In Russia, it is e-commerce that drives the market for cloud technology. New legislation incentivises cloud applications in retail as it requires online cash registers.

According to the Russian Association of Internet Trade Companies (AITC), in 2016 the Russian e-commerce market was up 21% to RUB 920 billion. This year, it is projected to reach RUB 1.1 trillion. By 2020, experts expect the figure to double (Higher School of Economics).

• Still, online purchases only account for 3.3% of the total retail turnover (8.5% net of petrol and car sales), as opposed to 10% in the US and 13% in the UK.

Russia’s e-commerce is largely driven by cross-border deals involving Chinese retailers (first of all, AliExpress).

• Cross-border trade (retail sales by post, without a local legal entity) comes laden with virtually no taxes and has soared 14.5-fold in the last six years.
• Foreign online stores account for about one third of the e-market, with Chinese players making 90% of all cross-border trades by number and for 50% by value.

The eroding tax base in cross-border trades has become a global focus.

• International working groups of G20 and the OECD jointly drafted and aligned on, with Russia among others, their BEPS Action Plan (Base Erosion and Profit Shifting Action Plan).
• It envisages that retailers should pay their VAT in the country where the consumer is, therefore ensuring equal competition for domestic and foreign sellers.
• In Russia, this provision only applies to sales of software, digital content and other electronic services so far.

Russian e-retailers mostly prefer cloud solutions that are cheaper than building their own IT infrastructure. It is retail that drives the market for cloud technology in Russia.

• According to a survey by IT Grad, every third e-retailer uses clouds.
• In a survey by CNews, most cloud providers named retailers among their key customers.
• The biggest suppliers of IT to retail in 2016 were Softline, Maykor, CFT, Croc and Atol.

That is a global trend – the international market for cloud technologies has been growing six times faster than the IT market in general (Gartner).

• Russia accounts for 2% of the world’s cloud market.

However, the Russian market is different to the global in how they use clouds.

• While the rest of the world mostly uses SaaS (software as a service, i.e. when applications are hosted by third parties and accessible via a browser), Russia prefers IaaS (infrastructure as a service, lease of virtualised computing resources over the internet). For large businesses, who use clouds more actively than SMEs, IaaS is more convenient given the scale and expenses.

A milestone event for Russia’s retail in the near term is the new law to be passed that requires most sellers to transfer cash register receipts to the Federal Tax Service over the internet.

• Transition to the new type of cash registers will not be an issue for big players, but these expenses will be quite painful for small and medium-sized businesses. So, cloud-based cash registers look like a more affordable solution.
• LiteBox estimates the market for cash register upgrade at RUB 28 billion, out of which cloud solutions may get over 25%.