CC BY
234
Kotlyarov Kirill, Master of International Trade College of Economics and Management, Northeast Forestry University, Harbin China E-mail: kotlyarov@qq.com Tian Gang, Corresponding author, Professor of International Trade and Economics, College of Economics and Management, Northeast Forestry University, Harbin China E-mail: tiangang0451@sina.com
CHINESE ALIBABA INFLUENCE ON RUSSIAN SME E-COMMERCE 2015-2017 YEARS
Abstract: The international trade market has started to use more and more e-commerce platforms. In this research paper there is an analysis of the data of the Chinese firm Ali baba and Russian small and medium enterprise (SME) E-commerce sectors, their communications and obstacles in customer loyalty, and also possible solutions for the Russian SMe e-commerce market, as well as methods for showing how to be competitive with Alibaba's influence. Keywords: e-commerce, AliBaba, Russia, China.
1. Introduction already have done to remain profitable will be dis-
AliBaba (AB) is one of the biggest e-commerce cussed in the paper. platforms. Small and medium enterprises (SMe) in- The main focus of this paper will be to pay atten-side AB feel safety and can see future for their busi- tion to, and find ways to show how Russian compa-nesses. AliBaba is everywhere and huge amounts of nies can improve their business (SMe) and stay in consumers prefer to buy cheap Chinese products market. instead of similar products offered from their local 2. Literature review shops. So, what will other firms and shops do? 2.1 E-commerce. Definition
Russian companies have huge competition with E-commerce was invented and began active use the small companies under the Alibaba platform in in the United States. In the late 1960s, there were the Russian market. This is an issue because these four industry standards for data exchange. They were companies offer lower prices with fast delivery. Rus- used in control systems of air, rail and road transport. sian companies and e-shops will need to create new That is, in the second half of the XX century, entre-ways of business in order to survive. preneurs understood the effectiveness of cashless
We will investigate obstacles and benefits for payment. both AliBaba and Russian SMes. 2.2 Types of e-Commerce on the Internet
What governments can do to protect their own The online trading segment has grown to the country's enterprise without losing their position in point where most traditional forms of monetary and the international trade market, and what companies commodity relations have gone online. This includes
ordinary trade (e-trade), banking (e-banking) and insurance (e-insurance). Everyone is involved in this flow: from the ordinary consumer to the owner of the state Corporation.
It is customary to allocate such segments as:
- B2B (business to business);
- B2C (business to consumer);
- C2C (consumer to consumer).
2.3 Online store
The tendency of offline business transition to the network is gaining serious momentum. The platform for placing goods on the Internet has a number of significant advantages, both for buyers and sellers:
Cheapness: For those who create, there is no need to rent a room for a regular store. It is enough to pay for the creation of the site and the cost of its maintenance (hosting, filling with new products, technical support). These expenses cannot be compared with the opening of offline business.
Convenience: The buyer acquires the goods in one click then immediately reads descriptions and reviews, and saves time on the trip and personal inspection of the goods.
Larger audience base: The spread of the Internet - a global problem and its solution are engaged at the highest level. Therefore, every year the Internet audience increases by an order of magnitude. People, realizing the benefits of e-Commerce on the Internet, cease to buy goods in the traditional way. For this, they are increasingly turning to online stores [1].
2.4 E-Commerce issues
E-Commerce on the Internet, developing, leads to a number of problems. These include:
• Copyright. Pirated content distributed by users is not tracked. Accordingly, the authors 'rights are violated every hour;
• Law on advertising. Provisions regulating advertising activities are enshrined in legislation. However, in modern conditions, each case of non-compliance with these laws on the Internet cannot be traced;
• Partnership commitments. Remote work and part-time staff also lacks regulation by law. Refunds to the customer, or the employee's salary is based on oral agreements, which leads to misunderstandings:
1) Fraud: The Internet is a field for all sorts of fraudulent schemes. From veiled pyramid schemes to online payment fraud.
2) Tax avoidance: The number of Internet entrepreneurs who prefer not to register the organization officially, despite the large revenues, is a lot today. Again, e-Commerce allows the use ofloopholes in the law.
3) Technical failures in the system: E - Commerce is not perfect. Every day there is a leak of user data and other confidential information that scam-mers use for their own purposes [2].
2.5 SMe
Medium-sized businesses are usually combined with smaller businesses. The acronym SME refers to small and medium businesses together.
