The sales revenues (GMV) of Ozon, Russia’s leading multi-category e-commerce platform, increased by 73% last year, reaching 42.5 billion rubles (nearly $680 million) incl. VAT. More than 15 million orders (74 million items in total) were processed, the company announced last month.
Much of the activity increase was driven by a larger assortment (now 1.6 million SKUs) and more efficient logistic processes, according to the company.
Never had Ozon – one of Russia’s leading e-commerce companies – recorded such a high growth over the past 10 years. “The physical limitations of our fulfilment centers prevented us from doing even better,” said Darya Chalova of Ozon’s press service to East-West Digital News.
As of late 2018, the company operated a logistic infrastructure of around 100,000 sq. m. These facilities includes a large fulfilment center in Tver, a city 180 km northwest of Moscow, and other centers in the Moscow region, Kazan, Ekaterinburg, Voronezh, Krasnodar, Novosibirsk and St-Petersburg.
Ozon says its fulfilment capacity will at least double in 2019 with the extension of the Tver hub and the launch of a new facility on the outskirts of Moscow. Under plans, the company’s logistic infrastructure will “exceed 1 million sq. m. in 2025,” the company’s PR director Maria Zaikina told us.
Ozon claims that only its investments in logistics and IT have prevented it from being profitable so far.
Several other Russian online retailers saw their sales increase dramatically last year, overperforming the market which grew by 19%, according to Data Insight’s first estimates, to some $18 billion (domestic orders of physical goods only). In the top 10, Wildberries (fashion) and DNS-Shop.ru (electronics) did even better than Ozon in terms of sales growth last year with +74% and +83%, respectively, according to Data Insight’s ranking.
Big capital injections
Ozon was founded in 1998, with an initial focus on books, CDs and DVDs. On the footsteps of Amazon, the site progressively enlarged its assortment: it sells now veirtually anything from mobile phones, to fashion items, to medicine.
The company launched Ozon Travel in 2009; acquired Sapato.ru, an online retailer of shoes and accessories, in 2012; and bought a stake in Litres, the Russian e-book leader, two years later. More recently, the company launched a user-to-supplier loan platform as well as an e-commerce subscription system dubbed ‘Ozon.Premium’ – a first in Russia.
With big capital injections in 2011 ($100 million), 2014 ($150 million) and 2018 (up to $92 million), Ozon is one of the most well-funded Russian e-commerce companies. The company has just agreed a $150 million convertible loan provided by its two main shareholders, the Russian conglomerate Sistema and the international PE firm Baring Vostok.
The company’s valuation in the 2018 round amounted to $814.2 million, according to media reports.
Big money is indeed required to develop the company’s logistics and resist growing competition. LSE-listed Mail.Ru Group has made an alliance with Alibaba to create an ambitious e-commerce and social communications platform, while Yandex’s e-commerce projects have been backed Sberbank, the state-controlled financial giant, which has put $500 million in their joint-venture.
Ozon will also have to measure itself against Wildberries, the current e-commerce leader in Russia, which is switching from its initial focus on fashion items to a more diversified assortment.
