(Bloomberg)—Yandex NV, long Russia’s leading internet search provider, now has its sights set on becoming an e-commerce powerhouse.
Yandex wants Beru, the online marketplace that it’s launching on Wednesday, to become one of the country’s top three platforms for locally sourced goods by the end of 2020. It’s counting on the backing of partners with deep pockets.
State-controlled banking giant Sberbank PJSC is funding the construction of warehouses and adding credibility from its name to Beru, or “I’ll take it” in Russian, to lure citizens still wary of paying online for goods they haven’t seen.
E-commerce has taken years to emerge in the country because of the lack of logistics infrastructure in a nation that spans 11 time zones. It now accounts for less than 5% of retailing and is growing fast as services become more reliable and the array of foreign consumer goods increases.
Unlike in Western countries, where Amazon.com Inc. (No. 1 in the Internet Retailer 2018 Top 500) dominates e-commerce, Russians use a range of specialist online shopping sites, from cheap electronics and clothes to household staples or big-ticket items. Amazon has stayed away from Russia due to political tensions and the logistical challenges of the vast country.
“What’s becoming key in retail is the knowledge about consumers,” Maxim Grishakov, head of the so-called etailing JV, said in an interview, explaining why consumers may choose Beru over rivals that have more experience. “Being a part of Russia’s largest search engine, we know much more about people than any retailer.”
It’s not Yandex’s first attempt to break into e-commerce. A 2016 effort stumbled when the company tried to turn Yandex.Market—then essentially a price-comparison site that would redirect shoppers to individual retailers’ websites to make purchases and made money from advertising—into a retailer with its own warehouses.
“That experiment was confusing for customers who didn’t know who they were buying from and an inconvenience for merchants who were comfortable with the earlier model and angered by the competition,” Grishakov said.
The misstep has cost Yandex CEO Arkady Volozh precious time. Rival billionaire Alisher Usmanov is hooking up with Chinese e-commerce giant Alibaba Group Holding Ltd. in a $2 billion e-commerce venture that has Kremlin backing. And Wildberries, a clothing etailer, and Citilink and M.video, big in electronics, are expanding to offer all types of goods. But with Amazon absent from Russia, the race to dominate an e-commerce market expected by Morgan Stanley analysts to grow by 25% a year looks wide open.
Beru will offer almost 100,000 different products, focusing first on big-volume goods that don’t spoil like pet products, diapers, electronics and home appliances. Like Amazon, it will own many of the quick-turnover goods while matching up buyers and sellers of less common items for a commission of about 10%, Grishakov said.
Sberbank, which has poured almost $500 million into the project in exchange for half of Yandex.Market, is a powerful ally. It serves half the Russian population and its $61 billion market value puts it among the three most valuable Russian companies. Yandex, headquartered in Moscow, is 85% owned by public investors, including large U.S. funds and has successfully defended its leading position in Russian online search from a challenge by Alphabet Inc.’s Google.
The alliance with Sberbank is a second opportunity for Yandex’s understated CEO Volozh to succeed in online retailing. Yandex now splits its e-commerce into three platforms: Beru for domestic goods, a new site to come for cross-border sales that will compete with Alibaba’s venture and its original basic price comparison site.
Beru isn’t afraid of competition, Grishakov said. “There is plenty of room for several large players to develop,” he said.
Yandex gained as much as 2.5% in Moscow on Wednesday. On Oct. 19, the stock plunged 20% on speculation that Sberbank may seek acquire a large stake. The bank denied the reports, while Volozh later said he has no intention to sell his 48% voting stake in the company.
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