Russia's KupiVIP eyes 2014 IPO to power e-commerce market share grab

By bne IntelliNews February 19, 2013

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KupiVIP, one of Russia's leading online fashion stores, hopes to raise $125m in an IPO to raise investment capital to build out its logistics system - the major challenge for the country's growing e-commerce segment.

Founder and CEO Oskar Hartmann said the company plans to raise the fresh capital in a float in New York next year. KupiVIP raised about $100m in venture financing over the last two years as it fights to promote itself as one of Russia's top e-commerce retailers.

"Russia is set to converge with the global trends in e- commerce," Hartmann said in an interview with Bloomberg. "In five years, half of its 143m population will be buying goods online," he added, saying that the proceeds of the float will be used to acquire additional warehousing space and build out delivery networks.

The firm has hired Goldman Sachs and Jefferies & Co. to advise on the issue, the CEO said, although no mandate has been awarded yet. KupiVIP declined further comment on the company's financing needs, its possible valuation, or a more precise time window for the IPO, reports Ria Novosti

Russian e-commerce is booming and has reached the same stage traditional retail arrived at a few years ago. The race is on to grab as much market share as quickly as possible while so much virgin territory is up for grabs. This sees the leading companies are rushing to raise money from IPOs, debt and private equity funds to expand as rapidly and widely as they can.

KupiVIP has been one of the fast growing of the new breed of online stores selling top quality brand names at discount prices, fonder Oskar Hartmann told bne in an interview at the end of last year.

While sales are booming, like most online stores the biggest problem it faces is how to get the goods to their punters once an order is placed. Courier services are prohibitively expensive for most e-shoppers and the Russian postal system is still too slow, although Pochta Rossii is just starting to invest and reform. In the meantime most companies, like KupiVIP, have set up their own distribution services. The rise of e-commerce has already impacted Russia's warehouse market, driving up prices.

Total turnover of Russia's e-commerce reached $12bn in 2012, accounting for 1.9% of total retail sales, according to a report from Morgan Stanley. Online sales are expected to grow 35% a year through 2015 as Russia catches up with Western Europe in terms of penetration, the bank said.

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