Baring Vostok, a major Moscow-based international PE firm, and Sistema, a large Russian conglomerate, have provided a 10 billion ruble (roughly $150 million) convertible loan to online retailer Ozon.
The funds will help the company “maintain its current growth rate and to develop its warehouse infrastructure, IT-platfrom, marketplace and financial services offerings,” according to a Baring Vostok statement.
Ozon also needs financial means to “aggressively grow its market share.” The company is number one among multi-category online retailers in Russia, but only number four in Data Insight’s general e-commerce ranking. It has to measure itself against Wildberries, the current e-commerce leader, which is switching from its initial focus on fashion items to a more diversified assortment.
Other strong contenders for market leadership are LSE-listed Mail.Ru Group, which has made an alliance with Alibaba, and Yandex Market, which is backed by Sberbank.
From startup to massive capital injections
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’s valuation in the 2018 round amounted to $814.2 million, according to media reports.
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 virtually 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.
Baring Vostok and Sistema are Ozon’s largest shareholders. They provided 4.3 billion rubles and 5.7 billion rubles, respectively, of the agreed convertible loan.
E-commerce on the rise
Russian e-commerce is entering a promising development cycle: although the size of this market reached just $18 billion last year (taking into account only domestic orders of physical goods, according to Data Insight), its growth is accelerating, as witnessed by the performance of Ozon and many other players.
In October last year Morgan Stanley predicted that the market could exceed $50 billion by 2023. But market analyst Boris Ovchinnikov of Data Insight believes online retailers could do even better.
“Over the past year or two, the performance of many players, including both large and medium-sized sites, has been so impressive that forecasts may have to be revised upwards,” he told East-West Digital News.
- East-West Digital News is conducting an international study on Russian e-commerce in partnership with Data Insight, ECommerce Foundation and InternetRetailer.com. Foreign brands and online retailers selling to Russia or considering to do so are invited to participate in an online survey; they will receive the research report free of charge upon release.
