Russia's internet services giant Yandex and largest state-owned bank Sberbank announced they are creating a joint e-commerce venture based on the Yandex.Market marketplace platform, the companies announced on August 9.
Sberbank is set to invest about $500mn into the joint venture that values Yandex.Market at RUB60bn ($1bn). The terms of the agreement are non-binding and still need to secure regulatory approval.
According to East-West Digital News (EWDN) the platform attracts more than 19mn desktop and laptop users each month, giving them access to over 20,000 domestic and international merchants and 150mn product offerings.
CEO of Yandex.Market Maxim Grishakov is cited in the press release as saying that the platform would rely on Sberbank's infrastructure to develop payment solutions on the Yandex.Market platform, including consumer lending.
The announced investment would also allow Yandex.Market to improve logistics capabilities and enhance its value proposition to domestic and international merchants.
"We continue to see e-commerce as being among the important areas for Yandex to develop its business and generate additional value," VTB Capital commented on August 9. The bank sees the partnership as positive, as it would allow Yandex to share the risks with a strong player and take advantage of Sberbank’s large franchise.
Previously, Yandex announced that it wished to transform Yandex.Market into an Amazon-type online hypermarket model. "With no clear leader in the Russian e-commerce space, we see good opportunities for Yandex to take the top spot, while the announcement of a partnership with Sberbank might make it easier to achieve that goal," VTB argues.
Meanwhile, analysts at Renaissance Capital are cautious, especially of Yandex's potential investment in logistics, "given no retail experience and multiple unsuccessful examples, underscoring the difficulty of doing e-commerce in Russia".
RenCap points out that Yandex.Market has been operating for 17 years and although it has become a popular price comparison site, different management teams have failed to create a full-service e-commerce platform, while Sberbank as a strategic partner brings little e-commerce experience.
Other players on the market, such as Ozon and Ulmart, despite operating for almost 20 and 10 years respectively, and investing substantial sums of money in building their own warehouses, distribution centres and pick-up points, still lack scale and remain loss-making, RenCap warns.
The competition from abroad is strong too. EWDN writes that Yandex.Market used to dominate the Russian e-commerce marketplace scene, but now struggles with two extremely strong competitors. Not only is Alibaba’s B2C subsidiary AliExpress by far number one in the Russian cross-border e-commerce flows, but it has opened its marketplace to local sellers too, and its traffic (23mn 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 site, and attracts more than 21mn desktop and laptop users every month (source: TNS Global).
The company’s total revenue reached $192.5mn in 2016, up 75% from 2015. In October 2015 Naspers announced a $1.2bn transaction to become the largest shareholder in Avito.ru. The deal valued the classifieds site at some $2.7bn.