Transfer Pricing Associates

Ozon, The Russian Amazon

post Tuesday June 3, 2014

Tags: amazon, ozon, russia

Map Russia - freedigitalphotos

Like Starbucks can be found on every street corner in the US, Russian street corners have OZON. OZON is not a coffee chain, but a Russian online retailer, trying hard to become the Russian Amazon. The difference with Amazon is that OZON has over 2,000 stores where customers can pick up their purchases.

OZON had to deal with a lot of obstacles before becoming this big and even had to come up with their own innovations. For example, the 2,000 stores all over Russia were built because the infrastructure in Russia is not nearly as good as in the U.S. This problem ensured a difficult and slow expansion of the online retailing in Russia. The Russian also had to deal with fending off the black market in their country in order to change the consumer landscape.

Furthermore, OZON has not only opened 2,000 stores in Russia, but they also built their own delivery service. The Russian company is now among a list of companies in the world’s fastest growing markets that are shutting down Amazon in their own country. They use their own home advantage to attract the people in their country.  Every online retailers knows that the biggest opportunities lie in the countries with billions of people and who are still new to the digital options of the 21st-century. This phenomenon is happening in India (Snapdeal and Flipkart), China (Alibaba) and Japan (Rakuten).

The most significant asset of OZON is their pick-up stores, although it was just an invention created out of simple need. As a result, OZON now has a broad physical presence and it even solves the common problem of not having a secure place for a package to be delivered at home. The CEO of OZON thinks it is odd that Amazon did not come up with the idea themselves.

The persistence of underground markets is still a problem for OZON in Russia. Using cash on delivery is still a common payment method in Russia. Somehow that money has to be transferred back to OZON of course. The only country in the world where cash is not accepted is the U.S. The black markets force OZON to keep their prices low, but that is only possible to a certain limit, says their CEO.

However, OZON is now trying to convince the potential Russian customer to buy from them, because they are a lot more trustworthy and that certainly makes up for the difference in price from the black market. This is similar to the business model of Amazon. Customers come first and delivery is as fast as possible. Even though the American company has not gained ground in every market in the world, their business model has, even in Russia. The annual sales of OZON are about $750 million, that is only 1% of Amazon’s revenue last year. The Russians are still a small player in the online retail world, but they have a huge potential in their home market with 140 million customers and their room to grow seems enormous. 

Source: wired

Image courtesy of David Castillo  /

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