Vladyslav Chechotkin answered AIN.UA during the Novoe Vremia Prize called “Ukraine and the World 2022” if the company will initiate the IPO:

“We consider the IPO as an option, but it is only one of many,” the Rozetka founder said.

He also mentioned that after a minor stakeholder — Horizon Capital — entered the company in 2015, Rozetka is audited every year by one of the Big Four (Deloitte, PricewaterhouseCoopers, Ernst & Young, KPMG).

“We refine our routines and build a business that we can present in the future for public offering,” said Chechotkin.

According to him, Rozetka wants to get 10% of the retail market in Ukraine, about $6 to 8 billion, and there is a “long-long way” to achieve it.

Why is it interesting?

As AIN.UA stated, the acquisition of Rozetka is the main target of the biggest Kazakhstan fintech project, Kaspi.kz, in Ukraine. If the company is ready for the IPO, it can always accept the proposal of M&A, and full compliance will turn in a bonus in addition to the deal amount.

• In June 2021, there were rumors that Rozetka announced its entry into the Uzbekistan market and registered its logo and trademark in Uzbekistan. But at that time, the company gave an official answer that they had not decided yet if Rozetka would appear in Uzbekistan.
• As for now, Rozetka doesn’t have a marketplace in Uzbekistan and sells all the goods under its own brand. However, the company plans to launch it in 2022.
• Rozetka operates only in Tashkent (the capital of Uzbekistan); it has two delivery points and offers free delivery within the city. The company plans to open four more delivery points in Tashkent.
• Moreover, the retailer works on a Ukraine-Uzbekistan cross-border project (international trade) to allow selling millions of goods available on rozetka.com.ua in Uzbekistan and importing goods from Uzbekistan into Ukraine.

“Uzbekistan is an increasingly developing country with a 35-million population; we believe it has a large potential, and hopefully, such promising projects as ours will be supported by the state. Now we are moving forward pretty well. We plan to open four more delivery points in Tashkent and then in regions. These are Samarkand, Namangan, Andijan, Bukhara, and Fergana. We also cooperate with local and international last mile vendors,” said Georgy Fesenko, CEO at Rozetka Uzbekistan.

Who is the richest in the IT industry

• 8th place in Top 100 richest Ukrainians in 2021 is taken by the co-founder of the UK-based fintech startup Revolut, Vlad Yatsenko. His net worth is estimated by NV at $1.277B. In July of 2021, Revolut raised $800M, and its valuation increased sixfold: from $5.5B in 2020 to $33B.
• 14th spot is occupied by the founder of the aerospace firm Firefly Aerospace, Max Polyakov, with a fortune of about $540M. In May of 2021, Firefly Aerospace raised nearly $200M, and its valuation went way beyond $1B.

According to AIN.UA’s estimates, the ranking takes just one of Polyakov’s assets, Firefly Aerospace, into account. It was valued at more than $1B even before its launch. The worth of his other aerospace companies and all the IT businesses are not factored in.

• 17th place is held by the owner of Rozetka Vladyslav Chechotkin. According to NV, Chechotkin’s net worth is $472M.

The share of Vladyslav Chechotkin is often miscalculated, with the total attributed to Chechotkin alone. But this includes shares of two entrepreneurs, Vladyslav and Iryna Chechotkin, who own the company that the stake in Rozetka belongs to. Thus, according to AIN.UA’s own calculations, the figure of $472M reported by Novoye Vremya is in the range of $359M to $526M but should be attributed to both stakeholders.

• Spots 23, 24, and 25 are taken by Alex Shevchenko, Dmytro Lider, and Max Lytvyn, the co-founders of Grammarly, an online spelling and grammar checker. NV estimates each one’s net worth at $386M.

In calculating the wealth of the co-founders of Grammarly, the valuation of the company at $2.3B should be factored in, as cited by PitchBook and confirmed by the American Forbes magazine. Considering that the latest round took place back in 2019 (the co-founders’ shares have remained the same) and their cumulative share being 76%, the valuation of the fortunes of Alex Shevchenko, Dmytro Lider, and Max Lytvyn, according to AIN.UA, should be about $582M each, which is $196M more than cited by Novoye Vremya.

