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Bloomberg: Ozon Targets one-third of booming Russian e-commerce market

 Ozon Holding Plc, Russia’s second-biggest online retailer, sees the value of merchandise sold on its platform increasing tenfold by 2026 with the company aiming for control of a third of the country’s e-commerce market. 

The company raised its forecast for gross merchandise volume to 110%, up from 100% previously, in a statement on Tuesday. Ozon is targeting annual GMV of 2.5 trillion rubles ($34 billion) in 2026, Chief Executive Officer Alexander Shulgin said in an interview. 

Ozon, which trails Wildberries by market share in Russia, has grown faster than its closely held competitor, taking advantage of a boost to the industry after Covid-19 lockdowns pushed shopping online. It accounts for about 10% of the country’s fragmented market, although well-financed rivals, including internet giant Yandex; and the tech division of Russia’s biggest bank, Sberbank, are planning large investments.

It “won’t be winner-take-all in Russia,” Shulgin said. “It’s not like we are taking customers from one another. Our efforts bring more customers online.”

GMV grew 94% to 89 billion rubles in the second quarter from a year earlier, Ozon said in a statement Tuesday. Adjusted earnings before interest, taxes, depreciation and amortization was a loss of 9.1 billion rubles, compared to a 1.8 billion-ruble loss a year ago.

In the Zone

Ozon's GMV grew 144% last year, the most among Russia's major e-commerce players.

Ozon’s American depositary receipts have gained 74% since their November listing on the Nasdaq stock exchange. 

Lower Commissions

Ozon switched to a marketplace model after Shulgin took the reins in 2017. Its 50,000 active sellers accounted for 62% of GMV last quarter, up from 42% a year earlier, helped in part by a decision to slash commissions in early 2021.

“2021 is the year of the marketplace,” said Ivan Fedyakov, head of researcher Infoline. “Companies that let people get everything in one place are winning the race.”

To boost order frequency, Shulgin has promoted Ozon Express, which offers 20,000 items, from groceries to earbuds, delivered within 90 minutes. Ozon Express grew 500% in the second quarter from a low base, and the company is considering offering 15-minute deliveries.

It is also developing advertising and fintech, with Ozon buying a bank license in the second quarter. It issued more than 200,000 cards in the quarter, bringing the total to 1 million, making them the third-most popular payment method on the platform. Ad revenue next year will be comparable to the current volume of Russia’s largest social network, VKontakte, according to Shulgin.

“We understand how to be profitable by 2024, but it depends on how much growth we want to have, and what’s best for shareholders,” Shulgin said. “We are still very far from the scale needed to be a huge Russian e-commerce leader.”

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