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Amazon on Ukraine's horizon: Why Rozetka buys its main competitor

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biz.liga.net
In the near future, Ukraine will face a deal of the year in the field of Internet commerce. The two largest marketplaces in the country - Rozetka.ua and Prom.ua - will unite.
Rozetka.ua CEO and founder Vladyslav Chechetkin claimed that his company planned to buy out the share of Naspers (a majority stake - Ed.) in the group of EVO companies. It includes Prom.ua, Bigl.ua, Zakupki.prom.ua, Crafta.ua, Kabanchik.ua, Vchasno.com.ua, Shafa.ua, and others. The share of the founders of EVO - Mykola Palienko, Denys Gorovoy, and Taras Murashko - transforms into a share in the combined company (Rozetka + EVO). One of its main shareholders will be Horizon Capital investment company, which has invested in Rozetka in 2015.

For last year, the trade turnover of the EVO market (Prom.ua, Bigl.ua, Crafta.ua, Shafa.ua) amounted to 0,5 billion USD. Buyers make over 2 million orders monthly, using EVO market marts.
In order for the transaction to take place, it must still be approved by the Anti-Monopoly Committee of Ukraine (AMCU). Participants do not comment on the financial details. Head of the analytical department of the Concorde Capital investment company Olexandr Parashchy says that market multiples in such transactions in this area now amount to 0.5-0.6 of sales (over the past 12 months). That is, to understand the cost of the company, their volume should be multiplied by these figures. Parashchy clarifies that this coefficient can be applied only for the commission income, and not for the turnover of all sellers of the marketplace. But details about the profit and EVO income are not disclosed. Given that the average commission for the sale on the marketplace can be several percents, a group of companies could be valued at hundreds of millions of hryvnia.

"Rozetka has got an image of a monster, which prevents small businesses from developing, presses suppliers and so on. This is not quite true," said Chechetkin during his May speech at the iForum. He admitted that he was very afraid of launching the marketplace because he thought that small sellers would spoil the reputation of his online store as their quality of service would be lower. But in the first quarter of 2018, 28% of all items were already delivered to Rozetka customers by the affiliate sellers. There are already thousands of them. It turned out that small and medium-sized businesses have good sales. And Rozetka has something to learn from them. It even bought a large warehouse so that its partners could place their goods there. For each successfully completed sale, the marketplace receives from 3% of the transaction.
If Rozetka now buys EVO's marketplaces, its network of vendors-partners, as well as the experience of interaction with them, will grow many times. And this will be a logical step in the development for Chechetkin's business. In addition, there will be virtually no competitors left in the market for marketplays, and the company's group will be the only major player on it.

The Rozetka and EVO deal looks quite logical from the point of view of business development. But there is one question: where does the buyer get such money from? Horizon Capital, which could help with financing, refused to comment on this issue.
Several players have put forward an alternative version regarding the purpose of the investment: Rozetka is preparing for a larger deal, in which it can become the object of takeover itself. Head of the online department of the Helen Marlen Group Oleksiy Kavitsky is almost sure in it. Back in February, he found out somewhere that the world e-commerce giant Amazon was preparing to enter our market, and wrote about it on Facebook.
Such assumptions were voiced not only by Kavitsky. "In the light of old rumors about Amazon and its entry into our region, it seems that this (the deal with EVO - Ed.) is a prerequisite for their expensive selling. Not only from the point of view of increasing capitalization, but also from the point of view that there will be no other market participants, which could be bought by Amazon," Dmytro Pokotylo, managing partner of F.ua, claims.

There are market participants who do not believe in such a future. As Evgen Rezuyev thinks, the specifics of the business of any national e-commerce player would unlikely to be understandable and attractive as an object of absorption for Amazon. "Because of a relatively small domestic market, filled with incomprehensible imported goods, Ukraine would not be interesting for such system companies," he adds. According to Ukrposhta director, Igor Smelyansky, there is one serious obstacle on the way to Amazon's arrival in Ukraine - smuggling.
Dmitry Pokotylo makes one more assumption: maybe Rozetka is preparing to enter the stock exchange.
Stas Yurasov, Anton Kobyliansky
Read the original text at biz.liga.net.
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