Lamoda co-founder and CEO Florian Jansen:
“Lamoda is virtually the only major pure player in the fashion segment”
How do you see the current state of e-commerce in Russia and its future prospects?
In 2011, when I started doing business in Russia, the market was very small, though promising; and until recently it grew at relatively quiet pace. E-commerce penetration is historically lower than in most Western countries: in grocery for example, online sales account for approximately 1% of the market vs. 3-4% in advanced countries.
But, for the past one-two years, we have witnessed a notable acceleration. The market is close to a tipping point that will lead to more adoption across consumer groups and in different shopping segments. Meanwhile, several very large multi-category players are asserting themselves and contending for leadership, including existing players like Ozon and Widberries, and such new entrants as Yandex Market, backed by Sberbank, and the Alibaba/Mail. ru Group alliance.
What about the fashion segment?
There’s a huge growth potential here. Only 6% to 7% of fashion goods are purchased online in Russia vs. 25% or 30% in Europe. But Russia is catching up fast: in 2018, the fashion segment grew by 30%, according to the AITC (AKIT) association, while the average market growth rate for e-commerce was 20%.
This segment was worth an estimated 500 billion rubles (nearly $8 billion) last year, including sales via marketplaces and social networks.
What differentiates Lamoda from other Russian fashion players?
Unlike in most Western countries, there are not that many fashion players in Russia. Actually, there are only three big ones: Wildberries, Lamoda and KupiVIP. But the latter has a very specific model (flash-sales), and Wildberries is no longer a fashion-focused business. Now they sell virtually anything, from home appliances, to pet food, to car parts. Thus, putting aside KupiVIP, Lamoda has become the only major fashion-focused pure player in Russia.
Even without a fashion-focus, Wildberries remains extremely strong in this segment…
Sure, but we’re not doing this fashion business in the same way. Lamoda focuses on middle- and high-end products, including exclusive brands, and develop a sophisticated, inspiring user experience with quality content. It’s a bit like Zalando sustaining vs. Amazon in Germany: the fact that Amazon also sells fashion items doesn’t make them the first destination for fashion aficionados.
What is so specific in the Lamoda user experience?
First, Lamoda offers a very wide fashion and lifestyle assortment. Users can effortlessly move between a unique collection from niche designers to premium brands as well as lifestyle goods, cosmetics, jewellery, home decoration and gifts.
Delivery is another key part of our unique user experience. We offer the vastest range of delivery options — even more than Ozon or Wildberries do — including our own self-pickup points. We deliver same-day in Moscow and next-day in 150 cities.
All our operations are absolutely customer-focused. We have created a UX lab and a dedicated consumer research team to develop a sophisticated UX experience. Even those working in our office provide their feedback!
But Lamoda is more than a place to shop easily: it is a platform to discover fashion and lifestyle, to help users make their personal lifestyle choices for every day. We create rich content with new formats such as purchases from blogs; use machine learning for personalization, as well as sophisticated advertising technologies. This might not sound exceptional in the West, but I don’t think anyone does comparable things Russia. Such sophistication is important in all verticals, but in fashion even more than in others.
All this translates into a unique B2B proposition. It is not by chance that such brands as Calzedonia and Inditex work with us… and only with us: it seems that other platforms don’t suit them.
What does this B2B offer consist in exactly?
Lamoda has the highest concentration of well-known brands. Among them are Nike, Mango, Hugo Boss, Arcadia Group, Inditex Group and many others. They work with us because of our focus on fashion, our audience, our customer service, our IT platform and our fulfilment capacity. What’s more, we allow suppliers to provide content, developing jointly an online fashion ecosystem beyond just inventory. We are the only B2B provider and partner of that kind.
We are always looking forward to long-term partnerships with brands: not only those already established in Russia, but also those who need an entry point in the country. We have a double B2B offer: as a third-party service provider (including notably logistics) and as a marketplace.
At the moment, more than 2,000 companies are involved in this marketplace. While taking advantage of our ecosystem, they allow us to provide the widest possible choice, even in smaller, niche categories. All this represents a growing part of our business.
So, your business model is no longer that of a retailer?
We were a retail company when we launched in 2011. Since 2015, we have been building a platform — not dropping inventory-based retail as a business model, but articulating things around the concept of connecting buyers and sellers of goods and services. In Q1 2019, our partners’ sales through the marketplace accounted for 22.2% of total sales, more than three times as much as one year before.
Do you have any plans for offline?
Lamoda Market, our first offline store, was opened in March 2019 in Moscow, in the Atrium shopping center. It is a 1,000 square meters boutique combined with a traditional shop format and pick-up point. We also have more than 200 try-on (pick-up) points across Russia. They serve e-commerce orders through fast delivery, cash and card payments, and returns management. The largest ones, so called ‘flagship’ points, also have a kid’s corner and upselling areas with relevant goods. Expanding these try-on points is a big priority for 2019-2020, with the goal of doubling their numbers in one year.
However, Lamoda is and will remain essentially an online business. We will develop an offline presence only as adjunct online operations and a stimulation to the online business. Our offline projects (pop-up stores, Lamoda Market) are about image. It’s an opportunity to communicate with clients on another level and to introduce Lamoda to those who are still suspicious about online shopping.
Can you comment on your company’s latest financial results?
In the first quarter of 2019, total sales for Lamoda online stores in Russia, Belarus, Ukraine, and Kazakhstan increased by 23.5% year-on-year, exceeding €111 million (including both Lamoda-owned inventory and inventory listed through its marketplace). This growth also translated into a 3.3% gross profit year-on-year growth. This revenue and profitability surge illustrate that the re-positioning of the company into a fashion, beauty and lifestyle expert platform has been successful and will continue to be so.
How do you envision Lamoda to evolve in the future?
In the foreseeable future, the core of our model will remain the same: providing fashion and lifestyle solutions for both brands and customers. Going forward, we will keep expanding the share of marketplace goods on our platform, expecting these sales to account for half of total sales by 2022. At the same time, we are betting heavily on premium sales, which currently constitute 15% of our sales, but shows strong growth ahead.
I also see Lamoda expand even further beyond selling simply products from a catalogue, entering the lifestyle and services sphere, such as style advice. We want to inspire our customers and better enable them to discover lifestyle solutions by offering features such as ‘shop by trend’, ‘shop by style’, ‘shop by occasion.’
We are also pushing the personalization agenda very hard across the board with personalized product recommendations and catalogue sorting based on purchase history, size recommendations and much more.
Lamoda is part of Global Fashion Group (CFG), what is the level of integration?
Participation in this group implies significant synergies. GFG supports us in global brand relations, technological solutions, supply chain innovations, investor relations and many more aspects. At the same time each GFG market is run in its own way: for instance, our region is the only one where try-on is offered. Independence in local execution is critical to the success of GFG overall. Since the balance between delegation and control is satisfactory, I don’t see any real value in tighter integration at the moment.
Could Lamoda go public, raise funds, make an acquisition or even be acquired?
Investor relations, fundraising and capital allocation decision are a prerogative of GFG. They are currently reviewing several options to raise additional funds¹.
As for a potential acquisition, we don’t have any concrete offers right now in Russia, but such outcome is possible. E-commerce is developing fast in the country, and there are many players with plenty of capital and a rush to acquire market share.
Interview conducted in June 2019