Yandex, the NASDAQ-listed Russian search giant, and Sberbank, Russia’s state-owned national savings bank, announced today their plans to join forces and create “a leading e-commerce ecosystem” based on the Yandex.Market ecommerce marketplace. The move, if rubberstamped, would mark the biggest ecommerce investment in Russia’s history.
According to their non-binding term sheet — which is still subject to regulatory approval in Russia — Sberbank would invest 30 billion rubles (approximately $500 million at the current exchange rate) in the joint venture. The investment would value Yandex.Market at 60 billion rubles ($1 billion) post money. The two partners would own equal stakes in the joint venture (JV), with up to 10% of the shares allocated to a stock option plan for Yandex.Market’s management and employees.
Currently, the Yandex.Market platform attracts more than 19 million desktop users each month (source: TNS Global), giving them access to over 20,000 domestic and international merchants and 150 million product offerings. Yandex.Market used to dominate the Russian ecommerce marketplace realm, but now struggles with two very strong competitors. Not only is Alibaba’s B2C subsidiary AliExpress by far top dog in Russian cross-border ecommerce, but it has opened its marketplace to local sellers too, and its traffic (23 million monthly visits according to SimilarWeb) matches that of Yandex.Market.
Another competitor is Avito.ru, the country’s first classifieds site, which allows businesses to operate on its platform and attracts more than 21 million desktop users every month (source: TNS Global). The company’s total revenue reached $192.5 million in 2016, up 75% from 2015. In October 2015 Naspers announced a $1.2 billion transaction to become the largest shareholder in Avito.ru. The deal valued the classifieds site at some $2.7 billion.
In this context, Yandex.Market has evolved significantly over the past few years. Inspired by the Amazon model, it has increased its control of fulfillment and delivery processes. Thus two years ago the platform launched the Yandex.Delivery service, aggregating offers from several ecommerce shipment service providers.
Now Yandex.Market intends to go even further: “We will build [our own] logistics and delivery system to aggregate goods in warehouses and offer the best delivery price conditions to our customers,” said Maxim Grishakov, CEO of Yandex.Market, in a recent interview.
The marketplace intends to use Sberbank’s funding to improve these logistics capabilities as well as to implement a checkout function on the site at a large scale, and “enhance its value proposition to domestic and international merchants.”
In addition, Yandex.Market plans to leverage Sberbank’s banking and payments infrastructure to “develop simple and secure payment solutions on the Yandex.Market platform and introduce new features, such as consumer lending,” Grishakov stated.
This is not the first partnership between Yandex and Sberbank. Back in 2009, the state-owned bank acquired a golden share in Yandex – a privileged stake that gives significant control over the Yandex shareholder structure. And in 2013 Sberbank acquired a 75% interest in Yandex.Money, the e-wallet and payment service developed by Yandex.
Sberbank has been considering several options to become more involved in Russian ecommerce. In late 2016, the bank was reported to be working on a project to launch a national e-commerce ecosystem. In addition to using its own resources, the state-owned bank considered gathering a variety of organizations around a common technological platform to build a comprehensive B2C and B2B offer. The plan was inspired by the ecosystems which Google, Amazon and Facebook as well as Tencent and Alibaba have set up in their respective countries.
Sberbank initially considered an alliance with Alibaba, Mail.Ru Group, or an even exclusively in-house development strategy. Today’s announcement of a planned JV with Yandex could help the bank realize its ecommerce ambitions.
According to EWDN’s Russian E-Commerce Report, online sales in 2016 exceeded $26 billion, growing more than 20% year-on-year. Included in this figure are some $16 billion for physical goods and $10 billion for online travel, according to Data Insight. The cross-border segment is the fastest growing, up 26% by value and 80% by parcel deliveries, and exceeded $4 billion for physical goods alone, according to Russian Post and industry association NAMO.
This post first appeared on East-West Digital News on August 9, 2017