• The founder and CEO of Ajax Systems, Aleksandr Konotopskyi, is in 26th place, with a net worth of about $380M.
• No. 30 is occupied by one of the co-founders of GitLab company, Dmytro Zaporozhets, with a fortune of approximately $375M. On October 14, 2021, Gitlab went public on Nasdaq. Today its shares are listed on the market at $113.75 per share, and its total capitalization exceeds $15B. Dmytro Zaporozhets owns 2.5% of the firm’s stock, hence his high position in the ranking.
• 37th spot is taken by the founder of People.ai, Oleg Rogynskyy. NV estimates his net worth at $279M. In August of 2021, People.ai raised $100M as part of a new investment round and was valued at $1.1B. As such, the company became a unicorn. Besides, Oleg Rogynskyy has mentioned that, given the current size of the company, it is time to think about an IPO.
• 42nd and 51st positions are held by the co-founders of the IT company SoftServe Taras Kytsmey ($245M) and Yaroslav Lyubinets ($199M). Taras Vervega ($167M), Yuriy Vasylyk ($131M), and Oleh Denys ($130M) are ranked 63rd, 77th, and 78th, respectively.
• 48th place in Top 100 richest Ukrainians in 2021 is taken by the founder and director of Terrasoft company, Katherine Kostereva, with a net worth of $207M, according to NV.

The calculations by AIN.UA show that the value of Katherine Kostereva’s share is significantly lower. At the time of leaving Terrasoft, Alexander Popov owned a 44.75% stake, valued at $51M. Based on the information that he and Kostereva had equal shares, hers should be valued at $51M too, instead of the $207M cited in the NV ranking.

• Oleksandr Kosovan, CEO and founder of MacPaw, is ranked 52nd. His net worth is estimated at $196M.
• Spots 53, 98, 99, and 100 are taken by the co-founders of Fintech Band, the developers of monobank Dmytro Dubilet with $196M, Oleg Gorokhovskyi — $100M, Yevheniya Kryvenko (Yatsenko) — $100M, and Mykhaylo Rogalskiy — $100M.

Who else has made it into the Top 100 richest Ukrainians in 2021

• 22nd place is occupied by the director general and co-owner of Fozzy Group, Volodymyr Kostelman. His fortune is estimated at $388M. Beside him, the ranking also features Roman Chyhir ($175M) and Oleh Sotnykov ($175M), ranked 58th and 59th, respectively. Fozzy Group also has an IT subdivision, and recently, they have tested a service to compete with zakaz.ua.
• The net worth of $346M has earned 32nd place to Stepan Chernovetskyi, head of the investment company Chernovetskyi Investment Group having some IT projects in its portfolio.
• No. 39 and No. 40 are taken by the co-founders of Nova Poshta, Volodymyr Popereshnyuk and Viacheslav Klymov, with a fortune of about $273M each.
• The developer Vasyl Khmelnytsky with a net worth of $223M is ranked 43rd. His main asset is UFuture Investment Group.
• 91st spot is occupied by the owner of the multistore Comfy, Stanislav Ronis. His net worth is estimated at $111M.

The richest five

At the top of the ranking, like in the last year, comes Rinat Akhmetov, whose fortune is valued at $11.5B (to put this into context: last year, Akhmetov’s wealth was estimated at nearly just half as much, $6.6m). The top 5 also include Viktor Pinchuk ($2.6B), Vadym Novynskyi ($2.44B), Petro Poroshenko ($1.52B), and Kostyantyn Zhevago ($1.497B).

Why would Kaspi.kz buy a Ukrainian e-commerce company

After the IPO, Kaspi.kz raised about $1 billion and planned to invest in expansion to new markets. It considered the Ukrainian market as the most promising one.

Kaspi.kz already has half of its local market, being the biggest market player there. The company developed the Kaspi.kz SuperApp where users can order dozens of different services.

After the IPO, the company’s shares are continuously growing; its market capitalization hits $20 billion. For further growth, the national market isn’t enough. So the company is trying to replicate its success in a new market. Ukraine is a big and empty market at the same time.

So, it is obvious what company it chooses to merge with. In Kazakhstan, it generally works in two industries — e-commerce and banking/finance. By buying a Ukrainian national marketplace, it will be able to enter a new market and take a lead quickly.

