OZON.ru, Russia’s leading online retailer, and described as the country’s Amazon, has closed a $100 million round, the Moscow-based company announced today.
It is the largest private investment the Russian eCommerce market has seen to date.
Existing investors Index Ventures and ru-net Tld—an investor in Yandex—are joined by new investors including Rakuten, the major Japanese e-tailer, and Swiss Equity Fund, Alpha Associates.
According to Maelle Gavet, the French 33-year-old ex-Boston Consulting Group and now CEO, the decision by the two original investors to stay in rather than cash out “is a huge vote of confidence” in the company that was founded in St Petersburg in 1998. OZON Group had a turnover of $137 million in 2010, delivering 2.1 million orders to its 5.2 million registered users.
Like Amazon, OZON grew from being an online bookshop. Today, OZON.ru also offers music, videos and films, household electronics, sporting goods and children’s products to the Russian speaking Internet.
“We sell a few goods into Germany, U.S. and Israel as well as to the other CIS [Commonwealth of Independent States] countries,” she said. “But our main focus is on Russia.”
Unlike Amazon, though, OZON has had to build its own distribution network, says Ms. Gavet. “Amazon relies on UPS. We have had to build our own courier network,” she said. Given that the Russian Federation is the largest country in the world and stretches some 8,000 km across, that is a non-trivial problem.
“We employ about 1,100 people,” she said. “About two-thirds are in fulfillment.”
Much of the $100million will be spent on logistics, she said, increasing the number of pick-up points from the current 1,000 to 3,000.
“We have a network of places where consumers can go to pick up their goods,” explained Ms. Gavet. “Unlike in the west, couriers are not common in Russia. Instead people are used to going to their local collection point. It is more convenient for them as they know the goods will be there and they don’t have to wait at home for the delivery.”
OZON already has the largest e-commerce distribution center in Eastern Europe, the $3.5 million 8,000 square meters center in the Russian city of Tver.
According to a report by GP Bullhound, the U.K- based international technology-focused investment bank, the Russian speaking Internet is fast becoming the largest European online audience.
In a report earlier this year, analyst Sasha Afanasieva wrote:
The speed of Internet growth in Russia is astonishing. Five years ago, the Russian Internet audience was behind the majority of European countries—at just over 10 million it was less than that of the Netherlands (11 million), Spain (12 million), Italy (16 million) and less than half of the French audience (24 million). Since then, Russian Internet penetration has grown from 9% to 43%, with Internet users estimated at c.60 million—it is now the second largest audience in Europe after Germany (65 million). An additional 47 million users are in the remaining countries of the CIS, forecast to grow to 130 million by 2013. As a result, the Russian-speaking Internet audience is one of the largest in the world.
However the report highlighted some of the problems with conducting business within Russia, including the perception of business risk, the protection of intellectual property rights, and a perception that Russia’s tax system is not always transparent.
By Ben Rooney