Ozon, What You Need To Know About Amazon of Russia

At a projected compounded annual growth rate of 25%, revenue of Ozon at 60 billion rubles in 2019, will become almost 600 billion rubles (10X) in 10 years time.

Some dubbed the company as the Amazon of Russia. They just went public back in November 2020. So, if you missed out riding on the wave of the e-commerce market in the U.S, then take note of Ozon.

Today, we are going to take you through some numbers and share with you the potential of the Russian market that Ozon is operating in. So that you can ride on this under-penetrated e-commerce market at the right time.

We want to bring your attention to the investment potential in Russian’s ecommerce market, starting with Ozon, the rising e-commerce star in the country. And here’s why.

Ozon Business Overview

Ozon business model

Source: Ozon Prospectus / Business Model

Just a quick overview, let’s understand a bit more about the company.

Ozon has a business model that is very similar, if not identical, to Amazon. The company operates as an e-retailer focusing on the Russian consumers, by selling products on its online platform, known as their First Party offering.

At the same time, like Amazon, they have a Third Party Marketplace. It allows third-party sellers to sell their products on the platform to their 11.4 million active buyers.

In fact, even the company’s strategic objectives mirror very closely to Amazon’s. It was stated in Ozon’s prospectus that the company strives to offer best value, maximum online shopping convenience and widest selection of products among Russian e-commerce companies.

And this is similar to what Jeff Bezos pointed out regularly that Amazon’s three key customer value propositions are:

  1. Low prices,
  2. Fast delivery, and
  3. Vast selection.

These combinations of strategic pillars have enabled the company to attract more buyers to their platform. And more buyers on the platform in turn draws more sellers to the Marketplace. 

Having more sellers in turn expands the product catalog, and bolsters the retention and order frequency of the buyers.

As a result, it reinforces the company’s strategic objectives and thereby creates a self-fulfilling flywheel effect, just like Amazon.

Why Is Ecommerce Under-Penetrated In Russia

Source: Ozon Prospectus / E-commerce Penetration of Retail Market by Country

Now, why should we look at Ozon or the e-commerce market in general in Russia? It’s because of the fact that Russian’s e-commerce market is currently under-penetrated.

We have written about the Russian e-commerce market in more detail in the article here. So, do check it out if you want to have a better understanding.

But I want to highlight here that the under-penetration is namely due to the relatively dispersed population in the country.

Given its vast size in terms of land area, Russia stretches across 11 time zones. To put this in perspective, it is bigger than the US by 74%. Yet, Russia’s population only makes up about 44% of the number of people in the US. This results in a relatively scattered population.

Major cities are located very far away from each other, presenting a challenging logistical environment. The key reasons for the slow take-off rate of ecommerce compared to other countries are therefore due to underdeveloped logistical and warehousing infrastructures.

Fragmented Market

And apart from the under-penetration, we need to understand that the Russian retail market is highly fragmented. According to INFOLine, top ten retail businesses, including both online and offline, accounts for only 25% of the total retail sales in Russia in 2019.

Comparatively, the United Kingdom, Germany and the United States register figures of 42%, 40% and 35% respectively.

Why Ozon Is Positioned To Win The Ecommerce Market

Now, let’s take a deeper look at why Ozon is positioned to win in the e-commerce market.

Ozon Logistics Infrastructures In Russia

Ozon Key Pickup Infrastructure

Source: Ozon Prospectus / Key Pickup Infrastructure Operators in Russia

First, understand that Ozon has built up an extensive logistic infrastructure in Russia.

The company is able to offer same-day delivery services in Moscow, and in parts of Moscow region and Saint Petersburg. Its next-day delivery covers more than 40% of the Russian population as of September 30, 2020.

Source: Ozon Prospectus / Fulfillment center network as of September 30, 2020

Ozon has developed one of the largest and most sophisticated logistics infrastructures in the Russian e-commerce market, according to INFOLine. The company has 9 fulfillment centers, including one of the largest fulfillment centers in Russia among e-commerce businesses.