AIN.UA private sources said Kaspi.kz already negotiates with the actual owners of Rozetka. The legal firm Avellum is likely responsible for the due diligence of this deal, according to the research company Molfar. Avellum has already assisted Kaspi.kz in the Portmone deal, Rozetka and EVO, and in some other deals of the Rozetka’s investor, Horizon Capital VC firm.

Now our sources are skeptical about the possibility of signing the deal. However, they also mention that “Kaspi.kz wants only Rozetka.” Both parties refused to comment on the situation.

Why Kaspi negotiates acquiring Rozetka

• Rozetka is one of the most valuable and most famous local brands in Ukraine.
• With its large client base, the website is one of the TOP 10 in Ukraine, even without EVO.
• Its revenue is ₴18 billion, or almost $670 million.

The two most popular marketplaces in the country sell all kinds of goods. Moreover, Rozetka is developing its own delivery service, parcel locker network, and points of delivery. Kaspi.kz needs exactly this company as the last missing link to replicate the success of SuperApp in Ukraine and combine financial services and online trade.

If the deal will be successful, Rozetka will be the third asset Kaspi acquired in Ukraine. As previously mentioned by AIN.UA, the Kazakhstan company purchased Portmone. The deal, according to AIN.UA sources, could cost up to $20 million. The purchase of BTA Bank could cost from $5 to $11 million. It purchased the bank to get a license and Portmone for a quick partnership with Visa and Mastercard.

Unlike the previous two deals, now Kaspi buys an e-commerce company not only for licenses but rather for its large user base and well-known brand. Instead of acquiring a startup and developing it for several years. Moreover, all the biggest national players are big and known enough, so a new player would have complications and, what is more important, must spend a lot of time and money to win the market share.

In addition, Kaspi.kz plans to build a tech hub and create a large IT department in Ukraine.

What can be the price of Rozetka?

According to different calculations and including market multipliers, the value of Rozetka can vary from $600 to $889 million. On the one hand, it is too much for that market. On the other hand, there is always a premium for the market leader. Provided that it is in a good shape.

According to the sources of AIN.UA, Kaspi.kz has funds for this deal, but it would be its total M&A budget. So if the deal will actually happen, Kaspi.kz will highly likely borrow funds.

Based on the available information, Kaspi negotiates acquiring Rozetka but the parties still have not agreed on the terms of their deal.

About the marketplace

Shafa.com.br was launched by the creators of the Ukrainian Shafa (shafa.ua) after its acquisition by EVO in 2018. Now the Brazilian marketplace has 500 active sellers offering 40,000 items. The turnover is doubling annually.

The current team led by Anton Yermolenko will continue to develop shafa.com.br. EVO will help with technology and expertise.

“Brazil is a completely new market for us, and it is a big challenge. We invest a lot in the development of entrepreneurship and the construction of marketplaces here in Ukraine. I believe this experience will help us build prominent projects far beyond its borders as well,” Vladislav Chechetkin, Rozetka founder, commented on the deal.

“E-commerce in Brazil, with an annual turnover of more than $20 billion, is among the top 10 largest in the world and growing rapidly. Shafa is one of the largest and fastest growing marketplaces in Ukraine. We believe that we will be able to migrate the project development experience to the new market and build a breakthrough and in-demand product,” said Mykola Paliyenko, CEO at EVO.

About Shafa.ua 

Shafa.ua is a service for buying and selling clothes focusing on conscious consumption. Here Ukrainians sell new and previously owned merchandise or come to shop. On Shafa, you can buy clothes, shoes, accessories, cosmetics, perfumes, and household goods. The site’s objective is to motivate people not to throw away things in good condition but to give them a new life.

• In 2020, Shafa.ua featured 21 million items for sale.
• During the year, the marketplace was visited by over 30 million people, 200,000 of which became sellers.
• In March 2021 alone, 9+ million customers visited Shafa.ua, and the sellers added 3 million items for sale.

The website domain is Rozetka.md: it is in the Russian language, and the prices are specified in Moldovan leu. In Chisinau, Rozetka also has an offline store and a service center, where you can pick up or return the order.

The website indicates that delivery to any point in the country is carried out by Nova Poshta. Delivery time: 3-7 days.

The range of products differs from the Ukrainian one. For example, there is no section ‘Plumbing and Repair,’ as well as no alcoholic beverages in the Moldavian Rozetka.

