Sramana: How does the sales cycle work? Is delivery fulfillment happening in Russia with merchandise stored in Russian warehouses?
Aaron Block: We are a middleman in Russia, but in the U.S. we are known as a cross-border e-commerce company. There are a number of players in the cross-border space. The cross-border space means that you shop from a location outside of the U.S., typically the big markets from which you would buy are the U.K. and China. You will shop online and have the goods delivered to you, the consumer, directly from abroad.
In terms of our business, there is very little going on in terms of a supply chain inside the former Soviet Union. The entire operation, including the Russian-speaking call center, happens to be in the suburbs of Chicago. The goods move from the manufacturer, wholesaler, or retailer in the United States to our warehouse in Chicago. We open the goods to do quality control and reconciliation against the order to make sure that the item ordered is the exact item shipped. That is a big step in the process for a cross-border company. We then do a few value-added services such as photographs, consolidation, and quality assurance. At the customer’s request, we will repackage and ship to the former Soviet Union with proper customs forms completed. The packages are shipped directly to the end user.
Sramana: Is the order taken directly by Bay.ru?
Aaron Block: Yes. The consumer never sees the vendor and the vendor never sees the consumer. That creates a lot of trust and eliminates a lot of problems in the process. We are experts at capturing demand. Over the past five years there has been tremendous demand that far outstrips supply in the former Soviet Union. The populace is becoming wealthier by the day, as many of us know. The emerging middle class has a lot more money to spend. The supply chain infrastructure in Russia is not robust enough to satisfy this demand. In addition, there are problems with payment online. They are still a cash-based economy. Credit cards have not yet taken hold like they have in the U.S.
We offer 500,000 payment points in Russia. Customers browse more than 200,000,000 SKUs on our site because we integrate other catalogs such as Amazon and eBay on our site. A customer is capture by our marketing channels and drive to our site where they can browse and order what they want. They check out using a single shopping basket, which starts the operations process. A payment confirmation call comes from Chicago and the movement of the goods to the user via Chicago begins.
Sramana: How many touch points do you have in Russia to take orders?
Aaron Block: We have 500,000 touch points in Russia.
Sramana: What does that mean? Do you have kiosks?
Aaron Block: Kiosks are prolific in Russia. People pre-pay with telephone bills among other bills. We also have a presence in Russian bank branches, Russian post offices, Western Union stores, and online payment systems. We have found a way to accept every which way a person could find to be a comfortable manner of payment.