30 Nov 2015
Third Party Opportunities Soar in Russia's Automotive Spares Sector
Falling rouble turns domestic online car spares site into country's most successful e-commerce operation.
Against the backdrop of the uncertainties caused by the depreciation of the rouble and the ongoing EU/US sanctions, the Russian economy continues to have a few bright spots. One such market is widely seen as the automotive sector.
Brand new Hyundai sedan cars and Renault-Nissan SUVs are still best sellers across the vast spaces of Eurasia on both sides of the Ural Mountains. This has also breathed new life into Exist.ru, Russia's specialist online automotive parts vendor and the country's oldest e-commerce site.
The site was launched back in 1999, a time when buying a brand new car was considered extravagant even by the more affluent middle-class Russians. In its early days, the site offered third party and official spare parts and accessories for many of the most popular makes of car. It also delivered throughout Russia via a dedicated network of local spare parts shops. These outlets also acted as payment points, a vital link in the chain given the relative scarcity of both credit cards and online payment systems at the time.
Today, the reinvigorated company processes more than 50,000 car parts orders per day, giving it an estimated turnover of some US$550 million in the first half of 2015 and making it Russia's largest domestic e-commerce site. Its current incarnation still maintains a nationwide delivery system, but also boasts a dedicated online payment system, as well as a 24-hour support service. The site targets both individual and corporate clients, offering a tailored package of discounts and bonuses to suit both groups.
With most cars in Russia now locally assembled foreign makes, the cost of imported spare parts and consumables has soared, while incomes have flat-lined. This has seen many car owners now willing to accept cheaper, third-party alternatives to the official spare parts supplied by the original manufacturer. As many such items are now available through independent dealers and re-sellers, it is not unusual for owners of brand-new cars to risk losing their manufacturer's warranty by sourcing their own parts and consumables prior to their first scheduled service.
Overall, the Russian market is unlikely to return to the 1990s' situation, a time when the use of unofficial spare parts was pretty much the norm. This is largely because of the huge investment in Russia made by many of the global car manufacturers back in the early 2000s. As a result, a number of Russian regions – notably St Petersburg, Kaluga, Nizhny Novgorod and Tatarstan – now have a substantial workforce engaged in the automotive sector, resulting in a high level of local output.
Despite this, the localisation of spare parts, unlike initial components, is yet to reach a critical mass. This leaves a substantial gap in the market for third-party suppliers of brake shoes, shock-absorbers, oil filters, batteries, generators and bearings.
Overall, domestic e-tailers, such as Exist.ru, are ideal springboards into many of the former Soviet bloc markets. Relatively sophisticated, such sites feature comprehensive Russian language, catalogue-based search services, while also benefiting from the high level of consumer trust accrued from their many years of operation. This has seen many of them more than able to compete with the incoming mainland e-commerce giants – notably AliExpress and JD.com – particularly in the spare parts and car consumables sectors.
Leonid Orlov, Moscow Consultant