The digital transformation of international trade: e-commerce and beyond

5 September 2019

The digital transformation of international trade: e-commerce and beyond

KEY CONCLUSIONS

Digitalizing trade is a crucial tool for increasing Russian exports

“From the perspective of trade, it appears to me that there is no more important task right now than building a common digital economic space for our Eurasian Economic Union,” Maxim Akimov, Deputy Prime Minister of the Russian Federation.

“Our non-commodity exports are growing at around 30% per year, with current volumes standing at roughly USD 750 million. We see potential for this market to grow to at least ten times that figure, and I believe we are capable of significantly increasing the rate of export in our country,” Nikolay Podguzov, Director General, Russian Post.

Developing e-commerce will set the rules for international trade more broadly

“At present, a little over 10% of retail trade around the world is conducted online. It is expected that over the next three years the figure will rise to over 20%. <…> There is no self-contained e-commerce sector – all commerce has become electronic. <…> It is precisely these rules in the digital space that will now set the terms of international trade,” Pavel Kadochnikov, Vice Rector for Research, Russian Foreign Trade Academy of the Ministry of Economic Development of the Russian Federation.

“The leaders in online sales and the digital transformation of trade are the developing markets. This is such a huge trend. We can see where the future is being made in this respect,” Andrey Slepnev, Chief Executive Officer, Russian Export Centrer.

Digitalization becoming a key factor in business competitiveness

“As for our retail, <…> everything that can be digitalized – we are talking not only about online trading, but also the adoption of digital technologies and new platforms in offline trading – all of this will come to pass, starting with warehouse automation. <…> The implementation of virtual reality begins with staff training, <…> predictive analytics are being used, <…> the use of biometric data <…> Our trade understands all of this, and that there is no escaping it – it is competition, and it is a competitive advantage,” Viktor Evtukhov, State Secretary – Deputy Minister of Industry and Trade of the Russian Federation.

“If value for the customer could previously be found in a single company, this is not the case anymore. Value for the customer is found in a system, in a certain ecosystem, which includes former competitors. <…> Digitalization of e-commerce, the creation of marketplaces – this is actually a solution to the fundamental problems that the financial sector is currently facing,” Boris Kim, Chairman of the Board of Directors, Qiwi.

“The move towards digitalization has, of course, allowed us to improve quality and promotion. There is now a trend for personalization in marketing, with the aim of improving customer experience <…> Closer collaboration with regard to data, with the aim of simply getting to know our customers better. <…> We have significantly improved our customer satisfaction indicators thanks to digitalization,” Marc Carena, Director General, McDonald’s in Russia.

PROBLEMS

Regulatory inconsistency in new market conditions

“We are witnessing the destruction of the traditional regulatory framework on the part of national governments, which are coming into conflict with a new model of platform power. <…> Governments do not understand – and this is the case all over the world – how to deal with the new configuration whereby a global player knows more about your citizens than you, influences their behaviour more than you, and controls them to a greater extent than you,” Maxim Akimov, Deputy Prime Minister of the Russian Federation.

“One of the problems that is certainly very far from being solved at present and which requires serious regulation is the safety of products that we buy through online retail, because it does not fall under technical regulations,” Veronika Nikishina, Member of the Board (Minister in charge of Trade) of the Eurasian Economic Commission.

“In fact, the complicated technology for VAT refunds on retail shipments is one of those export restrictions, in this case on Russian goods going abroad. <…> Here, the main route we are going down involves ensuring the highest-quality and tightest IT integration possible between the Federal Customs Service and the Federal Tax Service. <…> This will enable automatic VAT refunds,” Nikolay Podguzov, Director General, Russian Post.

Monopolies in e-commerce

“We are now seeing significant monopolistic tendencies, and on a global scale .<…> Currently, 1% of the very largest tech companies account for over 50% of turnover,” Pavel Kadochnikov, Vice Rector for Research, Russian Foreign Trade Academy of the Ministry of Economic Development of the Russian Federation.

“The major players in e-commerce are not governments, but major digital ecosystems like Alibaba and Amazon, and it is these companies that are setting the rules of the game. They are ahead of the curve and the state is essentially playing catch up,” Veronika Nikishina, Member of the Board (Minister in charge of Trade) of the Eurasian Economic Commission.

Widespread lack of readiness for the adoption of digital tools among business

“Only 17% of companies are ready to introduce some kind of online promotion, and that is just in the B2B market, while as of spring this year 83% view the IT sphere as a tool that is exclusively for the use of IT specialists and nothing more,” Dmitry Maksimenko, Executive Director, Innosoft.

SOLUTIONS

Developing international rules for e-commerce

“We are now focusing on three main objectives. Objective number one is to set out reasonable rules for the presence of global players in our market. <…> Global players and global platforms working alongside national financial institutions, the national financial system, national logistics specialists, the transport system and, of course, product manufacturers. And this should, as a rule, be mutually beneficial,” Maxim Akimov, Deputy Prime Minister of the Russian Federation.

“It seems very important to us that, in parallel with our efforts in our national Eurasian market, we are working very actively to develop an international standard in the form of an international agreement. In our view, the World Trade Organization seems to be the most appropriate platform, and it should release a package of rules to regulate e-commerce, setting out definitions and using those key elements that have served, as part of a package of WTO agreements, as the basis for international trade in traditional goods for many years,” Veronika Nikishina, Member of the Board (Minister in charge of Trade) of the Eurasian Economic Commission.

Digitalization of logistics

“Logistics in the new retail environment should no longer simply be logistics. It should be a platform solution that combines both physical services and the corresponding data exchanges and electronic communications. The strategy of Russian Post is aimed precisely at making sure that the customer is given the best possible choice and the best possible service with the help of this platform solution,” Nikolay Podguzov, Director General, Russian Post.

“Logistics can account for as much as 25% of production costs for midstream products, for example in the case of agribusiness. There is significant potential to reduce this share, including by way of digitalization,” Ekaterina Grishkovets, Vice President, Far Eastern Shipping Company (FESCO).

Creating new digital tools for international commerce

“We have created our own platform, a bank for business partners. <…> We now have 32,000 clients registered on the platform, and 500 companies have already signed up to our export accelerator. <…> We hope that, by working alongside the REC [Russian Export Center, – Ed.], we will be able to build up our platform completely from scratch, exporting to new countries and developing our commodity nomenclature,” Anatoly Popov, Deputy Chairman of the Executive Board, Head of Corporate Investment Business, Sberbank.

“In the first half of 2019, overall sales of goods from Russia increased by 17% to CNY 400 million. Over the last few years, online retail in China has been growing rapidly and, of course, China is utilizing AI and new online trading technologies as part of this process. We are now focusing our attention on the needs of our customers. <…> Thanks to digital information collection methods we have a very clear picture of what our clientele wants,” Sha Tao, Chief Executive Officer, Epinduo.

For more information, visit the Roscongress Foundation's Information and Analytical System at roscongress.org/en.

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