Russian Biggest Steelmaker Bets on E-Commerce to Boost Sales

  • Severstal seeks to lure clients as steel industry flounders
  • Company’s new online shop to go live by the end of March

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Severstal PJSC is putting the finishing touches on an online shop that Russia’s biggest steelmaker by market value promises will make buying its products as easy as downloading an e-book or ordering a pair of shoes.

The company, which is controlled by Russia’s richest man, Alexey Mordashov, started testing its new website in November and plans to have the system fully operational by the end of March, Marketing Director Dmitry Goroshkov said by e-mail. The company is targeting online sales of 3.5 million metric tons by 2018, equal to about one-third of its total last year.

“We see huge potential in e-commerce,” Goroshkov said. “This is the fastest-growing segment of the world economy.” Online sales of goods globally are increasing by about 20 percent each year and in Russia stood at about 900 billion rubles ($15.2 billion) in 2016, according to Goroshkov. While retail sales accounts for the bulk, industrial companies shouldn’t lose time in developing their own online platforms, he said.

Steelmakers including Severstal are looking for ways to boost sales and add clients as an oversupply of the material drags on prices. The global industry is running at about 70 percent of capacity, according to the World Steel Association. While Russian producers have fared better than rivals elsewhere, thanks to low costs and less debt, Severstal’s steel sales still contracted 1 percent last year.

Niche Goods

While online steel sales have been expanding globally, particularly in China and India, most websites are run by traders, rather than producers themselves.

Severstal’s online shop will initially offer standard steel products only, but there are plans to expand to more niche goods over time and the system will be opened to international clients in 2018, Goroshkov said. Customers can order steel from storage facilities in 44 regions and choose from a selection of delivery locations, he said.

While Severstal has processed sales online in the past, the system was only available to a small set of clients and offered a narrow range of products. Russian rival Magnitogorsk Iron & Steel Works OJSC also offers online sales, in a process similar to Severstal’s original offering.

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