The editorial board of AIN.UA asked for comments from the Rozetka press service but did not receive any additional information at the time of publication of this piece of news.

Rozetka is not the only e-commerce company from Ukraine that entered the Moldovan market. Earlier, Zakaz.ua, a service for the delivery of goods from supermarkets, was launched in the country.

The information about the deal became known for the first time in the middle of August. Within the framework of merging, Rozetka bought all the shares owned by Naspers in EVO Group. According to AIN.UA the transaction amount could be between $12-15 million.

The parties assured that after the merger all services of the companies will continue to work. The services include online supermarket Rozetka.ua, the marketplaces, such as Prom.ua, Satu.kz, Deal.by, Bigl.ua, Shafa.ua, Crafta.ua, trading platform Zakupki.Prom.ua, online services Kabanchik.ua and online service of electronic document flow Vchasno.

“We increase the speed of development of the Ukrainian e-commerce market by this deal. We will continue to improve service and customer experience, invest in infrastructure and launch new projects. We do it in order to become an integral part of the life of every Ukrainian. We want to use our products to make people’s lives easier and more convenient,” the founder of EVO Group Nikolai Palienko commented.

Earlier AIN.UA reported that Rozetka became the third most expensive Ukrainian brand according to Novoe Vremya online magazine.

The leader of the rating, same as in the past year, was the Morshinska company – the value of its brand is estimated at $533 million. Nova Poshta took the second place ($285 million), and the third place was taken by Rozetka ($244 million). Compared to 2017, the brand value of both companies increased by more than 30%.

The top 100 includes such telecom operators: Kyivstar ranked 10th ($ 155 million), Lifecell is 18th ($104.8 million), Volya is 92nd ($5.5 million). The Vodafone brand is not taken into account in the rating, and Ukrtelecom dropped out of the list this year.

The rating also includes companies that Novoye Vremya places in the e-commerce category: Citrus took 28th place ($73 million), Foxtrot – 36th place ($51 million), Allo – 38th place ($46 million), Comfy – 61st place ($17.5 million), Prom.ua – 67th place ($12.5 million). It is noteworthy that the price of the Prom.ua brand rose the most in the top 100 – by 190%.

Compilers of the rating note that the methodology for their assessment is based on the financial results of the companies that own the brands, as well as factors that may affect the brand value: the geographical coverage of sales, the technological component, the output, and the investment attractiveness of the industry.

The top ten most expensive brands are the following:

1. Morshinska – $533 million
2. Nova Poshta – $285 million
3. Rozetka – $244 million
4. PrivatBank – $237 million
5. Sandora – $231 million
6. Hortytsya – $229 million
7. Roshen – $206 million
8. Nemiroff – $196 million
9. ATB – $157 million
10. Kyivstar – $155 million

The ranking mostly consists of raw materials businessmen who control enterprises of production of products with low added value. The first place belongs to the owner of SCM (which includes Ukrtelecom) Rinat Akhmetov, who, thanks to growing demand for metals, increased his wealth by 76% up to $12.2 billion. In absolute figures, Akhmetov became richer by $5.3 billion.

Speaking about sphere of technology and e-commerce, only Vladislav Chechetkin, the founder of “Rozetka”, entered the top 100. He has taken the 29th place in the ranking. His estate was estimated at $165 million by “Novoe Vremya”. It is noteworthy that in just a year it grew by 124%.

In April, a similar rating was released according to the Focus magazine, in which Chechetkin’s estate was estimated at $87 million.

The creators of the company “Nova Poshta” – the leader among private delivery operators – Vyacheslav Klimov and Vladimir Popereshnyuk also appear in the rating. The estate of each of them was estimated at $102 million (in April “Focus” estimated their estates at $121 million each). The growth dynamics could not be measured, because businessmen were ranked for the first time and immediately acquired 55th and 56th places.

The President of Ukraine Petro Poroshenko ranks as 6th. Vasily Khmelnitsky, chief investor of UNIT.City, ranks as 36th in the rating ($125 million), Comfy owner Stanislav Ronnis ($94 million) is 62nd, Vladimir Tsoi ($68 million) and Sergey Bashlakov ($51 million), owners of IT-distributor MTI, are 79th and 91st, respectively.

