The China-Russia connection: E-commerce demand supports a booming trade lane

To Russia, with love

China has already made great strides in Russia’s expanding e-commerce market. According to e-commerce giant Alibaba, its AliExpress shopping site is Russia’s most popular e-commerce market. So far, the Russian government and Russian businesses alike have been supportive of China’s prominent position in the Russian e-commerce market – last year, a consortium of public and private investors announced a joint venture to form an “online ecosystem” in support of Russian e-commerce.

The Russia-based JV includes investment from Alibaba Group, as well as Russian investment from the Russian Direct Investment Fund (RDIF) sovereign wealth group, internet services company Mail.ru Group and telecom company MegaFon. According to Alibaba, the JV will form a “one-stop destination for merchants, consumers and internet users across Russia and the CIS to communicate, socialize, shop and play games.”

Alibaba launched AliExpress in Russia in 2010 to take advantage of the growing consumer market there. Under the JV, AliExpress Russia will be transferred from Alibaba Group into the Russian JV, while Alibaba will also contribute US$100 million to the JV. Meanwhile, RDIF will also contribute $100 million to the JV, with options to acquire more shares for an additional $194 million. MegaFon will sell its roughly 10% stake in Mail.ru to Alibaba Group for a 24.3% stake in the JV, and Mail.ru will contribute its Pandao e-commerce business to the JV, along with $182 million for a 15% stake in the JV.

In an article published by Alibaba’s Alizila, CEO Daniel Zhang said the partnership between the Russian and Chinese entities “will enable the AliExpress Russia JV to accelerate the development of the digital consumer economy of Russia and CIS countries in ways that no one party could accomplish alone.” He added, “together, we are uniquely positioned to offer consumers in Russia and neighboring countries an innovative shopping experience by combining social platforms with commerce, as well as enabling regional brands and SMEs to sell their products locally and globally.”

Russian carriers give Alibaba a boost

Volga-Dnepr Group made headlines in 2018 when it was selected as the preferred carrier for Alibaba’s logistics arm, Cainiao, but AirBridgeCargo has been operating to and from China since 2004, ABC’s Nikolay Glushnev said. Currently, ABC has operations in mainland China at Beijing, Chengdu, Chongqing, Shanghai, Shenzhen, Taipei and Zhengzhou, as well as in Hong Kong, with most e-commerce traffic originating from Hong Kong, Shanghai and Shenzhen, Glushnev added.

Atran is also expanding its Chinese operations, Atran’s Dmitry Obsharov said. The carrier is developing the Hangzhou-Riga flight launched under the Cainiao MoU and is “in talks with Cainiao Smart Logistics Network to explore other routes, covering major logistics centers to guarantee distribution options to Russia and beyond,” Obsharov added.

The ABC hub in Moscow is also crucial to its e-commerce lift from China, as “hub operations bolster connectivity and facilitate delivery options based on customers’ needs, which is especially the case with e-commerce shipments where every minute counts as the end consumer want to have his or her delivery ‘here and now,’” Glushnev said. As Cainiao chases its 72-hour global delivery goal, hub connectivity is key, meaning “customers do not need to wait for a suitable flight based on day and route – they could pick an origin station and choose from a number of online destinations.” Easy physical connectivity, combined with ABC’s online scheduling tool for desktop and mobile platforms, provide “the ease of experience our customers expect us to have,” he added.