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Reuters: Russian retailer Ozon to spend $300 mln on logistics to boost growth

Russian online retailer Ozon plans to spend more than $300 million on logistics in the next two to three years, its CFO Daniil Fedorov told Reuters, and has also talked to investment banks about a possible stock market listing.

Ozon, which sells everything from white goods to children’s clothes, wants to increase market share in Russia’s crowded e-commerce sector, which analysts expect to grow significantly in the coming years, as large companies, including Yandex and Mail.Ru and Sberbank jostle for space.

Ozon’s sales increased 93% to 80.7 billion roubles ($1.1 billion) in 2019 and the volume of orders more than doubled to 32.2 million.

Fedorov said Ozon intends to grab market share during this “hypergrowth stage” by adding 250,000 square metres of distribution centres across the country, an increase of around 125%.

Fedorov said that Russia’s e-commerce market is “fragmented”, with Ozon, along with most other players, having a less than 10% market share, based on the company’s and independent estimates.

He said Russia’s huge distances, 11 time zones and often unreliable third-party logistics providers are some of the problems facing the country’s e-commerce firms.

Ozon has spoken to some investment banks about a potential initial public offering (IPO) within two years, Fedorov said, but the $300 million logistics spending will primarily come from shareholders, which include Russian conglomerate Sistema and investment fund Baring Vostok.

“We are constantly working on financing, shareholders are supporting the company, but we are quite possibly considering different options,” Fedorov said. “We’re going to close some additional financing this year.”

Baring Vostok said it continues to invest in existing and new Russian projects and is committed to Ozon’s growth strategy.

Sistema said it plans to continue investing in Ozon, along with other shareholders.

Fedorov said Ozon had seen increased sales since the coronavirus outbreak, which he put down to people switching to online purchases instead of visiting shops and demand for certain health-related items had significantly increased since January.
Ozon’s sales of personal hygiene items are about 30-40% higher than a typical winter season, while sales of books about viruses have significantly increased.

“Volume-wise, we are actually seeing very good growth, it has even slightly accelerated,” said Fedorov. “Certain categories in health, like masks, have exploded.”

Original article: Reuters