Russia’s online grocery market has contracted for the first time in two years due to a severe shortage of couriers, The Bell reported on August 8.

Russia’s economy is afflicted by a severe labour shortage that has driven the unemployment rate down to a post-Soviet low of 2.4% in July, but has pushed up wages at the same time.

Many service sectors and labour intensive industries have been affected, including a shortage of Siberian bus drivers. Now the e-grocery business has been hit by the same problems, as workers, mainly men, are drained away to the military.

The labour shortage is forcing operators of online retail services to reduce delivery zones and raise prices, which could lead to a significant redistribution of market shares among main players in the market.

In the April-June period, the online sales market for everyday goods shrank by 3.2%, marking the first decline since 2022, according to a report by Infoline, cited by Kommersant. Although year-on-year growth reached 47%, this figure is still lower than the 55% growth recorded in the first quarter of 2024.

The Bell reports that the decline is largely due to a shortage of pickers and couriers, which has forced operators to scale back their operations and hike prices to cover a growing wage bill.

The labour market for couriers in Russia is under severe strain, with around 1mn couriers currently employed across the country. However, as of early March, there was a shortage of approximately 140,000 couriers, a number that could double by the end of the year. The bus driver deficit is at a similar or higher level, depending on the region, and ranges between 20-50% shortfall.

The shortage is particularly acute among men aged 18-40, leading companies to increasingly hire women, students, and pensioners for delivery roles. This shift in the workforce has driven courier salaries to more than double, with delivery drivers now earning up to RUB180,000 ($2,050). Likewise, bus driver salaries have been hiked from RUB75,000 to RUB100,000, but still can’t compete with the RUB200,000 or more a driver can make working for the Ministry of Defence.

The Central Bank noted that the country has not faced such a severe labour market situation since 1998. CBR governor Elvia Nabiullina was especially downbeat at the last monetary policy meeting in July, saying that the resources for more growth are exhausted that will cool the economy going forward, despite upbeat growth forecast of 3.8% for this year, released by Sberbank the same week and ahead of the official forecast of 3.4-3.5%.

In contrast to Infoline's report, another analytics firm, Data Insight, reported e-grocery market growth of 2.8% for the quarter and 60.1% year-on-year. The discrepancy is attributed to the fact that Data Insight does not include non-urgent food deliveries through marketplaces, which have seen their sales growth stagnate, says The Bell.

The shortage of personnel, particularly men from Russia and neighbouring countries, is a result of the ongoing war and tighter migration policies, which has driven many migrants to leave. Russia relies heavily on the millions of workers from the so-called near abroad to do the work its own nationals refuse to do.

This shortage is being felt across all industries, but it poses a particularly significant challenge for the e-grocery sector, which could see a redistribution of market shares among delivery operators.