Ozon, the Russian version of Amazon: Ozon's revenue in 2012 reached $492 million and aims to cover 80% of the Russian e-commerce market

June 12, 2013 The CEO of Ozon, the "Russian version of Amazon", recently accepted an exclusive interview with the well-known technology media The Next Web, saying that Ozon is developing well and its future goal is to achieve 80% of the Russian e-commerce market share. Ozon will achieve this goal through an IPO or acquisition by foreign technology giants such as Amazon or Rakuten.

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Ozon, often called the "Russian Amazon," is considering an IPO to achieve its goal of capturing 80 percent of Russia's e-commerce market within a decade, but has not ruled out a takeover bid from e-commerce giants Amazon and Japanese e-commerce company Rakuten.

Ozon's current CEO Maelle Gavet is not a typical tech leader. She is easygoing and informal. Ozon's revenue in 2012 was $492 million, up 67% year-on-year.

On the day of the interview, Lamoda, a Russian shoe retailer invested by Rocket Internet, announced that it had received a huge investment of $130 million in a recent round of financing. Gavent was very interested in this because Ozon acquired Lamoda's biggest competitor Sapato in early 2012. However, she was not worried about the huge amount of financing Lamoda received this time, and said that Lamoda would use the money to expand its business to Kazakhstan and Ukraine. "These are indeed markets that Lamoda needs to pay attention to, but we still hope to enter these countries through Ozon.ru instead of Sapato."

“We’re in a market that still has a lot of room to grow. A lot of the money that Lamoda gets will be used to continue to expand their logistics network, which takes a lot of time. Obviously, we’ll be watching the company closely. If a foreign company said, ‘We’re going to spend a lot of money to develop the Russian market,’ I’d probably be more concerned.”

American companies enter the Russian market

Speaking of these foreign companies, Gavent once wrote an article and published it on the technology media TheNextWeb, titled "It's the best time for the United States and Europe to enter the Russian e-commerce market." As she wrote, American and European e-commerce companies are entering the Russian market. eBay obtained a license to establish PayPal in Russia in March this year, and Amazon also recently established its own office in Moscow. Obviously, Gavent is closely watching the actions of these companies, but so far she is not particularly worried.

"Amazon has been extremely successful in the United States, and it can replicate its operating model in other countries. However, Amazon's performance in China and Brazil is not satisfactory. Amazon does not disclose its revenue in these countries, but it seems that it is not easy to succeed in these non-Western countries. To succeed in the BRICS countries, Amazon needs a different operating model."

Gavent said that Ozon's magic weapon for building a defense against foreign enemies is the fulfillment and logistics network it has built, which foreign companies need to start from scratch. The $100 million in financing Ozon received in 2011 helped the company continue to expand its logistics network in Russia and Kazakhstan. Ozon's entry into the international market is unstoppable.

Gavent said that Ozon's business in Kazakhstan is good, and it has plans to set up its own office in Kazakhstan instead of remote control. Other countries are also within Ozon's plan, including Ukraine, Lithuania, etc. But Ozon will not do business in Turkey like another Russian Internet giant Yandex. Gavent said that it would be easier for a fully digital company like Yandex to do business in Turkey, but for an online retailer, it would be a completely different game.

Considering an IPO

Although Ozon achieved high revenue in 2012, Gavant did not make it clear whether Ozon has started to make a profit. What is Ozon's goal? Will it go public?

“We are indeed considering an IPO. But we are not just looking for an IPO. Our goal is to have 80% of online shoppers shop on Ozone in ten years. I mean, consumers will either go directly to our B2C sites like Ozon.ru, Ozon Travel or Sapato, or go to shopping sites supported by the Ozon Group.”

“We created two B2B businesses, O-Kuryer and eSolutions, in February of this year. Our goal in building these businesses is to help smaller online retailers succeed.”

Gavant said Ozon's board is planning to raise funds to achieve its goal of capturing 80% of the market. "If it's just an IPO for the sake of an IPO, it won't make any sense."

However, it is worth mentioning that Gavent's statement this time is contrary to what she said in an interview 9 months ago, when she said, "It is too early for an IPO now." But according to her recent statement, the time for Ozon's IPO will be brought forward.

Of course, another option is for another company to acquire Ozon. If another company acquires Ozon, will Gavent agree? "That's also a good option," she said with a smile. But she made it clear that she would never sell the company at the moment, as Ozon is still in the growth stage.

She mentioned that she has evaluated a number of companies that Ozon is looking to acquire since its 2011 funding round. "You can tell which companies are built to be acquired and which ones need money to grow. You don't want to buy a company that's built to be acquired, that's definitely not the right thing to do. We emphasize that we really want to be a company that's focused on growth and not a company that's focused on 'when will we be acquired'."

Of course, Gavent admitted that to achieve the 80% market share target, an IPO or acquisition would be good options, "We will decide based on the circumstances."

While calling Amazon a "good choice," Gavent also praised another e-commerce giant, Japan's Rakuten, which has acquired and invested in companies around the world. But Rakuten was only a small investor in Ozon's 2011 funding round.

"We have learned a lot about the way Rakuten builds its merchant platform, how they manage merchants. Their management model is very good. I don't understand why some Western media don't report much on Rakuten. Maybe it's because in the e-commerce world, we only have the Amazon model and the eBay model, and the eBay model is gradually moving towards the Amazon model. But the Rakuten model that emerged later is indeed a model that can replace Amazon."

Achieving 80% market share is what any company in any market wants to achieve, but Gavint has the ability to do so, and she will achieve this goal by all means, including IPO or acquisition.