Wildberries, “Russia’s Amazon,” goes head to head with the e-commerce giant in Europe

Founded in 2004 by former teacher Tatyana Bakalchuk, Wildberries has since leapfrogged larger competitors to become one of the country’s largest online retailers.

The coronavirus pandemic has led to remarkable growth in the global e-commerce industry, but global giants like Amazon.com, Inc. haven’t been the only ones to profit.

A report from International Business Machines Corporation’s (IBM) United States Retail Index in August 2020 pointed out that COVID had accelerated the shift away from physical retail to digital retail by roughly five years.

Amazon, the largest e-commerce retailer and one of the most valuable global companies in the world saw its business skyrocket as a result of the pandemic. In the fourth quarter of 2020, which includes the holiday season, the e-commerce provider reported revenue of US$125.56 billion, passing the US$100 billion mark during a quarter for the first time ever.

But Amazon is not alone in seeing the benefits of the pandemic’s shift to e-commerce.

Wildberries, a Russian e-commerce retailer, also saw its business accelerate as a result of the pandemic, consolidating its position as the largest e-commerce platform in the country.

Founded in 2004 by former teacher Tatyana Bakalchuk, Wildberries has since leapfrogged larger, better-financed competitors to become one of the country’s largest online retailers. All this despite the company’s humble beginnings operating out of Bakalchuk’s apartment.

With its impressive domestic growth, Bakalchuk’s Wildberries is now looking to expand into foreign markets where it will face multinational giant Amazon for the first time.

Wild growth

Boasting a net worth of around US$13 billion, Bakalchuk is not only one of Russia’s richest women but unlike many of Russia’s oligarchs, her wealth is not founded on the spate of privatization that occurred during the chaos of the 1990s following the collapse of the Soviet Union.

A former English teacher, Bakalchuk founded Wildberries during her maternity leave in 2004, investing US$700 in a website to sell clothes, even delivering items to customers herself using public transport.

Growth was not always a certainty for Wildberries. Yet Bakalchuk successfully navigated two crises, first in 2008, then in 2014, with the collapse of the Russian ruble, ensuring a place for her company among Russia’s fragmented e-commerce industry.

In 2014, Wildberries began to enlist a greater number of local producers, creating a marketplace akin to the Amazon model, wherein Wildberries took a cut of sales made by retailers on its platform and charged sellers for the use of its warehousing and distributing services.

This local model has since proven central to Wildberries’ growth, with Bakalchuk herself stating that the company’s “strength is working with small businesses.”

The pandemic has provided yet another opportunity for Wildberries to accelerate its growth. In 2020 alone, sales on the platform almost doubled to some US$5.9 billion.

As a result, the retailer now accounts for some 14% of the Russian e-commerce market – the country’s largest platform.

Achieving this dominant position was by no means a small feat. Wildberries has faced significant competition from the likes of AliExpress Russia, backed by Chinese giant Alibaba, as well as domestic competitors Yandex (also the country’s largest search engine) and Ozon – Russia’s first e-commerce retailer.

Wildberries' international opportunity

With its position at home secured, Wildberries has begun expanding its presence abroad.

In 2019, Wildberries expanded its operations into Israel, Poland and Slovakia.

And, in January 2021, Wildberries launched in Germany. Wildberries plans to offer a catalog of four million products to German consumers, with the company saying it possesses a network of 40,000 collection points across the company.

Plans for the Russian e-commerce platform don’t stop there. Vyacheslav Ivashchenko, Director of Development at Wildberries, told The Moscow Times that “in the near future, Wildberries is also planning to enter the markets of France, Italy and Spain.”

An expansion into these markets, Germany included, brings Wildberries into direct competition with Amazon, which does not operate in Russia.

Amazon’s share of the online retail sales market in Europe as a whole stands at around 9.8%, though this is larger in some of the wealthier, more developed European countries. In the United Kingdom, for instance, Amazon’s share of e-commerce stands at a dominant 30%.

Expansion into Germany looks to be a bold move by Wildberries to challenge Amazon in those European markets where the latter is most dominant.

Future dominance

While its international expansion remains ongoing, so too does Wildberries’ consolidation in its Russian home.

According to a September 2018 report by financial services company Morgan Stanley, Russia is one of the world’s last big “frontiers” for e-commerce. That is to say that, despite Wildberries’ significant growth in recent years, the Russian e-commerce market has yet to be consolidated under one – or several – main providers, as in the US or China.

The pandemic has already accelerated the push toward e-commerce consolidation in Russia.

According to Marat Ibragimov, analyst at Gazprombank, “aided by the pandemic, large e-commerce platforms are gobbling up market share from both offline and online stores.”

“Competition is heating up, and in the future two or three will dominate.”

For Bakalchuk’s Wildberries, then, the goal appears to be both dominant at home and competitive with global players such as Amazon abroad.

Given Wildberries’ unlikely rise to predominance in the Russian e-commerce market, though, this may not be impossible.