Medium business is a segment of entrepreneur-ship that has a significant impact on the development of national markets in the world, connects large businesses, small businesses and consumers. Medium-sized businesses are characterized by features such as a high share in the economy, leadership in innovation, concentration on domestic markets, flexibility and, at the same time, the scale, the limitation on number and revenue, government support. Medium-sized business is the backbone of the economy of any developed country as it creates jobs, produces new types of goods and creates prerequisites for the development of healthy competition.
In the world, it is customary to classify medium-sized companies with a staff of fifty people to five thousand and an annual revenue of ten to five hundred million dollars. However, this division is conditional [3].
Table 1. - Different kind of firms
In 2015, the policy on regulation of cross-border e-Commerce between China and Russia still has not been finalized. The lack of e-Commerce between China and Russia has a "raw" legislative base. It also takes time to establish and implement such laws. Another important obstacle to cross-border trade between China and Russia is the issue of payment compensation. Russian consumers rely on cash payments, and online payments are relatively low. Low price is the main means of fighting for customers used by China's international companies, including Alibaba. However, in the age of information technology, users are carrying out large orders, consumers are paying more attention to the quality of service. Meanwhile Russian e-commerce companies rely on local service advantages, are more diversified in this regard, by developing services to compensate for the lack of competition in the market. Among them, Lamoda's e-store differs from the usual e-commerce company in that after receiving the goods, the consumer has 15 minutes to decide whether to buy the goods. You can choose to pay by cash or credit card. This Lamoda model is recognized as successful in Russia. Ozon and Wildberries also offer this service [4].
Shiganova M. V. and others give a plethora of statistical data in their work on the Chinese-Russian Internet trade. Cross-border sales are purchases of goods in foreign online stores (for example, purchases at Aliexpress.com). In total, Russians made 135 million cross-border purchases in 2015. In monetary terms, cross-border sales accounted for 24.5% of the total e-Commerce market in Russia. Chinese
online stores accounted for more than 80% of all cross-border purchases made by Russians in 2015. For comparison, in 2014 this figure was 70% [5].
2016, In A. V. Trachuk, Linder N. V. opinion, in the face of declining indicators of economic development, growth of e-business are a global technological trend. The cause of this growth can be attributed to the Internet opening up new opportunities for Internet services and applications, and the development of the Internet of things; where the vast majority of users are machines, not people [6].
Based on Martsulevich D. V.'spaper, which focused on 2016 data and also relates to the Alibaba group, the ability of Russian companies to compete with foreign firms, lies in the field of reducing transaction costs for consumers and overcoming information asymmetry. Given that in e-Commerce, the goods are distant from the consumer in space and time, the price that the consumer is willing to pay for ensuring confidence in the receipt quality goods within the specified period, can be quite large. At the same time, transaction costs of the consumer consists of the time spent on searching for information and confirming the reliability of the company, cognitive costs of working with information, assessing its sources and reliability when making and evaluating choices [7].
In 2017 Lousianin S. G., Afonasyeva A. V., the paper mentioned that political flexibility is an economical issue. The number of members of the AIIB has increased to 54.
Analyzing the composition of the member countries of the AIIB, it is easy to see that Beijing DOS rather cleverly recruits the best financial cooperation of their regional opponents, with whom in political terms they has certain disputes (Vietnam and the Philippines disputed Islands in the South China sea, India - border disputes and regional cooperation, etc.). Such a policy of Chinese involvement shows the flexibility of China's strategic line [8].
Others (see above) have described Alibaba's influence as well as the data on the statistics and challenges identified earlier.
Type of Business Quantity of employee Income Balance
Medium >250 >50 million euro >50million euro
Small >50 >10 million euro >10 million euro
Micro >10 >2 million euro >2 million euro
In this paper, data was summarized and applied using different methods of collection, then reviewed immediately for the years 2015-2017.
3. Methodology and data
3.1. Methodology.
In order to understand the issue more clearly, this paper will address the following issues: the situation of e-commerce in the Russian SMe market, and the problems and solutions for Russian companies to be profitable. In addition, primary and secondary data were used to analyze these circumstances and incorporated qualitative and quantitative approaches. For primary data, the author used questionnaires, interviews, and independent research in order to gather information. Furthermore, secondary resources and mediums used data collection such as official news articles and other relevant information from marketing firms.
3.2. Limitation
Data was collected in China during the 2017 calendar year. Participants from China, Russia, America and Finland took part in research interviews and answered the questionnaire. For secondary data collection, Russian and English language websites were used. Analysis was made of the years 2015-2017 with focus on the Chinese and Russian SMe e-commerce markets [9].