The former owner of UMH, Boris Lozhkin, is at the end of the ranking with estate of $48 million. According to the creators of the research, his estate has decreased by 20% over the past year (“Focus” has estimated it at $139 million).

As it is noted by “Novoe Vremya”, all of the people from this ranking can be confident in tomorrow’s day since the world economy is growing, consuming more raw materials and finished products and goods made in Ukraine every year. Ukraine’s GDP growth, according to the NBU forecasts, will increase by 3,4% by the end of the year, and by 2019 will add another 2,4%, and also will naturally affect the richest people.

The term “marketplace” is used in a broad sense and denotes an online trading platform integrated by a common set of rules of different stringency, explains Mykola Paliyenko, co-owner of Prom.ua (the controlling stake belongs to global media group Naspers headquartered in Cape Town). “This is a model helping business to develop faster,” he says.

According to Prom.ua, the audience of marketplaces is growing faster than the one of traditional online stores. From 2014 to 2016 the audience of traditional online stores added only 4% in traffic, while the one of marketplaces 78%. They also can differ depending on the set of services. “The minimum of services provided by the platform is a price-aggregator (price comparison website services) or bulletin board, the maximum of services is what is called “fulfillment” in the west,” explains in detail Alexander Olshansky, president of Internet Invest Group holding. The extreme conditions, he notes, are the least stable, so online merchants try to experiment by introducing some additional services or by refusing them.

So far, Rozetka, the largest Ukrainian online store, is far ahead of all others. It is the only one of all Ukrainian online retailers offering fulfillment, that is, a full range of services for its partners from storing goods at its warehouse to delivery and after-sales service. So what is the point?

As early as 2013, there were 160,000 unique commodity items in the company’s assortment. Nowadays there are already 1.5 million.

However, it is not enough for the company. The goal is to sell online all products that are in retail. If you focus on Amazon selling almost everything then it is 12 million unique SKUs (Stock Keeping Units) presented on one online platform.

“The processes are not yet ideal. We are torn between clever and beautiful ones,” Vladyslav Chechotkin, Founder and co-owner of Rozetka, is full of self-irony. The company is haunted by the success of OLX (a bulletin board, Naspers affiliated company as well), admits Chechotkin. Although Rozetka, as he says, will never go along the path of an irresponsible ad aggregator, he likes the idea to reduce risks without damaging the assortment. “We want to offer our buyers the maximum quantity of goods and the best choice. That is the strategy” Vladyslav Chechotkin almost repeats the Amazon Founder’s credo. “But not everything we want we can actually sell,” he adds.

Vladyslav Chechotkin at the lecture “What’s eating Ukrainian e-commerce today?”. Photo: Olga Zakrevska

In 2013, the most successful year for e-commerce in terms of turnover, the online retail market grew by 25% compared to 2012 and amounted to about $ 2,2 billion (UAH 16 billion). At the end of the year, Rozetka took 135th place in the Forbes Ukraine rating of retailers with the revenue of UAH 2,13 billion ($ 350 million) and became the largest online store (Allo and Mobilluck stores took the second and the third places respectively).

At that time, Rozetka was already selling on its website various products for outdoor activities, sport and tourism, for children, household goods, games and gifts. The website had 160,000 stock key units. Chechotkin felt quite confident and tried to experiment by displaying certain products at the website. However, the company maintained strongest positions of the traditional categories – engineering and electronics. While the share of Rozetka at overall online market was 13% (Ernst & Young assessment), the share of 35% in the segment of household appliances and electronics assured its absolute leadership.

However, the crisis burst out in 2014 collapsing the market in dollars to 1,5 billion (it grew only slightly in UAH to 16,6 billion). Ukrainians became poorer because of the fall in exchange-rate. An average check in stores has been cut in half. Later the pessimists forecasts would come true: the decline would continue in 2015 pulling back the online commerce market to a volume of $ 1 billion.

With the onset of the crisis in 2014, the experiment of Rozetka with product categories entered an even more active phase. The section “railway and air tickets” was introduced already in February, clothing and footwear appeared on the website in April. These segments are much more profitable than electronics, for instance: the margin in the trade of footwear and clothing can be from 50 to 200%, says Valentin Kalashnyk, president of Ukrainian Association of Direct Marketing. It rarely exceeds 10-15% in the segment of engineering and electronics.

