FOCUS: Legal problems not to stop Ozon from earning on promising jewelry e-retail

By Yekaterina Yezhova

MOSCOW, Feb 25 (PRIME) -- Ozon, one of Russia’s largest multi-category Internet stores, has branched out into jewelry, and although the sales are restrained by a conflict of laws, the retailer expects the new goods to boost turnover by up to 5% in 2019 and spur sales in adjacent categories. Analysts think online sales will account for 4.5% of nationwide jewelry sales this year.

“Consumer behavior tends to drift to online from offline: buyers find it convenient to compare prices of goods and purchase all they need on one website. Now online sales account for 5% of the country’s total retail turnover, which points to a huge potential of e-commerce,” Iloanga Yershova, head of new categories at Ozon, told PRIME.

“Ozon has 1.5 million unique users per day, and its loyal audience counts over 30 million people. The store has to create new services and offer new categories of goods to attract more clients. For example, orders on Ozon comprise goods from three or four categories, including individual goods. When clients like buying everything on one website, jewelry is not an exception.”

The online store launched the new category in Moscow and the Moscow Region and will soon expand its geography to some large regional cities.

The Association of Internet Trade Companies (AITC) President Artyom Sokolov said that online sales of jewelry reached 9.7 billion rubles in 2018, accounting for 4% of total sales of this category. “Online sales will increase to 11–12 billion rubles in 2019, or 4.5% of the total market. Internet sales will account for 6–7% of total sales over the next three years because large e-commerce players will expand this category,” he said.

Cross-border trade accounts for 18% with goods from China accounting for 99%, mainly from marketplace AliExpress with an average price up to 1,000 rubles, mostly of low-quality silver.

“Jewelry from other countries is almost absent in Russia as it fails to compete by price. The regional structure of cross-border jewelry trade will unlikely change any time soon since there are no prerequisites,” Sokolov said.

The e-commerce market is flourishing and could become one of the growth drivers for the country’s economy, but progress of Internet jewelry sales is obstructed by a conflict of laws.

The president’s order of 1992 forbids free sale of precious metals and gems to the general public, but a 1998 law contains no such restrictions. A government ruling of 2007 bans online sales of the goods whose free distribution is forbidden or limited in the country.

“Local jewelry companies have difficulties with online sales because of problems in relations with providers and operators of Internet access and services linked to advertisement placement, promotion and direct sales of goods. The authorities demand to delete information about jewelry sale to the general public, referring to the president’s order of 1992,” Sokolov told PRIME.

The conflict of laws earlier resulted in blocking of some websites dealing in jewelry. Despite further cancellation of such decisions and unblocking of resources, e-stores suffered losses.

“Special requirements to licenses of couriers delivering goods of precious metals were cancelled in 2015, but only a few firms deliver such items today. Competition on the market of jewelry delivery is absent, and only three of the top 10 logistics operators deal with it,” the association’s chief said.

“Such state of affairs complicates the development of online jewelry sales. There has been no investment in this channel of sales, and no players have emerged. Business will be able to evolve normally only when all the parties – producers, retailers, the government, regulators and court – will understand and apply laws in the same way.”

Ozon expects the jewelry category to add 3–5% to the turnover in 2019 and spur up sales of adjacent products.

“Jewelry is more frequently purchased online with clothes, whose sales spiked in Ozon 65% on the year in 2018 and 95% on the year at the beginning of 2019. We expect this category to entice Ozon’s audience that make individual orders in addition to daily purchases. More often, our clients buy jewelry with a price tag of 3,500–5,000 rubles. Earrings, chains, necklaces, and pendants as well as rings are the bestsellers,” Yershova said.

“Preferences could differ after we add positions: our assortment will rise to 20,000 items within a year.”

Ozon offers more than 9,000 items of jewelry brands Intalia, Karat, Accent Brilliant, and others. Clients pick goods they like and choose a method of payment and delivery.

The AITC said an average check shrank 5–6% in 2018 to 3,100 rubles, which followed a decrease in offline prices. Buyers preferred to shop online for silver and gold for click-and-collect. Earrings, pendants, and rings were mostly in demand, the association’s head Sokolov said.

“On the global scale, jewelry accounts for some 2–3% of the total online market, or about U.S. $10 billion in 2018. The U.S. leads with 15% of all online sales in this category,” the expert said.

(65.5149 rubles – U.S. $1)

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