If you were asked to name a place that’s the complete opposite of Russia, you might conceivably answer Skokie, Illinois. But you’d be wrong, because it’s the home of Bay.ru, the former Soviet Union’s fastest-growing e-commerce site.
A few years ago, two Russian brothers studying in the U.S., Anton and Gene German, noticed that every time they returned to Russia, they were being asked to “Bring me back an iPhone. Bring me back auto parts. Bring me back anything you can get your hands on.” They saw how difficult it was for Russians to purchase products online. Why? For one thing, post-Soviet Union roads and supply chains are still poor. Second, Russians rely overwhelmingly on cash rather than debit or credit cards, making it difficult to purchase goods online. And last but not least, corruption and fraud in Russia and other post-Soviet countries are still pervasive.
So the brothers German decided to build a more efficient way to get goods to Russians. They founded Bay.ru in 2007 to get products back home to their family and friends. The site, built by Russians for Russians, pools together millions of items sold on Amazon, eBay and other e-commerce sites and provides a much easier and more reliable system for Russians to purchase and receive products.
This March, five years later, the site turned profitable. The number of employees at Bay.ru has increased from 17 to 55 in the last year and a half, and sales have increased 700% in the last year. CEO Aaron Block says the company is hoping to hit $40 million in sales this year.
Block often describes BayRu by a Russian name – “posrednik,” which means middle man. “Our number one job is to capture existing demand,” says Block. “We do that by figuring out what they’re searching for. We integrate catalogs across all sites, and they can buy everything here. You go to one site, put it in one cart and checkout.”
What makes Bay.ru so interesting is its unique model: The site has been able to get goods to Russians more efficiently by first obtaining them in the U.S. and then shipping them overseas.
It works like this: Russian consumers place an order on BayRu, which then purchases the item from one of its partner e-retailers such as Amazon. The product gets sent to the site’s Chicago warehouse as a BayRu staffer calls the consumer in Russia to confirm the order. (BayRu employs a 24/7 call-center with native Russian speakers, which helps overcome language barriers.)
Once confirmed, the product gets shipped to Russia through one of the company’s many postal partners and couriers, including the U.S. Postal Service, UPS, FedEx and Russian mailers. Block says that for each shipment, the company has been able to determine the most optimal vendor to use.
“We can predict with fairly clear accuracy the actual cost to move the good from the Chicago warehouse to anywhere in Russia and post-Soviet countries,” says Block.
Another competitive advantage for BayRu is its payment system. Because Russia is still a largely cash economy, BayRu has 500,000 payment points across Russia and post-Soviet countries in stores, train stations and bank branches where consumers can pay cash that then gets transferred to BayRu.
Two of the most popular products sold by BayRu may not surprise you: fashion and electronics. But the third is auto parts, largely because the roads and weather often wreak havoc on Russian vehicles.
BayRu has been incredibly successful figuring out how to get goods to Russians much more efficiently, but does that mean another emerging market is on the company’s to-do list?
“I’m not going to rule anything out,” Block says. “It’s plausible that we would expand to other countries in Eastern Europe or emerging markets or the world in general. But right now, we’d rather be the best at one thing than being a jack of all trades.”