The following methods were used to collect data:
First, Surveymonkey.com was the medium used to issue the questionnaire. The survey was distributed through social media sites such as: (vk.com, wechat, linkedIn, Telegram). Surveys were a better
method of information acquisition than face-to-face interviews, because people are more willing to answer anonymous surveys more honestly than in a face-to-face interview.
Secondly, the following types of Interviews were conducted: face-to-face, open-questionnaires via e-mail, and small questionnaires for Russians businessmen. The questions regarded the Russian market and AliExpress's (Alibaba) influence on their business. Face-to-face interviews and open questions focused on businessmen and professors from Russia and China as well as professors from Finland and America.
Finally, additional data collected was collected using news websites, books, journals, and international organization's websites. It covers e-commerce situations and problems during 2015-2017.
With a different approach to gathering data the main aim is:
1. To see and analyze the situation on the Russian SME e-commerce market
2. To find problems from Chinese influence on the Russian market
3. To find possible solutions to make SMEs profitable and competitive [10].
3.3. Questionnaire
Website priority as shown in (Figure 1), more than 80% of respondents know Alibaba group (See Figure 1, 2, 3: Table 2.). Almost one hundred people wanted to share their opinion about choices.
38%
TaoBao Tin all
36%
25%
9%
JD
OZON Wid Ulm art Lamoda Berries
Figure 1. Website priority
Table 2. - Opinions about TaoBao (1rmb=10rub=0.14USD)
Respondents opinion Date Time
TaoBao, you can find almost everything there, at a reasonable price. 12/6/2017 10:29 P.M.
TaoBao. Various choices and competitive prices, great online service and fast delivery. 12/6/2017 10:29 P.M.
12/6/2017 10:25 P.M.
TaoBao. 12/6/2017 10:23 P.M.
Taobao, easy to handle. 12/6/2017 10:23 P.M.
Taoöao. Fast, convenient, large assortment. 12/6/2017 10:20 P.M.
11-50 51-100 101-300 301-more
Figure 2. General occupation
Figure 3. Favourite type of product
Average amount of purchase. The majority of re- Favorite type of product during online shopping. Fig-spondents prefer to spend 51-100 rmb per purchase. ure 2 shows, the majority of respondents buy clothes
and electronics.
Data Analyses General Occupation Statistics. The majority of respondents to the survey were students. A huge segment of the e-shopping market includes young people up to 25 years old. See Figure 3.
3.4. Interview
Via e-mails, social media messages and face-to-face interview questions research was investigated deeply and with more details.
Professors and businessmen took part in investigation and gave their opinion about Sino-Russian e-commerce cooperation.
The questions, which one can find in the analysis below, helped collect wider views and suggestions about the current situation in the e-business market.
3.5. Data collection
Data was collected due to East-West Digital News, AKIT, marketing agencies, e-commerce foundation statistics. There is a big database of figures, numbers, and expert's opinion and works.
4. Analysis and results
4.1 Questionnaire
If Russian SMEs are to focus on one demographic, it should be young people, as they supplied the majority of responses.
The main two group ofproducts on e-commerce market are clothing and electronic devices.
Participants gave their opinions about Alibaba, and Russian e-shops can use them as suggestions. See table 5.
4.2. Interview
Here one can find questions and a few answers from an interview and e-mail correspondence.
1) Do you agree that Alibaba (Taobao, Aliexpress) is having a huge impact on the economy of your country?
a) Russians responded that it is a big part of the market;
b) Americans agree and stated that the impact is more now (2018) than previous years;
c) Europeans believe that Beijing's investment in the European economy is growing. In 2016, they
amounted to about 36 billion euros, which is almost twice the total Chinese investment in previous years.
2) If not, what is your opinion about Alibaba?
a) If you agree, what options or actions would you propose to decrease Chinese influence and strengthen your country's economy (especially small and medium-sized e-Commerce businesses)?
b) 90% ofRussians agree that Russian SMEs should improve delivery speed and diversity of products.
c) Europeans wished to remain independent and were worried about further Chinese influence.
3) Do you use Alibaba (Taobao, Aliexpress) for business, personal use or do not use it at all?
a) After interviews with Russian firms, the result was that medium firms do not use Alibaba as a partner, but small shops often use it as a wholesaler.
b) Some Chinese companies that were asked responded that they use Alibaba to re-sell products, and others use the website 1688. However, mostly prefer to find a manufacturer or distributor instead of these websites.
c) The majority of Americans prefer Amazon, because of their quality and delivery.
4.3. Data collection
The most popular e-commerce website in Russia
A larger version of this graph can be found in the appendix.
