E-commerce penetration is increasing across Russia’s vast territory as the infrastructure to support the industry develops at a rapid pace.
Leading e-commerce platform Ozon announced growth of 239% year-on-year in the third quarter, with 56.2 million orders delivered in the last year alone as the company expands its fulfillment and sorting centres.
The e-commerce sector is booming in Russia, set to grow by 25% per year until the end of 2025, according to forecasts by INFOline. Ozon’s growth in new orders, along with an 87% increase in active customers compared to this time last year, testifies to the increasing popularity of this shopping format among Russian customers.
This growth in uptake is partly down to increasingly reliable logistics. Russia is the biggest country in the world, and trying to get orders from point A to point B can be a challenge for merchants. The lack of a common logistics infrastructure makes this problem all the more acute – Pochta Rossii, the national postal system, has invested substantially in distribution in recent years, but remains too slow to function as the network of choice for e-commerce platforms.
As leading e-commerce players like Ozon, Wildberries, and AliExpress hone their logistics and expand their infrastructure, the delivery process can become as seamless and rapid in the world’s biggest country as it is in smaller European nations.
Ozon operates fulfillment centres in cities across Russia, from Saint Petersburg in the West to Khabarovsk in the East, which ensures that items will be in stock and available for delivery to locations across the country. It has also nearly doubled its number of pick-up locations in the last twelve months, as well as quadrupling its sorting centre capacity, according to the company’s 3Q results press release. All of these operations mean that precious hours can be shaved off the total delivery time, making e-commerce increasingly convenient for Russian shoppers.
“Ozon continues engraining the habit of habitual online shopping in Russia. The expansion of our infrastructure has brought us even closer to the consumer. Coupled with the growth of our assortment, this has allowed us to not only increase the number of our clients by almost 20% to 21.3 million within just one quarter – but also almost double our order frequency year to date,” Igor Gerasimov, Ozon’s CFO, said.
Meanwhile, Ozon has also worked on growing its merchant base. The number of active sellers using the platform nearly quadrupled in the last twelve months to exceed 60,000. In Q3 2021, Ozon also launched sole proprietor sales, which it hopes will further boost its assortment.
“Our investment into launching new fulfillment centers, sorting centers and pick-up locations across Russia is not only increasing the number of our clients and their order frequency, but also helps our regional entrepreneurs. Around 70% of our sellers’ businesses are located outside of Moscow, and they rely heavily on our platform’s support and the ability to expand their sales geography. Overall, since the beginning of the year the number of our active sellers increased by 40,000 businesses – and as a result, in Q3 our sellers’ goods accounted for two-thirds of the Company’s turnover,” Daniil Fedorov, Ozon’s COO, said.
As the e-commerce industry continues to penetrate the Russian market, leading players will now look to differentiate themselves and continue to grow their market share. Ozon has started offering its logistics services to third parties in order to open a new revenue source, handling logistics for the likes of IKEA and Decathlon. Meanwhile, Wildberries has begun rolling out an express delivery partnership with food retailer Magnit.
Ozon is a Russian multi-category e-commerce platform. Its website features 46 million stock keeping units (SKUs), ranging from books and clothing to health products and food. Over the past several years it has developed its marketplace model, with more than 90% of the site’s product range provided by marketplace sellers today. More than 85 million Russians across the country’s 11 time zones have access to courier delivery through the company or live within walking distance of a pickup point. Ozon is also developing a system of additional services, including fintech products and a fast delivery service called Ozon Express.
The company’s $1 billion IPO on NASDAQ in 2020 was the best market debut by a Russian company since 2011, according to Bloomberg.
