Anna Kravchenko in Moscow -

In the middle of April, Germany became the latest source of investment for Russia's budding e-commerce market. Germany's Bonial International Group has teamed up with Russia's leading internet firm incubator Fast Lane Ventures to create Lokata - a location-based service combining retailers' virtual catalogues, maps, and offline shop details.

Lokata is based on Bonial's German service kaufDa, which was a big hit in Germany with 32m unique users each month and 1.2m downloaded mobile apps. The service allows punters to find the nearest shop carrying the products they are looking for, provides the vendors' opening hours and contact details, and generally makes it easier to shop. Stores can be found using search filters by products, retailers, and brands. Lokata is already nationwide and comes with all the bells and whistles you'd expect: a free mobile app released on iPhone, iPad, and Android devices.

Bonial followed up its German version with a French version Bonial.fr, but now it's time to conquer Russian market, say the founders. "There are two reasons why Bonial decided to enter Russian market now," says Christian Gaiser, head of Bonial and kaufDa's creator, in an interview with bne. "The first reason is the high level of internet penetration in Russia: there are 60m internet users now. The mobile devices are getting more popular and the number of mobile internet users is growing fast. The second reason is that the retail structure in Russia is similar to that in Germany and France, and Bonial's biggest European partners - Auchan and OBI - operate in Russia as well."

Indeed, Russia's "traditional" retail and existing online shopping networks are both doing well, said Alexei Filatov, managing director of The Boston Consulting Group in Russia, during a Lokata presentation. "We asked the biggest local players about their investment plans in 2012. For example, [book retailer] Ozon plans to spend $100m on logistic and new acquisitions this year." At the same time, the market and competitive conditions have changed, with turbo-charged consumer spending growth having peaked. "Traditional" retailers need to find new ways for promoting their products, and Lokata is one of them, Filatov added.

Assured by the positive outlook for the Russian e-commerce market, both Bonial and Fast Lane are confident the project will repeat the success of its European versions. For "traditional" retailers, it is an opportunity to promote products on the internet, while for customers, it is a smart vendor locator showing the brands' best bargains. Currently, it is mostly catalogues and flyers converted into PDF files, but if the project proves successful, retailers will be able to create catalogues specially for Lokata.

The size of investment was not disclosed, but the participation of Fast Lane Ventures means the project has got off to a good start. "Fast Lane has many successful start-ups under its belt, both in new niches and overcrowded sectors, like online dating sites. The company is able to attract enough investment to hold a serious advertising campaign," says Ivan Kurguzov, CEO of internet firm Oborot.ru.

However, it's hard to tell yet if the project will be successful; the team is going to play against the market, though it is a professional team, Kurguzov adds.

Local competition

The main issue for Lokata is the number of strong local players. Despite claiming it doesn't have a direct rival, Lokata does duplicate already existing services, and, in fact, will have to confront some major players. "There are already many similar services. Some of them are based on big sources of traffic, like Yandex.Addresses. From the other side, there is no service with all the necessary functions that, at the same time, would be popular and with a large database of products," says Kurguzov.

Mikhail Kisin, director of food products database GoodsMatrix.ru, points out there is the identical Russian start-up shoppingplus.ru, but he says Lokata looks more promising. "The main difference between Lokata and Yandex.Market is the range of products and principle of choosing them. Lokata looks for products that are really in half-hour accessibility with all discounts available. That is why these services are not mutually exclusive, they supplement each other solving different tasks - Yandex.Market looks for goods of preliminary choice, and Lokata for goods of every day and even every minute demand," explains Kisin. "Whether the project survive will depend on the business model. I doubt that retailers will pay. The advertising model will work if there are enough users to cover expenses on the digitization of catalogues, and that is considerable."

For the majority of customers, Anton Terekhov, e-commerce director at Rambler, believes that Yandex's services will be the primary choice. "Lokata will struggle with that kind of customer perception, and Yandex is a very tough player to compete with," says Terekhov. "I think as an independent project Lokata won't be successful, because attracting users is expensive. In Russia, the tradition of using coupons and flyers is not as developed as in Europe, so the service has to start this tradition from zero. Apart from that, it is crucial to have all catalogues from offline shops perfectly up-to-date, otherwise the whole project is pointless. To create a partnership with already existing price comparing services that have traffic would be more prospective."