Ozon.ru, the fast growing online retailer that calls itself the Amazon.com of Russia, has raised $100 million in new equity funding to fund an ambitious expansion that includes recreating the Russian postal service.
And Ozon.ru is experiencing such terrific growth — 36 percent growth in the first six months of the year, compared to the same period last year — that it’s beginning to think about an IPO, chief executive Maelle Gavet told me an interview this week at VentureBeat’s offices (also, see our video interview below).
The funding is the largest round for an e-commerce company in Russia, she said.
In Russia, public institutions like the Russian Post are not the most reliable, so Ozon can’t rely on the service to deliver in a timely fashion. Part of the $100 million will be used to bolstering its shipping and distribution system, she said. That delivery system is the company’s chief differentiator, and it’s also a reason why independent merchants are signing up to use Ozon’s network: They don’t have a great alternative.
Investors include ru-Net, an existing investor, and major Japanese online retailer Rakuten, Swiss equity fund Alpha Associates and Index Ventures. The round brings the company’s total funding to $121 million. Previous investors also include Baring Vostok Capital Partners, HV Holtzbrinck Venturs and Cisco.
The company brought in $137 million in revenue last year, which was a 34 percent increase from the previous year. That would put it in IPO territory from a revenue standpoint for many industries, but margins in retail are notoriously tight, and the company isn’t yet profitable, Gavet said.
The funding gives the company unexpected firepower, Gavet said. Ozon had originally sought to raise $30 million to $40 million, when it started looking in December, but investors soon piled in with enthusiasm, she said. And the company has more than enough areas to spend it on. Ozon is expanding its travel offerings, which are growing more than 100 percent annually, and yes, that means it’s also trying to be the “Expedia of Russia,” Gavet said. Moreover, it’s seeking to enter the apparel and shoe businesses. Right now, Ozon already has a 50 percent share of the Russian book market.
One remarkable thing about Gavet is her unassuming nature. Her rise to CEO is quite remarkable, because she wasn’t even in an executive position two years ago. In October 2009, while working for the Boston Consulting Group, she accepted a consulting assignment for Ozon. She says she did so reluctantly, because she wasn’t familiar with Internet companies. But she caught the bug, accepted an offer from the company in Feb 2010, and quickly mastered the company’s marketing and distribution operations. She became CEO in April of this year. (She says she’s learned to drink a lot of vodka along the way, and she isn’t joking).
She says she’s most proud of bringing on Rakuten, the large Asian online retailer, which boasts a successful model of merchant loyalty. While Amazon does direct sales, and often competes with merchants it works with, Rakuten shuns direct sales, and instead relies solely on its merchant partners. It puts them through quasi “merchant universities,” where it trains merchants in best practices for things like marketing strategy and sales forecasting. Gavet says the model will work well in Russia, where merchants will depend on a big player like Ozon to access its superior distribution and marketing engine.
Founded in 1998, Ozon.ru says it has more than 600,000 unique visitors to the site daily and 90,000 new user registrations per month.