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Internet Commerce in Russia has a Great Potential
April 19, 2011 15:29

Russian online discount service KupiVIP has raised $55 million of foreign funds. This is a new record for Russian Internet commerce. Despite low Internet popularity, Russia occupies second place after Germany in terms of online retail market. European investors are encouraged.

The biggest deal in the Internet history took place in the Russian market of online trading. Russian Shopping Club KupiVIP, owned by Oscar Hartmann, has attracted $55 million of fresh venture capital funding from well-known western companies: British Badlerton Capital, Bessemer Venture Partners and Russia Partners (A subsidiary of Siguler Guff & Company) from the U.S., in addition to the $20 million seeded by Accel and Mangrove Capital last year.

KupiVIP offers services similar to some European existing sites such as French Vente Privee and Spanish Privalia, but its potentially more lucrative market for investors. The site has more than 7 million users, hosts up to 20 private online flash sales every day. According to Emerging Markets, the company "sells Russian and foreign-made goods from 1,200 luxury brands and has more than 200,000 customers logging in each day, has also launched e-commerce services for other retailers such as Quiksilver and TSUM, Russia’s leading luxury store".

According to Dharmash Mistry of Balderton Capital, one of the three new KupiVIP's investors, “Russia is already the second largest internet market in Europe after Germany in terms of users, and with low penetration rates. Its e-commerce segment is three years behind the rest of Western Europe and the area has a population base of 270 million—more than Germany, France and the UK put together. We are backing a potential Amazon of Russia here.”

The company was founded by Oskar Hartmann, German entrepreneur, in 2008. At this moment KupiVIP is Russia's first sale site, which grew at an incredible rate. The company is very attractive for investors. In January, 2010 a fund Mangrove Capital Partners (which also supported such projects as Skype, Quintura, Securewave, Dialcom Networks) and Accel Partners (which participated in the financing of more than 300 successful companies, including Baidu, Facebook, Real Networks, Glam Media, ComScore and Macromedia) invested 20 million dollars in KupiVIP. According to KupiVIP, this funding is the single largest venture investment in a Russian ecommerce firm.

According to Zippy Cart resource, "with the newly acquired capital, the company plans to go beyond the original model and expand their reach toward larger ecommerce markets in western Europe, like Germany and the UK".

Mikhail Osin, PR-director of online store, says that shopping club is an interestiong and rapidly developing thing. He notes, that its the right time to invest in Russian electronic commerce as there are more and more online shoppers appearing in the country.

"Russia is completely its own animal, more than anywhere else in Europe. First, it’s large; second, they’re obsessed with luxury brands and third, the dynamics of supply and demand are such that KupiVIP provides an invaluable service to both supplier and consumer. For the supplier, once you’ve got goods into Russia from a tax and import point of view, you’ve no way to get them out. You need a trusted, branded way to get trusted brands at stages of the fashion cycle to reach the consumer. That’s what KupiVIP provides. Also, Russian business wants to go online but doesn’t have a clue how to do it. KupiVIP now has a service that takes customers online in a comprehensive way, from technology to marketing and logistics. So we can have full-season partnerships with these big-branded retailers, in addition to helping them with end-of-season sales", says Sonali De Rycker from Accel Partners.

KupiVIP founder, Oskar Hartman believes, that Russia is going to be the biggest internet economy in Europe. He notes, that people are getting more and more experienced in internet use and develloping road of Russian Internet market will be not too different from Europe and the U.S. He adds, that the entry barrier is high and it's not easily to enter the market, that's why there are 750 employees working in the company as it's impossible to do it with less.


Tags: Russian Internet Russian trade    

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