Editor’s note: This post from East-West Digital News was syndicated with permission.
Westwing, a German e-commerce company selling furniture and designer home accessories, has sold to one of the funds of Elbrus Capital its subsidiary covering Russia and Kazakhstan. This full acquisition was closed in mid-November, Elbrus Capital Senior Partner Dmitry Kryukov told Russian business daily Kommersant.
The amount of the transaction has not been disclosed, but in an exchange with Kommersant, market analyst Mikhail Burmistrov assumed it might have equalled at least the subsidiary’s annual turnover, or 1-1.2 billion rubles ($15-18 million at the current exchange rate).
Westwing launched operations in Russia in 2011, Kommersant notes. The online store has several thousand suppliers from Russia and abroad and claims no less than 5 million club members in Russia and Kazakhstan. Last year, its sales revenues reached around 1 billion rubles (around $16.5 million at the average exchange rate), according to official accounts, and could amount to 800 million rubles (around $13 million) this year, according to company forecasts cited by Kommersant.
Westwing’s exit from Russia and Kazakhstan, as well as from Brazil, has been presented as “a strategic decision to focus on its main business in Europe.”
The move, however, seems paradoxical as the company, backed by Rocket Internet, just raised €114 million euros in its Frankfurt IPO.
While the Russian e-commerce market is expected to almost triple in volume in the next five years, local market experts consider the furniture segment as particularly promising. E-commerce penetration in this segment is around 4% vs. around 10% in more advanced markets, Kryukov told Kommersant.
Elbrus Capital intends to invest further in the company to help it reach its potential, Kryukov added.
Massive investments from Russian and Chinese players
Westwing is not the only German retail company having fully or partially stopped operations in Russia, as reported last month by East-West Digital News.
In the course of this year Otto Group, the German e-commerce giant, announced the shutdown of its Russian online stores Otto.ru and Quelle.ru; Adidas significantly reduced the number of its trademark shops in Russia and neighbouring countries; Ceconomy sold all of its Russian Media Markt stores; and ECE Projektmanagement, the European leader in shopping mall management companies, left Russia.
Among the reasons for the decreased appeal of the Russian market in the eyes of German retailers are the ruble’s depreciation since 2014-15 and growing local competition.
Meanwhile, major local players such as Mail.Ru Group (which has made an alliance with Alibaba), Yandex (in partnership with Sberbank) and Ozon (backed by MTS and Baring Vostok) have launched massive investment plans in Russian e-commerce.
In the photo, left to right: Delia Fischer, Westwing co-founder and creative director; Stefan Smalla, Westwing co-founder and CEO; Florian Drabeck, Westwing CFO