Yandex and Sberbank agree $500 million JV plan to create “leading e-commerce ecosystem” in Russia - RUSSOFT

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Yandex and Sberbank agree $500 million JV plan to create “leading e-commerce ecosystem” in Russia

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

Aug 17, 2017
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 e-commerce marketplace. The deal, if confirmed, would mark the biggest e-commerce investment in Russia’s history.

According to a non-binding term sheet — which will ultimately be 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 JV, with up to 10% of the shares allocated to a stock option plan for Yandex.Market’s management and employees.

Fierce competition

Currently, the platform attracts more than 19 million desktop and laptop users each month (source: TNS Global), giving them access to over 20,000 domestic and international merchants and 150 million product offerings. used to dominate the Russian e-commerce marketplace realm but now struggles with two very 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 (23 million monthly visits according to SimilarWeb) matches that of Yandex.Market.

Another competitor is, the country’s first classifieds site, which allows businesses to operate on its site, and attracts more than 21 million desktop and laptop 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 The deal valued the classifieds site at some $2.7 billion.

Latest evolutions

In this context, Yandex.Market has evolved significantly over the past few years. Inspired by the Amazon model, it has significantly increased its control of fulfilment and delivery processes. Thus two years ago the platform launched the Yandex.Delivery service, aggregating offers from several e-commerce 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, the CEO of Yandex.Market, in a recent media 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 would like 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 morning.

Good old partners

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.

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 get more involvement in Russian e-commerce. In late 2016, the bank was already 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, or Mail.Ru Group, or an even exclusively in-house development strategy. Today’s announcement of a JV with Yandex, if confirmed, could help the bank realize its e-commerce ambitions.

According to EWDN’sRussian 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 the number of parcels and small packages, and exceeded $4 billion for physical goods alone, according to Russian Post and industry association NAMO.