In 2017, Aliexpress became the most visited ecommerce website in Russia. The graph shows that the Chinese market has a huge influence on the Russian SME sector [11].
Russian cross-border e-commerce distribution in 2015.
• Parcel distribution by countries: China 90%, EU4%, USA 2%, Other 4%.
Payments distribution by countries: China 49%, EU25%, USA 13%, Other 13% [12].
This data explains that 90% of imports are from China because the cost is lower. America and Europe represent a lower segment of imports and have higher prices.
Figure 4. The most visited e-commerce website
Demographic indicators.
45.5% of the Russian population are people 25-54 years old. As was mentioned before in questionnaire, Russian SMEs should focus on this target market [13].
Leading product group.
Figure 5 shows the leading online product group in 2015-16 is clothing [13].
Figure 5. Product groups
A larger version of this graph can be found in the appendix.
Reason to buy abroad
An appealing offer is the most common reason for Russians to shop abroad(47%).Also there are: better quality(17%), recommendations from oth-ers(20%), better conditions(29%), better availabil-ity(35%), and broader range of products(37%).
Also there is a statistics not to buy abroad: never occurred(10%), assuming to stuggle the language (20%), assuming delivery takes longer(29%), assuming returning is difficulr(30%), sites in local country meet concumer's needs(40%) [13].
From this data, Russian companies can make suggestions for e-commerce sectors and Chinese SMEs.
Via mobile phones and tablets
56 million users (above 16 years old) use the Internet via mobile phones and tablets (AKIT, 2016) [14].
Expert Opinion
1) President of AKIT Alexey Fedorov in 2016 said that because there was an increase in foreign parcels by 49%, there would not be a single store with Russian owners selling household appliances and electronics, or clothing by 2020. (AKIT, 2017).
2) A noticeable improvement in demand in 2017 for durable goods and a steady high demand for small electronics indicates a revival in demand and a significant reduction in consumer fears, says Oleg Pchelnikov, Director of the business direction
"product" of the Internet Company Ulmart (AKIT, 2017).
3) The Executive Director of AKIT Artem So-kolov in 2017 stressed that there are a number of constraints that do not allow the market to grow in full force. These are the existing prohibitions on the remote sale of pharmacy, alcohol, and the remaining legal conflicts in the sale of jewelry, food, and the high cost of acquiring these products for online stores (AKIT, 2017) [15].
B2B. B2C sectors
B2B is the main model of cross-border e-Commerce, and B2C is only an auxiliary one," says Sun Tianshu, President of the Qifa e-trading platform. In his opinion, today cross-border e-Commerce is at a bottleneck in its current stage, because it is hampered by the remaining stages of offline operations. When the information barriers between the stages of production and the sale of goods are completely overcome, the process of mutual trade will become more transparent and easier [16].
Local and foreign parcels
The number of incoming international shipments with commodity investment increased by 49%. The number of orders in the domestic market increased by 8% (Akit and Russian post, 2017)[15].
Average purchase price
In 2017, the average purchase price was 5370 rubles. For cross-border, the market was 3400 rubles for transaction and 1170 rubles for delivery (AKIT, 2017)[15].
Problems, competitor
«The upgrade to Tmall means a better quality of services due to a more careful selection of goods, a single warehouse, and logistics based on courier delivery, along with delivery to special points of issue,» said Director of Development ofAliExpress in Russia and CIS Mark Zavadsky [17].
Motivation from competitors.
Currently, Chinese online trading companies such as Alibaba, JD, etc. are actively expanding their business in Russia, increasing the level of service.
Russian banks and technology companies are also making efforts to improve the payment procedure in the field of cross-border e-transactions [18]. 2017 Modern logistics center solutions According to the leadership of the Harbin customs service, e-Commerce is developing quite quickly, representing great interest for both Chinese and Russians. Residents of China are primarily interested in food, and Russians-consumer goods from China. Due to the lack of a logistics and sorting center in the Far East, a modern logistics center in Yekaterinburg is used to send goods from Heilongjiang province. At the same time, the creation of such a center in the Far East would significantly simplify the delivery of goods from China to the Far East and back [19]. Internet behaviour in Russia The use of mobile devices is increasing. Most online purchases are made on a computer, after first visiting the shop on a mobile device. Also, discounts and competitive prices are the most significant factors promoting sales.
It should be mentioned that generating trust towards the online shop, authenticity of the product, payment methods and deliveries are very important [20].
