Russian e-commerce major Ozon has just announced a $150 million round of financing, consolidating its position among the most well-funded local market players. The money is coming from three investors bringing equal contributions: the Moscow-based private equity firm Baring Vostok Capital Partners, the corporate fund Sistema_VC and a new investor, the US VC firm Princeville Capital.
The deal took the form of a convertible loan. Some other details of the deals were published in the Russian media.
It comes as no surprise that Ozon secures a new giant round, following a $92 million investment in March 2018 and a $154 million deal in May 2019. With sales revenues increasing by up to 90% year-on-year, the company constantly needs to expand its logistics and technology infrastructure. The fresh funding will allow Ozon to open “at least five new fulfilment hubs” across Russia’s vast territory and to “grow its last mile logistics network at least threefold in 2020-2021,” according to a company statement.
What is less expected in the latest deal is the large involvement of a US investor. Since the Ukrainian crisis of 2014 and the subsequent US and EU sanctions against Russia, Western venture investors have virtually disappeared from the local venture scene.
The latest big Russian e-commerce deals involving Western investors took place in 2012-2013, when now defunct Wikimart secured $30 million from Tiger Global Management and Western-founded Lamoda received $130 million from Access Industries, Summit Partners and Tengelmann.
On the footsteps of Amazon
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 and bought a stake in Litres, the Russian e-book leader, in 2014. 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.
These activities were fuelled by big capital injections in 2011 ($100 million) and 2014 ($150 million), then in 2018 and 2019. The company’s valuation in the 2018 round amounted to $814.2 million, according to media reports.
Battle for leadership
Among other Russian e-commerce heavyweights in terms of funding are AliExpress Russia, in which shareholders Alibaba Group, Mail.Ru Group and RDIF are committed to inject nearly $400 million, and the Yandex Market group of companies, which received $500 million in 2017 from its co-owner Sberbank.
Ozon is the leading multi-category e-commerce company in Russia but only number four in general industry rankings. The leader, Wildberries, is growing as fast as Ozon. From an initial focus on fashion items, the company has switched to a diversified assortment and started expanding outside Russia.
As shown in a recent market research by East-West Digital News, Russian e-commerce is entering an accelerated development cycle. Online sales of physical goods reached some $22 billion in 2019 and jump to $50 billion or more by 2023. These numbers should be at least doubled to include online sales of digital goods and services.
