Following 73% growth in online sales in 2018, Russian ecommerce platform Ozon is investing in a big expansion of its fulfillment network. Several other Russian online retailers also grew rapidly last year, including market leader Wildberries.

East-West Digital News is conducting an international research on Russian ecommerce with its partners ECommerce Foundation and ThePaypers.com. Foreign brands and online retailers selling to Russia or considering doing so are invited to participate in an online survey; they will receive the research report free of charge.

The sales revenues (GMV) of Ozon, Russia’s leading multi-category ecommerce platform, increased by 73% last year, reaching 42.5 billion rubles (nearly $680 million) including 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.

The physical limitations of our fulfilment centers prevented us from doing even better.

Never had Ozon—one of Russia’s leading ecommerce 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 square meters. These facilities includes a large fulfilment center in Tver, a city 180 kilometers northwest of Moscow, and other centers in the Moscow region, Kazan, Ekaterinburg, Voronezh, Krasnodar, Novosibirsk and St-Petersburg.

advertisement
Ozon’s existing logistics center in Tver

Ozon’s existing logistics center in Tver.

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 square meters 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 (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 virtually anything from mobile phones, to fashion items, to medicine.

advertisement

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. London Stock Exchange-listed Mail.Ru Group has made an alliance with Alibaba to create an ambitious ecommerce and social communications platform, while Yandex’s ecommerce 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 ecommerce leader in Russia, which is switching from its initial focus on fashion items to a more diversified assortment.

advertisement

This article first appeared in East-West Digital News, the international online resource on Russian digital industries, and is reprinted with permission.

Favorite