Their delivery infrastructure consist of approximately 43 sorting hubs, 7,500 parcel lockers, 4,600 pick-up points and 2,700 couriers. They allow Ozon to provide one of the best online shopping experiences for the buyers in terms of cost, speed and convenience

Ozon Strong Network Effects

Next, recognize the strong network effect that the company commands. Through its wide e-commerce product catalog in Russia, competitive prices and convenient shopping experience, it has attracted more buyers to the platform.

Ozon Buy and Seller Value Propositions

Source: Ozon Prospectus / Buyer and Seller Value Proposition

The huge customer base, coupled with their sophisticated seller services, has in turn attracted more sellers to the platform. This further increases the selection of products on the platform. Consequently, it attracts more buyers and improves buyer retention and order frequency.

This huge and growing base of buyers and sellers create powerful network effects. Such a strong economic moat makes it harder for competitors to pull buyers or sellers to their own platforms.

Opportunity For Multi-Category E-Retailers

Finally, due to the highly fragmented state of the retail market, it places e-retailers operating in the multi-category e-commerce business in a favorable position to capture market share from smaller businesses.

Source: Ozon Prospectus / Russian Domestic E-commerce Market Breakdown by Categories of Business

Because, multi-category e-retailers have more attractive value propositions, such as wider selection of products and greater online shopping convenience.

Understand that Ozon is the leading multi-category ecommerce business in Russia, according to INFOLine. Hence, they are very well-positioned to capture market share from smaller and single category focused online businesses.

Therefore, we think that the company’s extensive logistical infrastructures, coupled with the strong network effects, as well as its positioning as a multi-category e-retailer, give the company a strong foothold and edge to compete effectively moving forward. 

Now, let’s look at metrics showing that there are indeed evidences that Ozon is winning in the Russian ecommerce market.

Evidence of Ozon Winning The Ecommerce market

Ozon Leads In Brand Awareness

First of all, according to INFOLine and Brandscience, Ozon is considered the most recognized e-commerce brand in Russia. The company registered a top-of-mind brand awareness of 32%, compared to 18% for their closest competitor in June 2020.

In addition, according to INFOLine also, Ozon’s platform provides the largest selection of products in Russian e-commerce market.

Ozon GMV vs Share of Marketplace GMV

Source: Ozon Prospectus / Ozon.ru GMV incl. service, Share of Marketplace GMV

In fact, in the nine months that ended on September 30, 2020, Ozon grew its Gross Merchandise Value (GMV) inc. services by 142% compared to the same period in 2019. More importantly, their growth rate is approximately 3 times the growth of the e-commerce market in Russia. The latter only grew by 41% during the same period.

So, Ozon expanding faster than the growth of the industry, meaning that they are capturing more market share. This is good because it tells us that the company has an edge over the rest of the competitors. The barriers to entry and competitive advantages that we have discussed earlier, are indeed working in favour of the company.

Ozon Increasing Net Promoter Score

Finally, let’s take a look at the company’s Net Promoter Score (NPS). This is a key metric for many internet and tech companies. The metric measures the likelihood that customers will recommend the company, product or service to a friend or colleague.

Ozon Net Promoter Score

Source: Ozon Prospectus / Ozone NPS Score

So, Ozon’s NPS score has been climbing up steadily recently. It achieved a high NPS score of 79 in the three months that ended on September 30, 2020. This indicates a high level of buyer satisfaction.

Therefore, the actual growth in Gross Merchandise Value and Net Promoter Score are strong indicators and evidence that the company is doing the right thing and capturing market share. And these are what investors should look out for when investing in a growth stock.


To wrap it up, we believe Ozon is well-positioned for its business to 10x in the future. But i want to stress that this is for the business itself. Investment wise, we still need to ensure that we don’t overpay for its stock that will affect our returns negatively.

We still have some unanswered questions before we can make an investment decision. For instance, what’s the company’s growth prospects moving forward? And to what extent the market has already priced in these growth elements?

Source: Statista / Market value share of the Russian internet retail market from 2018 to 2023

And who are the competitors? As a matter of fact, Ozon is not the number 1 ecommerce player in Russia in terms of market share. So, how should investors think about this?

Well, we will cover these in more detail in our next article, and analyse whether investors should enter now or wait for more opportunity. Remember to subscribe to our mailing list so that you can be informed once our next analyses are out!

In the meantime, check out other insights and analyses we have done. Keep learning and happy investing! 🙂

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