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A top Russian e-retailer talks growth, profitability and a possible IPO in the West

September 15, 2016 04:53 PM
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Ozon.ru, one of the most established Russian online retailers and one sometimes dubbed, with some exaggeration, ‘the Russian Amazon,’ saw its sales grow by 20% year on year in the first seven months of 2016. The figure was disclosed by Danny Perekalsky, the site’s CEO, in exchanges with Rambler News Service (RNS) and East-West Digital News.

“We’re satisfied with this growth rate, which is above market average,” he said, adding that Ozon.ru’s growth could reach 25% year over year in 2016 and as much as 30% in 2017. Ozon.ru is No. 25 in the Internet Retailer 2016 Europe 500.

Perekalsky did not disclose the sales numbers of the Ozon group, which also includes, in particular, Ozon.Travel and a B2B e-commerce service unit.

Conceding that the site—which has received hundreds of millions of U.S. dollars in capital injections since launch in the late 1990s—was not profitable yet, Perekalsky said that losses are being reduced and that his aim is to reach break-even in 2017.

Even though Ozon “does not need money urgently,” Perekalsky said that “at a certain stage, it would be interesting to start developing this business even faster and invest more in it.”

Postponed IPO plans

“An IPO remains in our plans,” he added, “but it will take place in a two or three-year perspective rather than in 2017 [as considered previously].”

The operation could take place in the USA or the UK, but “there’s nothing concrete for the moment, we haven’t talked with banks yet.”

Several other Russian online retailers—including KupiVip, Ulmart, and Wikimart—have also postponed their IPO plans over the past few years.

Alternatively, Ozon could sell a stake to a strategic investor or, “as a more likely option,” receive an additional capital injection from its existing shareholders, in particular Sistema, a Russian conglomerate which invested $150 million in the Ozon group in 2014.

However, no concrete discussions are being held at the moment, since “attracting new funding is not critical to us now,” Perekalsky underlined. 

No merger with Ulmart

Commenting on potential consolidation with other players, Perekalsky did not deny that Ozon.Travel—an entity of the Ozon group which he does not manage himself—has “periodic discussions” with other online travel agencies. These might include OneTwoTrip and Anywayanyday, two key players in their segment, according to RNS.

Meanwhile, Perekalsky does not support the idea of a merger with Ulmart, Russia’s leading e-commerce company, in spite of recent expressions of interest from Ulmart’s CEO Dmitry Kostygin.

“We’re not holding any such discussions, we’re not even thinking about this,” Perekalsky said categorically.

More generally speaking, Perepalsky sees market consolidation as inevitable. Thousands of sites operate in what Perepalsky calls the “grey market,” failing to serve their customers in a legal and satisfactory way.

In the interview, Perekalsky also provided fresh stats about the payment methods used by Ozon.ru’s customers. No less than 40% of purchases are now prepаid by bank cards or other electronic means, with 60% still settled by cash on delivery. Cash payments accounted for a much higher proportion just a few years ago. Ozon expects this type of payment to decrease to some 50% in 2017, Perekalsky said.

Born in Israel, Perekalsky became deputy CEO of Ozon.ru in 2014, then CEO in 2015. Previously he made most of his career in the Russian retail industry.

This story first appeared in East-West Digital News, the English-language e-commerce news service based in Moscow. It is reprinted with permission.

 

 

 

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