Blavatnik, embrace e-commerce sector in his native Russia, having recently invested $I30 million in Lamoda, one of Russia’s largest online fashion retailers.
/ By Stanley Green /
International business superstar Len Blavatnik’s decision to invest in Lamoda should be regarded as a major vote of confidence for the fast-growing e-commerce sector in Russia in general and Lamoda in particular. In recent months Blavatnik, has shown an increasing desire to invest in online retailing, having also taken a substantial interest in Germany’s Rocket Internet online retailing business.
Blavatnik’s agreement with Lamoda makes for largest injection of venture capital raised by a Russian eCommerce site in history, $30 million more than raised by Ozon, a Russia bookselling website similar to Amazon, and almost double the $75 million raised by Avito, an online classified site similar to Craigslist last year.
The people behind Lamoda welcomed the $130 million to be invested by the group headed by Blavatnik with open arms, stating that such significant capital injection will open the door for considerably more rapid expansion, especially in the fields of logistics and delivery services, with the company admitting to have been struggling to keep up with demands in the periphery of Russia itself, whilst unable to offer any form of service in the other Russian speaking countries in the former Soviet bloc
Although Blavatnik provided the bulk of the funding through his Access Industry conglomerate, other parties involved in the funding arrangement were U.S. based Summit Partners as well as Engelmann of Germany.
Significant about this particular investment is that it is Blavatnik’s first since he raised more than $7 billion in cash through selling his stake in oil group TNK-BP in March of this year.
Lamoda has previously received financial backing from Germany’s Rocket Internet, where Len Blavatnik also has a financial interest, as well as from U.S.-based merchant bankers JPMorgan Chase and AB Kinnevik, the Swedish investment group.
With the management team at Lamoda were reluctant to disclose specific figures, they were prepared to admit that annual sales on the site ran into hundreds of millions of Euros annualy, and that they had been enjoying triple-digit growth rates. However thanks to the Blavatnik group’s finance, Lamoda expect to grow both their turnover and profitability dramatically,
The increased appetite for investors to take a share of the ecommerce sector in Russia is again an indication of how rapidly it is gaining ground force with the online retail sector in the US as well as that of Western Europe, particularly in the fashion sector, estimated to be as high as €50 billion as well as growing at the rate of between 5 to 7% annually.
Neils Tonsen, co-founder and CEO of Lamoda pointed out that relative to income levels, there is a considerable demand for fashion products in Russia, especially among women who make up close to two thirds of the company’s client base.
One of the largest challenges that Russian online retailers have had to cope with is the country’s large size and underdeveloped transport infrastructure.
Tonsen, however, was quick to point out that thanks to the injection of capital from Blavatnik, Lamoda would be handed considerable tools to help them circumvent these problems, particularly in the speeding up of the development of the recently introduced express delivery service, which offers next-day delivery to the ten major cities in Russia, through using a delivery service owned and operated by the company, instead of staking their reputation for reliability in the hands of a third party.
With the new infrastructure in place Tonsen expects to see a major spurt in growth, driven by sales from Russia’s provinces where traditional retail stores are few and far between and are liable to be expensive and limited choice, a situation that is liable to make online shopping much more attractive.
For someone sitting on a personal fortune estimated to be around $8 billion, Len Blavatnik’s investments have been prudent in the extreme as well as being strategically placed to further the interests of the communities and business sectors that he obviously cares more about.