Ozon.ru, one of the most established Russian e-commerce sites, has just closed a $100 million round of financing led by Ru-Net, a major Russian fund, with the participation of Index Ventures, Alpha Associates and Japanese e-retailer Rakuten. Ozon’s main shareholder to date, Baring Vostok Capital, has retained its stake in what essentially appears to be a capital increase operation.
The transaction marks the most significant investment volume in the history of Russian e-commerce, topping a $55 million funding deal completed last April for private shopping club KupiVip.ru.
Ozon’s valuation has not been disclosed, but Maëlle Gavet, the company’s CEO, told East-West Digital News it was “higher than expected in a highly competitive situation.”
In 2010, the company’s revenues jumped 34% year on year to $137 million, The Guardian reported. According to Russian financial expert Leonid Delitsyn of Finam, the company’s valuation could amount to over $500 million based on the site’s 2010 turnover, reported Russian business daily Vedomosti.
Gavet indicated the funds will be used to reinforce its logistic capacities, enlarge its product assortment and further develop its travel offer, Ozon.Travel. Ozon.Travel announced in March a twentyfold increase in its annual gross booking sales, from 44 million rubles or $1.47 million, in 2009, the year of launch, to 898 million rubles or $29.9 million in 2010.
Large assortment, fully internalized fulfillment
Founded in 1998, Ozon.ru – often called the Russian Amazon.com – is among the most established of Russian e-retailers. Among its early stage investors were Baring Vostok Capital and Direct Group, a pioneer in distance selling in Russia. Initially focused on cultural goods, the site enlarged its positioning in the mid 2000s with consumer electronics, cameras and mobile phones, then to children’s goods and travel products. Today Ozon arguably has the largest online assortment on the Russian market.
Ozon has its own substantial logistic capacities. The company has internalized most of the delivery process, making it “cheaper and more efficient than the Russian post,” said Gavet in an exchange with East-West Digital News last month. “We’re the only one to offer real nationwide coverage,” she added.
The Russian e-commerce market was estimated at between $5 and $10 billion in 2010. “E-commerce is still a nascent phenomenon in Russia: 50 million users is a long way from being 50 million shoppers,” Gavet admitted.
The immensity of the country, the situation with payments – most purchases on Ozon are paid for in cash on delivery due to a lack of user trust – and import-related administrative hassle are some of the issues which make the development of e-retail businesses in Russia more difficult and costly.
But the situation is progressively improving and, with a 40% annual growth, the market could reach $100 billion before 2020.