Ozon.ru wins biggest Russian e-commerce investment

LONDON, Sept 8 Thu Sep 8, 2011 4:00am EDT

LONDON, Sept 8 (Reuters) - Russia's leading online retailer Ozon.ru has secured funding of $100 million, the biggest private investment to date in Russia's e-commerce market, from a consortium including Japanese online retailer Rakuten .

Often described as the Amazon of Russia, which has an underdeveloped but high-potential Internet market, Ozon.ru made sales of $137 million last year and plans to use the funds to increase its distribution and widen its product range.

Investors are taking an increasing interest in the Russian Internet market, helped by high-profile public listings like those of Yandex , Russia's largest search engine company, and email service Mail.ru (MAILRq.L).

"From an investor perspective, there's definitely a change," Ozon.ru Chief Executive Maelle Gavet told Reuters by telephone. "The market is becoming more known, less scary."

The new funding round is being led by ru-Net, and includes Swiss equity fund Alpha Associates -- a new investor in Russia -- venture capital firm Index Ventures, and controlling shareholder Baring Vostok Private Equity Fund.

With about 60 million Internet users, Russia is Europe's second-biggest Internet market after Germany and still has just 43 percent penetration.

But global Internet giants Google , Facebook and eBay have found the Russian market tough because of issues of language, business culture and infrastructure.

According to a November 2010 study by Google Russia and Citibank, Russians were expected to spend 600 billion roubles ($20 billion) on online purchases using bank cards in 2010, rising to 800 billion roubles in 2012.

Because relatively few Russians have credit cards, Ozon.ru accepts cash on delivery at a network of collection kiosks. It has also built up its own courier service to bypass the shortcomings of the Russian postal service.

Gavet said Russians were finally coming around to the idea of online shopping.

"From the consumer perspective, what happened in the U.S. 10 years ago and Europe five years ago is now happening in Russia. People are beginning to understand that e-commerce is easy and safe," she said. (Editing by Will Waterman) ($1=29.50 Rouble)

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