Posted on Mar 6, 2022

Digital sales in Russia have dropped dramatically in the wake of global sanctions, and Wall Street is warning of tough times ahead for Putin's Russia. Meanwhile, e-commerce merchants are raising money for besieged Ukraine.

When Russia invaded Ukraine, it got Phil Sklar thinking about how to help.

Sklar is co-founder and CEO of the National Bobblehead Hall of Fame and Museum. So those thoughts quickly turned to how to use bobbleheads to aid the besieged nation.

“We saw all the news stories celebrating (Ukrainian President Volodymyr) Zelenskyy and thought ‘bobbleheads are the best way to honor someone and to fundraise,'” Sklar says.

So Sklar and his team got to work designing a bobblehead of the Ukrainian president. Sklar announced the museum would donate $5 from every bobblehead sold to GlobalGiving’s Ukraine Crisis Relief Fund, supporting humanitarian assistance in Ukraine and surrounding regions where Ukrainian refugees have fled.

Within a few hours, hundreds — and then thousands — of orders poured in.

Sklar says the bobbleheads will cost $30 each, plus a flat-rate shipping charge of $8 per order. Those interested can pre-order one here. But given uncertainty about the global supply chain, Sklar says they won’t arrive until July. And even then, it’s unclear if anyone in Ukraine will receive one.

“There are quite a few shipping restrictions on Ukraine, Russia and elsewhere,” he says. “Who knows what it’s going to be like in July? We’re getting orders from around world. We ship everywhere. So, when the time comes, we hope we can send them to Ukraine.”

Russian ecommerce hit with sanctions

Governments and corporations are taking steps to squeeze the Russian economy. Sanctions, the move to block Russia from the SWIFT banking communications system, and dozens of companies’ decisions to halt sales in Russia are impacting the ecommerce industry and the payments and IT companies that support it.

According to a preview of data in the 2022 Top 1000 from Digital Commerce 360, 276 of the top North American online retailers offered a way to ship to Russia as of December 2021. Although Digital Commerce 360 does not track the dollar volume of such transactions, we estimate that few of them derive significant revenue from those operations. And the ones that did sell a significant amount to Russian consumers aren’t doing so any longer.

Apple Inc., No. 3 in the Top 1000, has a 15% share of the mobile phone market in Russia, according to IDC’s Worldwide Quarterly Mobile Phone Tracker. Apple announced March 1 it was halting all sales of its products in Russia.

“We are deeply concerned about the Russian invasion of Ukraine,” the tech giant said in a statement sent to the press. “We are supporting humanitarian efforts, providing aid for the unfolding refugee crisis, and doing all we can to support our teams in the region.”

Nike Inc., No. 11,  has also announced it has cut off sales in Russia, but the footwear and sporting goods brand blamed logistics. The athleticwear giant said it “cannot guarantee delivery of goods to customers in Russia,” according to Bloomberg News. Nike operates 119 stores and an ecommerce arm within the Russian Federation.

HP Inc., No. 50, also stopped exports to the country this week. HP CEO Enrique Lores told Yahoo Finance the impact will be negligible.

“We will be quantifying in our earnings call that this will have an impact of about $0.03 of EPS (earnings per share) in Q2. So it’s a relatively small business. Remember that our EPS guide is between 104 and 108, so this gives you an idea of the relative size,” Lores said. “So it’s small business, but still important to do it and to follow the regulations and the sanctions that the U.S. administration has put in place.”

A spokesperson for W.W. Grainger Inc., the distributor of maintenance, repair, and operations products and industrial supplies, says Grainger “serves Russia through our Export organization with minimal sales to the country. In alignment with U.S. sanctions, we have restricted business to Russia and have added it to our Restricted Country Policy.”

Grainger is No. 16 on the Top 1000.

Outdoor retailer Recreational Equipment Inc., commonly known as REI, No. 69, had offered shipping through its website to customers in Eastern Europe. But the invasion changed that.

“We paused shipping to Ukraine and Russia because our international providers have paused or there are sanctions,” a spokesperson for REI said. “If an individual places an order on REI.com, we will be in touch and share that their purchase is not possible to ship to those countries.”

Russian ecommerce sales fall

Online sales Russian consumers purchased fell 53% at the end of February compared with Feb. 1, according to data from Signifyd. The fraud-prevention provider tracks transactions of thousands of merchants and millions of consumers worldwide.

Signifyd said ecommerce began to tumble as soon as the invasion into Ukraine began. On Feb. 24, the day President Vladimir Putin announced the invasion, ecommerce sales in Russia were up 7% compared with Feb. 1. The next day, they dropped to 43% below the first of the month — and then continued their descent.

Meanwhile, online sales in Ukraine fell as the war neared, then dropped dramatically beginning Feb. 22, when it seemed inevitable that the invasion would soon begin. When Putin announced the Russian attack two days later, online sales headed for Ukrainian consumers were 80% below their level on Feb. 1. By Feb. 27, online sales were down 96% compared to the beginning of the month.

How to pay for online goods in Russia

Complicating matters in ecommerce in Eastern Europe now is that the payments system is in chaos. Visa, Mastercard and American Express are popular in digital commerce and retail in Russia. So are Apple Pay and Google Pay. But all of these payment systems have suspended operations in Russia since the invasion.

That leaves Mir, the payment system Russia created after international sanctions were imposed following Russia’s military actions in Crimea in 2014. Mir does not itself issue cards, extend credit or set rates and fees for consumers. Rather, Mir provides financial institutions with Mir-branded payment products they can then use to offer credit, debit or other programs to customers.

All the top ecommerce sites in Russia accept Mir.

But just how well Mir can work in the present environment — in which the Russia’s currency, the ruble, is already down more than 30% against the dollar this year — is an open question.

The larger question is whether the Russian economy itself can withstand the pressures of sanctions and near-global disdain. JPMorgan Chase & Co.’s analysts aren’t optimistic. They wrote in a note to clients March 4 that “Russia’s export earnings will be disrupted, and capital outflows will likely be immediate despite its large current-account surplus,” they said. “Imports and GDP will collapse.”

Original Post: https://www.digitalcommerce360.com/2022/03/04/russia-ecommerce-slows-retail-industry-looks-to-help-ukraine/