2010 more than 500 thousand parcels were sent from China to Russia every day. In 2017, the Russian e-commerce market was estimated at 1 trillion rubles, of which 374.3 billion rubles came from orders from foreign trading platforms, of which China's share was almost 90%. [2]
According to China's Belt and Road Initiative, an international initiative aimed at improving trade and transport routes, as well as economic corridors linking more than 60 countries around the world. Cooperation between China and Russia in the field of e-commerce has changed from one-way to two-way: Russian goods are gradually entering the Chinese market; more and more Russian goods end up in the homes of Chinese consumers.
The boom in cross-border e-commerce has also allowed Russian financial institutions to see new business opportunities. China is steadily increasing its presence in the electronics market in Russia; at the moment, almost all offices of the most dynamically developing Chinese companies in the electronics field (Huawei, Xiaomi, JD, Vivo, Oppo, Honor, etc.) are open.
Over the past few years, important agreements have also been concluded. Alibaba, Mail.ru Group, Megafon and the Russian Direct Investment Fund (RDIF) announced the completion of their investment in the creation of a joint e-commerce company - AliExpress Russia [3]. On June 16, 2015, an agreement was signed in Moscow between the Chinese Internet retailer JD.com and the Russian companies Yulmart, Yandex.Money and Qiwi [4].
China's Heilongjiang province, which borders Russia, has seen a boom in cross-border e-commerce in recent years. In the border town of Heihe Province. Heilongjiang, which is separated from the Russian city of Blagoveshchensk only by the Heilongjiang (Amur) River, more and more cross-border e-commerce businesses are emerging and their business continues to revive. This year, a comprehensive cross-border e-commerce pilot area was established in Heihe City. Since then, Heihe has made efforts to innovate in the cross-border e-commerce development model and has taken a number of measures to improve logistics efficiency, reduce logistics costs, and improve consumer purchasing experience.
According to the provincial office of commerce, in the first three quarters of 2020, the volume of exports and imports through cross-border e-commerce channels prov. Heilongjiang reached 560 million yuan, an increase of 3.6 times in annual terms.
Most often, in 2020, Russians bought goods of the following categories via the Internet:
Figure 1. Russians bought goods of the following categories
From 2016 to 2020, sales of consumer electronics in Russia increased by 12%: from 64.8 to 72.6 million units. Mobile phones dominate in total sales.
Figure 2. Consumer electronics sales in Russia in 2020 (million pieces)
According to the "Analysis of the consumer electronics market in Russia" prepared by BusinesStat in 2021, from 2016 to 2020, its sales in the country increased by 12%: from 64.8 to 72.6 million units. The highest growth rates were recorded in 2017-2018 (5.6-6.3% per year) and are associated with the implementation of deferred demand: in the crisis of 2014-2015, Russians postponed the purchase of consumer electronics in favor of essential goods. In 2019, sales of equipment changed slightly (+ 0.2%), despite the fact that the market did not recover until the pre-crisis period. The effect of deferred demand has exhausted itself - the minimum required amount of electronics has been updated, but the market continued to be pressed by stagnation in consumer income. In 2020, consumer electronics sales were down just 0.3%. [3]
According to analysts, the first place in the Russian market in terms of the number of gadgets sold in three months of 2021 was taken by Samsung smartphones - over the year their share increased from 23% to 33%. This was facilitated by the entry into the market of popular new products in the middle price categories. In second place is Xiaomi, whose share has grown by three percentage points to 22%. In third place is Apple with a 16% share. A year earlier, the American company held 10% of the market. Also in the top five most popular brands were Honor - 9% and Huawei - 3%.
In monetary terms, Apple leads with a 46% share of the Russian market, Samsung with 29% and Xiaomi -12%, followed by Honor - 3% and Huawei with 2%. In addition to the iPhone 11, the top five best-selling models included the Xiaomi Redmi 9A, Samsung Galaxy A12, Samsung Galaxy A01 Core and Samsung Galaxy A12. [4]
Chinese brands have firmly secured their mid-price segment, but in monetary terms, these figures are much lower. This data shows that buyers are not ready to buy flagship phones at the moment. Branding and quality of materials are two mandatory criteria on which to focus on product positioning in the Russian market.
Google, which develops the Android operating system used in Huawei and Honor smartphones, stopped partnering with brands after US President Donald Trump signed a decree in May 2019 to block the purchase of equipment that threaten the country's national security, and the US Department of Commerce introduced Huawei into a blacklist. This fact also negatively affected the demand for Chinese devices in Russia. Google products are widely used in Russia, and such news raises concerns about the acquisition of technology.
To ensure the survival of the Honor brand, Huawei decided in November 2020 to sell it to a third-party Chinese consortium. The cost of the deal was not disclosed, according to Reuters, it could have amounted to $ 15 billion. And already now, negotiations are being actively carried out between representatives of honor and Google. It is highly likely that the new line of flagship phones will already be with Google products.
The Russian government prepared the final version of the decree obliging device manufacturers to install Russian software on them on November 23, 2020. the deputy head of the Ministry of Digital Industry Maxim Parshin said that the timing could be postponed to April 2021 "The MPs have prepared a bill to postpone the pre-installation to April 1, 2021, and we expect that it will be adopted in the near future," he added. This solution can facilitate the use of Chinese technology (phones, TVs, etc.) because at the time of purchase, applications that are used in Russia will be installed there.
In addition to the problems described earlier, a number of key problems have not yet been resolved in Russia that complicate the development of cross-border trade. These problems include the following:
- complexities of customs clearance of products;
- low development of logistics services;
- problems of cross-border payments;
- uneven regional development;
- underdeveloped regulatory framework;
- the presence of counterfeit products and the presence of products of inadequate quality.
Conclusion. Over the past 10 years, the development of cross-border e-commerce has reached a completely new level, China has become the main partner of Russia in e-commerce. With the development of bilateral relations, a huge number of small companies were able to enter the Russian market.
More and more A growing number of Chinese companies are entering the markets of Russia and the CIS countries, and at the first stage all of them have to deal with the problem of consumer distrust of Chinese brands.
For further rapid development, more warehouses in Russia should be created, which will help solve the logistics problem. The staff of such organizations necessarily have to have qualified Russian and English-speaking specialists to provide customer support.
In addition to the actions of companies that must consider the specifics of the Russian market, the governments of Russia and China must unite and solve all the problems with the legal framework and customs control.
References:
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- RDIF, Alibaba Group, MegaFon and Mail.ru Group complete investment in Joint Venture in Russia and the CIS [online] available at: https://rdif.ru/Eng_fullNews/4425/
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