Evgeniy Schepelin and Alex Vassiliev:
How Yandex Market aims at market leadership
Formed as a joint-venture by Yandex and Sberbank in 2018, the Yandex Market group of companies (further referred to as “the JV”) comprises three entities: the Yandex.Market price comparison platform; Beru, a domestic marketplace; and Bringly, a cross-border marketplace. The marketplaces provide logistics solutions, delivery services and customer support.
In this exchange, two top executives of the joint venture, Business Development Director Evgeniy Schepelin and Chief International Officer Alex Vassiliev, spoke about the JV’s strategic goals¹ and practical steps, the competitive context and the value it offers to international e-merchants.
The stated goal of Yandex Market JV is to generate 500 billion rubles (around $7.7 billion at the current exchange rate) in gross merchandise volume (GMV) by 2022. Is this realistic?
Evgeniy Schepelin — This goal is ambitious, but not unrealistic. Judging by the recent Morgan Stanley forecast, the Russian e-commerce market is expected to be worth around $42 billion by that time, so why wouldn’t a market leader — perhaps even the leader — generate one sixth of this amount?
The objective also looks realistic if we look at AliExpress’ current GMV — 330 billion rubles — and keep in mind that the market is set to double by 2022.
This being said, the forecast might possibly change. Market conditions can alter significantly in the next few years, influenced by factors such as the population’s revenues, evolutions in offline retail, new initiatives from other players, etc.
Why launch three distinct platforms? What is the strategy in terms of positioning?
E.S. — Since Yandex launched the Yandex.Market price comparison engine in 2000, many different business models have been tested. By doing so, we understood that too many experiments or too much complexity may perturbate user experience, so we decided to support three separate platforms for three distinct user goals and experiences.
Yandex.Market as a price comparison engine is maintained for its great content, which gives an opportunity to browse, compare and choose. Rumor has it that Beru is cannibalizing Yandex.Market, but this is not true.
Do you think Bringly could challenge AliExpress for market leadership?
Alex Vassiliev — We believe we can compete and perhaps even beat the China-to-Russia platforms. We are building a truly global platform, including both cheap goods from China and alternative supplies, particularly from Turkey and Western countries. We compete with the Chinese platforms on the one hand, and with such websites as Lamoda and Wildberries on the other. But our competitors tend to focus on relatively narrow geographies.
Another distinctive advantage is Bringly’s M2M (marketplace-to-marketplace) model, as exemplified by our partnership with Turkish Hepsiburada. By onboarding large marketplaces and charging them commission per order, we immediately offer a super wide assortment to our customers.
Also, we’re developing an M2C (manufacturer-to-consumer) model. For instance, by working directly with Xiaomi Bringly eliminates all unnecessary intermediaries and connect the manufacturer directly with the consumer on its platform. Therefore, we help to reduce the price and guarantee good quality, which are the most important factors for customers. Neither AliExpress nor other marketplaces do this.
Last but not least, unlike the competing marketplaces, the JV is building its own in-house logistics infrastructure to serve the needs of Beru and Bringly. This is an important factor for success. A well-known US cross-border marketplace failed in Russia partly due to the absence of such infrastructure.
How are the various Yandex services (search marketing, taxi, food delivery…) articulated with the marketplace initiatives?
E.S. — Even though the JV became a separate legal entity in April 2018, it still is a part of the Sberbank and Yandex ecosystems and aims to make use of its various services. For example, we closely work with Yandex’ search and advertising services, which provide most accurate targeting, massive reach and analytics tools. We also partner with Yandex.Taxi, which merged with Uber in 2017, Kinopoisk (movie search), Yandex.Zen (personal content feed) and are planning to partner with even more independent business units to reach different audiences.
Moreover, Bringly and Beru place campaigns and promos in Sberbank’s mobile application ‘Sberbank Online’ which has more than 30 million active users. We also partner with Sberbank’s dedicated project for youth, called ‘Sberkot’ (Sbercat), to appeal to young people.
What is the role of Sberbank? Why did Yandex feel such an alliance would be necessary/beneficial?
E.S. — Needless to remind the importance of Sberbank’s investment in financial resources — as much as 30 billion rubles². However, the biggest value of the deal lies in the opportunity to take advantage of the synergies between the leading IT company and the largest financial institution not only Russia but the whole region.
Can Beru and Bringly be considered as full-fledged marketplaces? Which kinds of in-house logistics and delivery services has the group made available, or could make available in the future, for e-commerce operations?
E.S. — We have our own warehouses (in Riga, Rostov and Moscow), call centers, software infrastructure and carrier aggregation system Yandex. Delivery. Even though some services are outsourced, we manage them directly to keep control of the whole system. And we invest considerable amounts in it. Less than a month ago we launched our own lockers network ‘BoxBot.’
Do you plan to launch other e-commerce initiatives?
E.S. — Yes, we are looking at many options. We are launching an offline price comparison engine called ‘SuperCheck’. We’re also thinking about an advanced analytical platform for market data, and new facilities for operational activities.
We don’t have short-term plans to launch or buy a vertical e-commerce site. We have enough commitments and plans with what we’ve launched already.
In January 2019 the authorities lowered the threshold for tax-free purchases on foreign sites — from €1000 to €500 per person and per month. Did it have an impact on cross-border flows?
A.V. — Practically not. There may be an impact when the threshold will be at €200 — but perhaps not that significant, because we’ll be talking about €200 per package, not per month; and the tax will be lowered to 15% instead of 30% (see Part II, Section 5).
Currently the cross-border market is dominated by Chinese players — first and foremost, by Aliexpress. What are the chances for Western players trying to sell to Russians?
A.V. — The Chinese will lose a part of their domination. In the low-price segment, Chinese products are becoming more expensive. Turkish ones, on the contrary, are now becoming better and cheaper! The Western players, mostly in other price segments, also have their chance: there was a setback in 2014-17 due to the ruble’s fall and the political or ‘psychological’ context. However, many Western players have learned to work with Russia under the new conditions.
By offering an easy and risk-free solution, Bringly will make the Russian market accessible to an even wider range of players. So far, only few international brands and platforms were using our price comparison platform Yandex. Market (e.g. Asos, Farfetch etc) as only these brands / online retailers had their own logistics solution to Russia. By developing our logistics network, we will open an access to Russia to hundreds of other retailers that didn’t have it before.
Interview conducted in June 2019
¹ In terms of market leadership, the JV pursues three goals: Beru to become the leading marketplace in Russia; Bringly to become a leading cross-border marketplace; and Yandex.Market to maintain its leadership among price comparison websites (see interview with Board chairman Gabriel Naouri)
² Roughly half a billion US dollars, more than any e-commerce single deal in Russia so far – editor’s note