How to use a physical footprint to boost e-commerce

Formerly the Soviet Union’s savings bank, Sberbank’s physical footprint across the vast landmass of Russia is fuelling the state-owned company’s ambition to become an e-commerce titan.

Why it matters

As e-commerce saw a pandemic-induced surge around the world, the realities of a business model made to look easy by Amazon have been shown to be an extremely difficult way to make a profit – effectively, as sales grow, your margins shrink.

It all comes down to distribution advantages, as the strategist James Hankins explained in a recent piece for Marketing Week. Brands would do well to explore how examples from companies like Sberbank in Russia and Magazine Luiza in Brazil (which just posted a return to profit in Q2) show that physical infrastructure with digital characteristics is critical to profitability.

What’s happening

• A deep dive in the Financial Times explores the extension of the company from a dominant retail bank into e-commerce (and pretty much everything else).
• While the dynamics it faces are different from most western companies – the firm’s profits directly power a chunk of the Russian government’s spending – it is an interesting example of strategy under pressure.
• E-commerce is for the taking in this vast country, with a highly fragmented space that is growing fast.
• The entire sector faces a major barrier in the shape of Russia’s notoriously unloved roads. It’s difficult to overstate how important physical infrastructure and availability are to a successful e-commerce business. A footprint within reach of most citizens is a huge advantage.

The pressure

Financial services, Sberbank’s bread and butter, are coming into the crosshairs of tech firms who will, arguably, be able to deliver a stronger customer experience digitally. What they can’t hope to do is to build anywhere near the footprint of Sberbank, whose “ecosystem ambitions”

Key quote

“Ecosystems are growing all over the world. If there won’t be any Russian ecosystems, then Russians will be forced to live in American or Chinese networks” – Lev Khasis, CEO, Sberbank, speaking to the FT.

Sourced from the Financial Times, Marketing Week, NASDAQ