OZON.ru is often called the “Russian Amazon.” Is that a good analogy?
Yes, we have a very similar business model. Like Amazon, we started out selling a large selection of books, then step-by-step branched out into other products. We now have 1.5 million unique products in 12 categories. We are the leader of e-commerce in Russia, and the most recognizable e-tailer among online buyers.
Your diversification strategy seems ambitious: OZON Travel, children’s goods, your own reading tablet, just to name a few recent examples. What’s your ultimate goal?
Our goal is simple: offer everything the user needs. We aim to be the best in every category, and that’s why our selection is the widest in Russia.
What, in your view, are the main differences and similarities between doing e-commerce in Russia and in Western countries?
Delivery and payment methods are the two biggest differences. Delivering goods across Russia is a challenge. Russia is a continent-sized country spanning 9 time-zones. There’s no fast, cheap and reliable federal delivery here. This is why OZON has built its own delivery network in more than 80 cities and offers 14 types of delivery. As for payment, Russians are used to paying cash on delivery: more than 80% of our orders are paid this way. OZON, therefore, had to develop a reliable system for collecting cash across Russia.
But the appetite of Russians for online shopping is as strong as it is for westerners: with the rapid increase in internet users, e-commerce is booming in Russia.
Logistics and delivery, in particular, may be more difficult and expensive to organize in Russia. How do you solve these issues, both technically and economically? What are the implications for OZON’s profitability?
The company has its own warehouse in Tver – a city between Moscow and St. Petersburg. This is the largest logistical center for e-commerce in Eastern Europe. It can serve up to 3.5 million items and handle on average 30,000 orders per day. We also have small warehouses in Moscow and St. Petersburg to support our own courier service, “O-Courier.” Additionally, OZON arranges delivery by the Russian Post, DHL, TNT and other third-party logistics providers.
Because delivery in Russia remains expensive, we have to subsidize part of the delivery costs to make it affordable for our customers.
Do you think it’s a good idea for foreign players to invest in the Russian internet and Russian e-commerce today?
Definitely! The recent IPO of Mail.ru shows the interest of international investors in the Russian internet. OZON itself has had foreign capital investors for several years (including Index Ventures and Cisco).
With the expansion of regional internet penetration, the number of internet users continues to grow. As a result, the demand for e-commerce services is accelerating.
How do you see the Russian e-commerce landscape in, say, 5 years?
There will be one Amazon-like, universal internet-store – OZON.ru – plus some big specialized stores and a large number of small, local stores connected to one or more e-commerce networks.
• Bernard Lukey is CEO of OZON.ru. Prior to joining OZON.ru in 2005, Bernard Lukey worked as marketing director for Nestle Nespresso Switzerland. In 2000-2002, he worked as marketing director for ru-NET Holdings and Baring Vostok Capital Partners, where he coordinated strategic planning and marketing for Yandex and OZON.ru projects.
Illustration: OZON.ru’s warehouse in Tver