Realizing that the usability of the site is affected because of such an intensive expansion, the management of Rozetka completely updated its design. The new version of the website adjusted more to the expansion of categories was launched in March 2015. “We can no longer be called a specialized electronics supermarket. We are moving towards the actual Internet supermarket, where you can buy almost everything from mobile phone to clothing and seeds for your summer house,” the company’s press service reported.

Rozetka before/after the redesign

Within 2 years, Rozetka introduced the categories of seeds, auto products, jewelry and cosmetics to its product assortment and began selling alcohol. In 2016 the company entered the grocery segment and launched a sale of books, and in January 2017 pharmacy products became available for sale.

Chechotkin claims that the company has already been working on the marketplace model for several years. “A little more than a year ago we released it to the public as an offer for partners,” he said. Today there is a direct link “to sell on Rozetka” on the main page of the website. By clicking on it you will be requested to fill a short application form for partnership.

Long way

When Amazon decided to start selling something other than books, DVDs and CDs were introduced to the product assortment and then Jeff Bezos set his sights on children’s toys and electronics. However, he did not even imagine what difficulties were ahead: these goods required a completely different approach than those that were already familiar to the retailer. In 2000, with the Christmas boom on toys coming up, the head of the company made all possible mistakes in the estimation of both the required range and volume. Still not knowing this, he invested $ 120 million in a new sector and swore to the team that he would personally landfill all the leftover stock using his car should there be any after the holidays. In the end, it would be problematic to implement this, especially considering that Bezos was driving Honda Accord at that time: the company could not manage to sell toys for $ 50 million.

The expansion of Rozetka has not passed ideally either. Competitors assure that Chechotkin was not selling sport goods very well and there did not seem to be a surge in railway and airline ticket prices. “I admit that the traffic of Rozetka could be monetized in this direction. But the way I would do it is very different from how they did it,” says Serhiy Kravets, director of Tickets.ua. “Tickets pay off, but they are not something outstanding for us so far. They generate hundreds of sales a day, not tens of thousands as we expected,” agrees Chechotkin. Rozetka is not interested at all in selling such products like books, for example, he says, as its logistics is simply not tailored to such low-margin products. “Or tires. There are strong players here who have well established processes. It is more profitable for us to cooperate with them and not to enter this market,” he continues.

In general, the head of the company reluctantly talks about the categories he succeeded in and the ones he failed. “And it makes sense, because it is also a competitive advantage if you know what you need to sell by yourself and what should be outsourced,” Alexander Olshansky agrees.

“Quite logically, they have failed. For example, we clearly understand that selling electronics and clothing are absolutely different things. Everything is different: from displaying on the website to communicating with clients and delivery,” Dmitry Pokotilo, Founder of F.ua, notes. He recalls how Fotos (the forefather of F.ua) for a long time has been losing money on delivering large-sized household appliances, until the logistics of the store was adjusted to this category new for the photography equipment seller.

“Why are we doing so well? Perhaps we really love money,” Chechotkin jokes. He also adds that commercial risk is the main point in trade.

“Marketplace fixes this problem for us, the risk whether a product will be sold or not is taken by an entrepreneur,” – the businessman tells.

It is indicated on some products on the Rozetka website that the seller is not Rozetka itself, but one store or another its partner. There are about 30 such stores publicly available on the website, although the head of the company claims that there are several hundred of them. As he said, according to the assortment, most of the products on Rozetka are the products of partners, although in retail trade the greater part is the production of Rozetka. He does not give exact figures, but says that the positions of Rozetka in the field of household appliances, children’s goods, and clothes remain very strong.

According to AIN.UA, the categories of such products as books, car tires and pharmacy goods are almost completely outsourced. In the categories of auto products, footwear, clothing, children’s goods and household utensils, the assortment of Rozetka intersects with its partners ones. How is it possible to compete with one product on the same platform, for example, in clothing? The segment is very large and lucrative, there is enough space for everyone. “For the purposes of discussion, there are expensive ethno brands. Each vyshyvanka costs UAH 10,000. Do I believe that they will be sold? Not sure. But my partner believes, then let him take this risk,” says Chechotkin. The market of organized clothing retail in Ukraine is estimated at about $ 5 billion. Online retailers have only a small part of it, no more than 3% (according to UADM estimations, $ 140 million in 2015). However, given that more and more Ukrainian Internet users prefer to shop online, these figures will obviously increase.

