EBay to Alibaba Hurt by Russia New Rules on Express Parcels Delivered From Abroad as Local Rivals Gain

EBay to Alibaba Hurt by Russia Rules as Local Rivals Gain

Russia’s new rules on express parcels delivered from abroad are benefiting local online stores at the expense of global companies such as EBay Inc. (EBAY) and Alibaba Group Holding Ltd., Renaissance Capital said.

Strengthened document checks were introduced this month on imported goods intended for personal use, regardless of their value, Kommersant reported. Express-delivery operators including Deutsche Post AG (DPW)’s DHL unit and FedEx Corp. (FDX) reacted by stopping shipments to private individuals in the country, while others such as United Parcel Service Inc. said deliveries would suffer delays.

“The losers in this situation are global online stores including EBay and Alibaba, which have been increasing shipments to Russia,” David Ferguson, an analyst at Moscow-based investment bank Renaissance Capital, said by phone. “Local Internet stores including Ozon.ru and Lamoda may benefit in the short term.”

Cross-border e-commerce shipments in Russia probably doubled last year to almost $3 billion, while the domestic online retail market rose 26 percent to the equivalent of $15 billion, according to researcher Data Insight.

“A lot of those Russians who made online purchases in global online stores aren’t eager to switch to the local ones,” said Boris Ovchinnikov, co-founder of Data Insight. “They would rather make more purchases while traveling abroad.”

Tax Initiative

President Vladimir Putin said last month that e-commerce should be put “in order” with more tax collected from it. Subsequently, Russia’s Finance Ministry proposed to lower the threshold for tax-exempt online purchases to 150 euros ($206) from 1,000 euros. Meanwhile, Russia has introduced the additional paperwork for deliveries for personal use.

The decision by DHL and FedEx to stop shipments to private individuals in Russia won’t affect EBay as the share of parcels shipped through these operators is insignificant, EBay’s press office said by e-mail. Pamela Munoz, a spokeswoman for Alibaba in Hong Kong, declined to comment.

Maria Nazamutdinova, a spokeswoman for Ozon, and Yana Basaranovich, a spokeswoman for Lamoda, declined to comment.

The effect of Russia’s new rules for the delivery companies will be limited because more than 90 percent of international package and document shipping is business-to-business, said Satish Jindel, president of SJ Consulting Group, a logistics advisory company in Sewickley, Pennsylvania.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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