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Russia's Yandex moves further into e-commerce as online ad growth slows

Reuters

By Olga Sichkar

MOSCOW (Reuters) - Russia's biggest search engine Yandex (YNDX.O) said it would transform its online shopping search site Yandex.Market into an electronic marketplace allowing customers to buy direct, in a further move to capitalize on the growing e-commerce market.

Russia's e-commerce sector has boomed over the past decade following the development of broadband. According to industry association AKIT, the country's e-commerce market totalled $17 billion last year, a 30 percent increase on 2012.

Yandex holds a dominant position in Russia, where its 60 percent market share in Internet search far exceeds the 27 percent held by global market leader Google (GOOG.O).

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It derives the bulk of its revenue from online advertising but its pace of growth has been slowing, prompting Yandex to diversify more actively its revenue sources.

On Thursday, the company announced that online shops can now sell their merchandise on Yandex.Market to customers making advance payments through Yandex with a bank card or the electronic wallet Yandex.Money. Retailers previously used Yandex as an aggregator, offering customers links to their shops.

"We want to solve key issues for online retailers - a cash gap, help with logistics, to increase trust between a seller and a buyer," Alex Avdei, the head of Yandex.Market service, told a presentation. A cash gap refers to the time between a retailer dispatching an order and being paid.

It will also offer logistics services to small online shops through Multiship – an online logistics services aggregator in which Yandex invested in January this year.

Yandex will charge online shops a 3 percent transaction fee, said Avdei. The delivery of goods paid for on Yandex.Market as well as refunds will be guaranteed by Yandex, which he said should increase trust in online shopping.

The company has no plans to create its own logistics infrastructure such as warehouses or to become a merchant itself – which differentiates it from Amazon.com Inc (AMZN.O) and eBay (EBAY.O).

(Additional reporting and writing by Maria Kiselyova, editing by David Evans)