The most significant competitor of Rozetka in terms of marketplace is OLX ad aggregator. The companies compete for the attention of the Internet audience. According to Factum Group Company, in 2016 OLX outrun Rozetka in two key categories audience reach (45% vs. 40%) and average daily share (17% vs. 9%). Why is that important? Sellers use both websites to attract attention to their product. “Sales on Rozetka do not provide us with a special additional revenue, although their percentage is very loyal. The partnership with them serves more to the image purpose, it is like an alternative to promotion in Google,” Artem Kiryahno, head of the online store for clothing trade GrandUA, admits.

In this context, both Rozetka and OLX are akin to online media: they act as advertising platforms and monetize their traffic. However, the conditions are different. OLX places advertisements free of charge, but sells packages for business users, who are not satisfied with the limited number of placements. Prom.ua charges a subscription fee from customers for the period of service.

Rozetka can offer its partners a wide range of services communication with customers, warranty service, delivery and storage at its warehouse. The company does not act as intermediary, but guarantees the quality of goods to buyers by its name and reputation. In doing so, it charges a commission for the effected transaction from partner rather than a fixed fee, as competitors do. “Commission can be different, from a fraction of a percent to tens of percent. It depends on the range of services and the terms of the agreement, which may differ for clients,” says Chechotkin.

Problem logistics

Amazon began its activity under the motto: “to sell as much as possible, to carry as little as possible.” Bezos was obsessed with the idea of creating such a virtual store that would not exist offline. This model was hardly intended for stockpiling and the right to form the assortment was initially delegated to Amazon trading partners and publishing houses. The cost of storing books was also delegated along with this right. But the businessman quickly understood that customers want fast delivery and they had to do it on their own. So the focus of the model shifted to efficient logistics, the company launched a grandiose investment project for the construction of fulfillment centers throughout the USA and later in other countries around the world.

“The construction project of Rozetka is very expensive. It is necessary not only to have funds to buy it, but also the volume of the market, so that it will pay off. We cannot afford this and hardly anyone else can,” Dmitry Pokotilo from F.ua says. We are talking about the huge warehouse complex in Brovary acquired by Rozetka in January this year. The A-class warehouses of a total area of about 49,000 sq. m are located on a plot of 9.5 hectares in 10 km away from Kyiv and 15 km away from Boryspil International Airport. $16 million spent on the purchase is not everything. “Twice as much as we spent on the warehouse, we will spend on its equipment,” the owner of Rozetka says.

The point is that the warehouse will be automated. The dimensions and equipment make it almost unique in Ukraine. They say on the market that even large offline networks do not have something like that. They do not have to, as their business model does not involve creation of such large stores as they trade “off the shelf” and not from warehouse. For comparison, the size of Auchan network in Kyiv Region is 27,000 sq. m, the warehouse of EpiCentre occupies an area of 20,000 sq. m. in Kalynivka urban-type settlement. Fozzy Group uses its own distribution center with an area of 30,000 sq. m (although the total storage area of the group exceeds 100,000 sq. m.), and fulfillment area of Nova Poshta, that is two warehouses in Brovary and Belgorodka, reaches 18,500 sq. m.

“No distributor stores at his warehouse more than 5,000-7,000 names of goods. Perhaps some electronics distributors have up to 10,000 unique products at warehouse. We have 1.5 million items, we sell 250,000 unique SKUs every month. These are completely different challenges, technology and processes,” Chechotkin says.

“Is there something like this in Ukraine? I do not know, I’m not sure. In fact, Rozetka is one of three largest companies in Ukraine (by the number of client transactions) along with PrivatBank and Nova Poshta,” Olshansky believes. According to Chechotkin, logistics is now the most cost-intensive part of the company’s budget: the company spends about $ 1.5 million on it every month.

The purchase of a warehouse and movement towards the marketplace are interrelated processes, confirms co-owner of Rozetka. “We are setting a new logistics and this will allow us to offer full service to our partners,” he says. It is interesting that in this niche his company will have to compete with Nova Poshta, one of its best partners. Not so long ago, Nova Poshta started rendering fulfillment service based on outsourcing. “You can just bring them the product, everything else they do by themselves – sorting, repackaging and delivery to the buyer,” – says Dmitry Pokotilo. Many online and offline retailers are among the company’s clients: Allo, WOG, Nestle, Philip Morris, Garna Mama, Rozetka and others.

