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Yandex, Russia’s top search company, has finalised a new $1bn joint venture with state-run banking giant Sberbank that will result in them attempting to tap the country’s Rbs1.1tn ($18.8bn) ecommerce market, the companies said on Wednesday.
The two companies are hoping to tap Sberbank’s enormous customer base — one in every two retail deposits in Russia is held there — and turn shopping comparison site Yandex.Market into a full-fledged online retailer.
“We don’t control the steps from the click to the actual fulfilment, and what we would love to do is to be able to control more and more of the steps post-the click,” Greg Abovsky, Yandex’s chief operating officer and chief financial officer, told the Financial Times in an interview.
Sberbank will invest Rbs30bn in Yandex.Market, effectively doubling its valuation. Yandex.Market director Maxim Grishakov will run the new company under Yandex’s brand in Russia and all former Soviet countries except Ukraine, which banned Yandex earlier this year.
The deal is subject to regulatory approval and expected to be concluded in the first half of next year.
It caps a string of successes for Yandex in recent months. They include winning an antitrust dispute against Google over Android search and setting up a joint venture with Uber in which the US-based car-booking app conceded the market to the Russian group.
Sberbank turned to Yandex after negotiations fell through with Chinese ecommerce giant Alibaba on a similar partnership, people briefed on the talks said.
Herman Gref, Sberbank’s chief executive, has said he wants to move into the Rbs1.1tn Russian retail market as a way to keep ahead of the digital curve.
“Yandex.Market has a huge user base but there’s a lot of work to transform the site into what I think Yandex, Sberbank, and many investors hope it will be,” said Mitch Mitchell, an analyst at BCS Global Prime. “And here the competition is fierce, and the competencies required are a bit newer for Yandex.”
Mr Abovsky’s predecessor, Alexander Shulgin, left Yandex last month to run Ozon, Russia’s largest online retailer. Yandex is running a pilot project for the new site in the mid-size cities of Nizhny Novgorod, Kazan, and Ufa. It is attempting to smooth out delivery kinks — a frequent problem in such a large country with poor transport infrastructure.
Mr Abovsky said that when the full system is launched next year, “you’ll have a perfect view into inventory positions, you’ll have a perfect view into goods flow in the warehouse, so nowadays you won’t have to rely on this third party-merchant taking two hours, or 12 hours, or 36 hours, or a week to get this out the door. It’ll go from stock shelf to courier’s truck within two or three hours.”
Mr Abovsky said the company is considering a possible New York initial public offering in 2019 for Yandex’s joint venture with Uber, which the companies value at $3.75bn.
Yandex spent hundreds of millions in subsidies to defeat Uber. It lost Rbs3.17bn before interest, tax, depreciation and amortisation last quarter despite doubling revenues year-on-year to Rbs1.2bn.
But Mr Abovsky said Yandex will not raise prices in the near future because it is hoping to boost the joint venture’s 10 to 12 per cent of the broader Russian taxi market, which is still dominated by telephone booking. “We’ll continue to lose money for some time,” he added.