Building a Cross-Border e-Commerce Success Selling to Russia: Bay.Ru CEO Aaron Block (Part 4)

Sramana: When you are buying wholesale, you have enough margin on the sale price to make a decent profit. If you are buying from other retailers, the margins tend to be less interesting. Is your margin with eBay or Amazon acceptable?

Aaron Block: There is a market for international goods in Russia. The markup above retail price is anywhere from 9% to 45%. We collect margin there. We also provide a number of value-added services during the supply chain process. We also buy shipping at wholesale prices because we are an enormous exporter of goods. We use a lot of freight, postal, and courier services, so we have ample opportunities to get margin on that side. When everything is combined, our margins work out well.

Sramana: You are basically making your margins based on prices that consumers are willing to tolerate, and shipping margins?

Aaron Block: In addition to what you have mentioned, we achieve margins on the value-added services around the online retail portion of what we do.

Sramana: What is the merchandise mix? Where is the interest of the Russian consumer?

Aaron Block: We track very closely to eBay’s largest categories. Our largest category by far is auto parts, followed by fashion and electronics. However, we have a very long tail of consumer goods. People shop from America because they are enthusiasts or they are looking for something specific that is not carried in the mainstream retail market in Russia. We sell a lot of toys, jewelry, and collectibles. The list goes on from there.

Sramana: Are the founders of the company still involved with the business?

Aaron Block: They are. Part of the reason I decided to join the business after I invested is because of the capabilities, shared approach, and capabilities of the founders. One founder is now the chief marketing officer and the other is the chief operating officer. One handles the capturing and creation of demand, while the other controls the supply chain process. Both are incredibly important roles.

The younger brother, Anton, is the chief marketing officer and the real founder of the business. This was his baby from the beginning. He had been selling on eBay while he was in college and dropped out to attend to this business full time, much to the chagrin of his older brother and partner, Gene, who at the time was working at Orbitz as the director of software yechnology. Between Gene’s technology savvy and Anton’s entrepreneurial spunk, the two found a way to get the operational, entrepreneurial, and technology aspects of the business figured out. This all came about because Anton and Gene were constantly asked by their family and friends to bring items back with them to Russia.

This segment is part 4 in the series : Building a Cross-Border e-Commerce Success Selling to Russia: Bay.Ru CEO Aaron Block
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