Battle for Russia’s Amazon crown is heating up

Russia’s $70 billion lender Sberbank is switching sides in the war for the country’s online-retail crown. The nation’s biggest bank is close to buying a 30% stake in online marketplace Ozon, Reuters reported, after untangling itself from a rival joint venture with search engine Yandex. There’s room for both players in a market enjoying a Covid-19 boost, but the usual political caveats apply.

Ozon is having a good crisis, bolstering its chances of grabbing share in a market that lacks a dominant player like Amazon.com. Orders grew by 200% year-on-year in April as stay-at-home punters opted to have goods delivered. The hope is that Russians, who only do 6% of their shopping online, will catch the digital-retail bug.

Sberbank, whose boss Herman Gref is assembling a portfolio of technology holdings, couldn’t agree on an e-commerce strategy with $13.5 billion Yandex. But the bank’s departure and backing of a rival won’t necessarily prove decisive in such a fragmented sector. Ozon, which has the biggest marketplace in Russia for buying and selling different types of goods online, only has a 9% market share.

Neither Sberbank nor Ozon has disclosed a price for the possible investment. But emerging-market digital retailers are usually valued at a multiple of gross merchandise value or the total value of products sold. Brazil’s B2W trades at 2.4 times multiple. Apply that to Ozon’s $1 billion GMV in 2019, and its enterprise value would be above $2 billion. Ozon’s GMV is on course to more than double this year, but its EBITDA is negative. In any case, it looks promising for investors in a 2018 funding round which implied an $815 million valuation, according to the Moscow Times.

The next step for Ozon is an initial public offering within two years. Any international investors will have to balance the perennial political risks in Russia, whose government is sensitive about foreign influence over companies that control data on its citizens. New York-listed Yandex last year announced plans to change its structure to placate Moscow. The danger is probably less acute for Ozon, whose data collection is less exhaustive. In any case, continued breakneck growth rates may help to ease any investor Russophobia.