However, Nova Posta is not only fulfillment. In fact, it saved Rozetka many troubles that neither Amazon nor many other global online retailers could avoid. We are talking about the most important, “last mile” of delivery delivery to the buyer. “Once Rozetka tried to develop its own delivery, they had a company for this purpose. But it could not manage to compete with Nova Poshta and it was closed down,” the market participant, who asked to remain anonymous, says. Chechotkin partially confirms: yes, Nova Poshta can do it more effectively in terms of economy. Rozetka has not disbanded its delivery service, but limited its activities to the territory of Kyiv, he clarifies.

Nova Poshta made an enormous contribution to the development of e-commerce in Ukraine. You cannot even imagine how big it is,” Chechotkin assures.

“Ask our neighbors in the north or north-east what is the situation with delivery in their countries. They will howl and swear. We do not have that kind of thing.”

Gods of content

What else, besides effective logistics, it is necessary to have to be a marketplace and make money on growth of your partners? In Amazon, huge value has always been seen in creating a convenient infrastructure for website users. At first Bezos invested tremendous funds in the purchase of technology companies and start-ups that could join the structure of the company and raise it to a new level of innovation. During the dot-com crash in 2000-2001, many of them went bankrupt, and Amazon began to develop independently. One of the company’s notable achievements is the 1-Click online shopping system allowing reducing the number of actions a buyer takes before buying up to 1 step. Once Bezos tried long and unsuccessfully to defend his patent right to this system and today hundreds of stores around the world use it (or try to adopt it).

Amazon paid much attention to technologies aimed at attracting users to the website, as well as at analyzing their behavior on it. Two different departments, the editorial and personalization ones, with hundreds of employees have worked on these tasks for a long time. In the first department, copywriters and editors dealt with the buyers, who played the role of product experts and made individual detailed descriptions on them. The second one employed analysts and programmers who worked with dry figures and designed algorithms. When the crisis started and the question of one of the departments dissolution arose in order to cut costs, the editorial department fell victim to it. Tests have shown that the stereotyped recommendations are more effective. Algorithms defeated people.

In Rozetka, there are people working on content: there are about 60 copywriters and editors in the staff, even more people are working on outsourcing. Chechotkin clearly understands how to catch the Internet user on the hook. After all, most people search through the network in order not to buy, but to get information. “We relied on content from the very establishment of the company. Not to brag, but if they start talking about some new trend in e-commerce in terms of content, it means that Rozetka has been in this trend for several years,” the businessman tells. He states that the base of videos, reviews, comments and product descriptions, which was created by Rozetka during its existence, is the largest in the Russian-speaking segment of the Internet. “I agree, they are the gods of content, we can’t reach this too soon,” the representative of one of the competitors, who asked to remain anonymous, confirms. For example, the video channel of the store on YouTube is ahead of e-Bay and Amazon channels in terms of traffic and number of subscribers.

$400,000 Rozetka spends every month on IT development

The technical department of the company employs even more people than the editorial office over 100 developers apart from outsourcing. Chechotkin says that Rozetka spends $400,000 per month on IT development. The company strengthens its IT infrastructure every month, constantly rewrites modules, optimizes load and just physically expands capacity by increasing the number of servers every year. “Perhaps, the infrastructure of the website is the least problematic place for us now,” co-owner of the company states.

Of course, the gap between Amazon and Rozetka is huge, if only because of market volumes and over recent years the American retailer has gone even further. In fact, today it is not only an online store, but also a technology company. In 2015, 55,9% of Amazon’s revenue came from the product of Amazon Web Services, a cloud-based operating system, an e-commerce platform for many companies. It is the logical continuation of marketplace development: IT infrastructure improvement and automation of processes reach such a high level that it allows scaling service and selling it separately as business services.

Does Vladyslav Chechotkin consider such a path for himself? So far, he believes that e-commerce in Ukraine cannot exist without a strong off-line component and intends to develop this direction first of all. However, who knows, maybe one day Rozetka will also become not a trading company, but an IT one.