A modern-day digital iron curtain has fallen on the 12th largest e-commerce market in the world.
eCommerce in Russia was the talk of the town in 2020-2021 as sales boomed and interest grew in the potential for significant gains in eCommerce sales and stocks in the sector. The darling of Russian eCommerce, Ozon launched an IPO on Nasdaq that brought the company's estimated value to $6 billion.
Ozon shares have since dropped 87%, from the all-time high of $68 to $11.6. The Nasdaq has since stopped trading in the asset.
The pandemic helped fuel the growth for Russia's Amazon, Ozon, and other online stores with record growth during the crisis.
Now we find ourselves in another crisis with war raging in eastern Europe. The conditions this time around have not been favorable for the Russian e-commerce companies and customers.
Most of the world's countries have brought forward crippling sanctions upon Russia, hoping that the economic pressure would stop the war on Ukraine. It is now becoming a commercial outcast, cut off by many corporations that pulled out from Russia. The list of companies ceasing services is growing by the day, applying more pressure on the already hard-hit retail and online stores.
Nearly 300 USA companies offered shipping to Russia in 2021, and that number has dwindled since these retailers started announcing bans on sales since the start of the war. And even if companies still ship there, it is almost impossible to get it to Russian customers through the usual distribution channels.
Online sales are down over 50% in February 2022, and this number will continue to drop as inventory starts running low without the option to bring in more stock. The Ruble also crashed nearly 40% in the last ten days, and this further decreases the buying power of Russian companies and small businesses looking to order stock from abroad. Access to foreign currency is extremely limited with the blocking of Russian banks from the SWIFT network and companies like Paypal ceasing services.
The Russian Payment System Mir seems to be the only available option available for online payments.
Below is the list of businesses that stopped operating or shipping to Russia (as of 08 March 2022)
- Coca-Cola Company
- Daimler Truck
- Ford Motor Company
- Calvin Klein
- Tommy Hilfiger
- Levi Strauss & Co
- Estee Lauder
- TJX Cos
- Visa, Mastercard, American Express & Paypal
- Google (Blocked State Media Channels)
How long the Russian economy can sustain this type of global onslaught remains to be seen. The effects of this new digital iron curtain will undoubtedly be long-lasting and devasting, especially on the small to medium-sized online businesses dependent on online sales and inventory from abroad.