Target market
A Finnish marketing agency also mentioned that the clothing is the main segment of online purchases. Also, purchasing cosmetics is popular [20]. Payment situation in Russia, 2016 Electric prepayment is most common in cross-border sales, but nearly 70% of online shopping is paid by "cash-on-delivery". One problem is that the Russian banks have issues with payments using cards and other domestic payment methods. However, the solution is using Russian payment methods that use foreign partners when conducting e-commerce [20]. Government support, 2017 Vladimir Padalko, vice president of the Chamber of Commerce of the Russian Federation said that «through BRICS, governments could discuss their taxation systems, financial regulations and other
thorny issues to eliminate obstacles to business ties» [21].
Solution for Russian SMe, VAT
Most online purchases Russians make in foreign online stores are mainly Chinese companies such as AliExpress and Taobao. Now foreign suppliers have an advantage over domestic ones: they are exempt from additional taxes and customs duties when selling goods at a price of up to 1 thousand euros. Russian
online stores pay 18% VAT on each item sold. They believe that the introduction of taxes for foreign stores is necessary in order to ensure fair competition [22].
5. Conclusion
Only a comprehensive and reasonable approach to solving social, economic, legal and administrative issues will contribute to improving the situation on the Russian e-Commerce market for small and medium-sized businesses.
References:
1. Dr. Anil Khurana. "Introduction to E-Commerce."
2. Artem Borisov. "Все об электронной коммерции". 2016. [Online]. Available: URL: https://callback-hunter.com/blog/5972-2/
3. Eeconomic-definition.com. "Medium business." [Online]. Available: http://economic-definition.com/ Business/Sredniy_biznes_Medium_business_eto.html
4. Chen Hunze. "Текущая ситуация и проблемы трансграничной электронной коммерции между КНР и РФ". 2015.
5. Shiganova R. E.V. Romanova M. V. "Concept of E-commerce." 2017.
6. Trachuk A. V. and Linder N. V., "Forecasting the dynamics of e-business development in Russia".- 2014. P. 4-22.
7. Martsulevich D. V.,"Crosschannel marketing communications as a factor of improvement of the russian online stores' Value." - Vol. 21. 2016.- P. 144-149.
8. Lousianin S. G., and Afonasyeva A. V. "Belt and Road Initiative - Political and Economic Dimensions". Vestn. - Tomsk. Gos. Univ. Ekon.,- No. 40. 2017.- P. 5-14.
9. Essays U. IK. "Barriers to online supply chain." [Online]. Available: URL: https://www.ukessays.com/ dissertation/methodology/barriers-to-online-supply-chain-adoption.php
10. Writepass.com. "How to write a methodology." 2017. [Online]. Available: URL: https://writepass.com/ journal/2017/08/write-methodology-dissertation-help/
11. Ecommerce foundation and AKIT, "Ecommerce Report 2017." 2017.
12. AKIT. "Рынок e-commerce 2015," 2015.
13. Ecommerce Foundation. "Russia B2C E-commerce Report 2016." 2016.
14. AKIT and Russian Post. "Рынок интернет - торговли в России. Результаты 2016." 2016.
15. AKIT. "Рынок интернет-торговли в России 2017." 2017.
16. Rg.ru. "Янтарь за юани." 2016. [Online]. Available: URL: https://rg.ru/2016/12/12/elektronnaia-torgovlia-mezhdu-rf-i-kitaem-stala-dvuhstoronnej.html
17. URL: https://www.rt.com, "Alibaba launches new e-commerce platform in Russia." 2017. [Online]. Available: URL: https://https://www.rt.com/business/404858-alibaba-russia-trade-platform
18. URL: https://russiancouncil.ru. "Российско-Китайские отношения," 2017. [Online]. Available: http://russiancouncil.ru/russia-china-2017bilateral
19. URL: https://minvr.ru, "Развить электронную торговлю между Россией и Китаем помогут МТК," 2017. [Online]. Available: URL: https://minvr.ru/press-center/news/5721
20. Flyinglynx.com. "Russian e-commerce trends 2017." [Online]. Available: URL: https://flyinglynx.com/ dataflow/nsc/files/media/russia_trends2017english_29174.pdf
21. Daily Mail News. "Russian trade official sees great potential in China-Russia e-commerce." 2017. [Online]. Available: URL: http://dailymailnews.com/2017/09/17/russian-trade-official-sees-great-poten-tial-in-china-russia-e-commerce
22. Tass.ru. "Налог на AliExpress." 2017. [Online]. Available: URL: http://tass.ru/ekonomika/4564606
