In the first nine months of 2022 Wildberries saw turnover increase 95% year on year to over RUB1 trillion (around $16.5bn). The online retailer has enjoyed a wildly successful couple of years, it now dominates the Russian market and is almost twice the size of its closest competitor.

Indeed, while it may not be a household name in the West, Wildberries is ranked by WebRetailer as the world’s tenth-biggest online market place, ahead of the likes of Target and Pinduoduo, when ranked by monthly visits.

And the outlook is only set to improve: rumours are circulating in the Russian media that Chinese e-commerce giant AliExpress is winding down its Russian operations as the war in Ukraine and Western sanctions make the Russian market an increasingly hostile environment for foreign companies.

If this is true, the news will be well received by all rival online retailers, including Yandex, Ozon, Sber and Avito. Most of all, however, AliExpress’ exit would be welcomed by Wildberries, which is the country’s biggest e-commerce player, and stands to inherit much of AliExpress’ market share.

While the site started out as a clothes vendor, much of that recent growth came from fairly new product categories, including household appliances and jewellery, which are also familiar territory for AliExpress, so Wildberries could make significant further inroads in the space AliExpress is slated to vacate.

Founded in 2004 on the $700 savings of English teacher Tatyana Bakalchuk, Wildberries quickly surged out of obscurity, leapfrogging competitors to become a market leader. It even began an ambitious programme of international expansion in 2019. So what exactly is the sanctioned internet giant waiting to step into AliExpress’ shoes, and what lies behind its sudden rise?

 

Ripening

When it started life in 2004, Wildberries was a small website set up by Bakalchuk during maternity leave. It specialised in selling on clothes from the catalogues of German retailer Otto Group.

The website was reportedly created with the help of her partner Vladislav Bakalchuk, a radiophysicist and successful businessman. The channel Svoi Da Nashi on popular social media network Telegram, which purports to tell Russians “What people are whispering about in the corridors of power”, claims that Vladislav sponsored the business in the early days.

Before Wildberries was born, Vladislav Bakalchuk traded computers – a line of work with a notorious reputation during the turbulent 1990s as the controlled economy gave way to a market economy and black-market channels proliferated. He was a co-owner of UTech, whose web design studio UT Design was reportedly responsible for the first Wildberries website. The Bell estimates that Vladislav earned around $3-5mnn dollars from the sale of UTech to a company majority owned by Gazprombank in 2007.

For all that Wildberries markets itself as a homespun business, then, it is clear that big money and influence have fuelled its success.

Family connections gave the business a boost in its early days, given that many of Tatyana’s relations worked for Wildberries as it grew into a large company. In an interview for Russian news agency TASS, Bakalchuk recalls that “My aunt became an accountant. Almost all my relatives came to help.”

The Bell points out that Tatyana is also indirectly related to the vice president of state-owned oil giant Rosneft, Yuri Tsoi. Another member of Tatyana’s extended family is described as a “family friend of Rosneft CEO Igor Sechin”. Wildberries told The Bell that neither of these individuals participated in the development of the company.

99% of the company is owned by Tatyana Bakalchuk, who is now the richest woman in Russia.

A third partner also seems to have joined the business early on: Sergey Anufriev. Some Russian media outlets describe him as a co-founder, although he isn’t officially listed as such by the company. His business history and wealth prior to joining the Wildberries could also not be traced through open-source research.

 

The thorns

Nonetheless, Wildberries enjoyed great success as it rose from relative obscurity. The strategy of charging only a 10% margin on top of the prices from the Otto Group catalogue attracted custom from other providers who were asking for a markup of as much as 30% to deliver outside Moscow. Wildberries also shrewdly decided not to ask for prepayments, which is one of the factors that Bakalchuk herself credits for the company’s early popularity.

After consecutive years of storming growth, Wildberries became a household name in Russia. Its collection points were dotted around the country's farthest reaches – even the closed military town of Ozersk, birthplace of the Soviet post-war nuclear programme, where popular convenience chain Pyaterochka ran into difficulties opening stores due to tight regulations.

Like any major company, the ascendancy of Wildberries has not been without controversy. In 2017, it racked up around 25 lawsuits from partners as suppliers chafed over alleged unpaid debts and reports emerged of haggling for the price of received goods.

The company also received a tide of complaints from suppliers claiming that the platform had forced them to mark down their entire assortment by 25% for World Singles’ Day on 11 November 2020. It seems that Wildberries backed down, with Russian media circulating apparent messages from the representatives of the company in which they described the 25% promo codes as a “mistake”.

Perhaps more concerning for international providers is the speed with which Wildberries has indulged some government whims in the past.

One memorable example came after Deputy Prime Minister Denis Manturov disapprovingly remarked at the Russian Retail Week forum that many homegrown companies selling Russian products had English names.

Another participant at the forum pointed out that Bakalchuk’s company fit this category, quipping that the name of her marketplace should be changed to “Dikiye Yagodi” – the Russian translation. Bakalchuk responded that “I can’t promise that we’ll do that, but we’ll consider it.”

Two months later, in August 2022, shoppers on Wildberries spotted that the name which appeared on the site had changed to the Russian word “Yagodki”. Wildberries quickly reverted back to the old name after receiving criticism for the sudden change.

Bakalchuk herself hardly helped the company’s international reputation when she was reportedly personally involved in talks with the Russian Federal Anti-Monopoly Service over the thorny issue of legalising parallel imports (importing products from abroad without the permission of the trademark owner).

As Western brands pull out of Russia over its invasion of Ukraine, the government is considering legalising parallel imports to ease some of the supply problems that retailers are facing. Bakalchuk has publicly supported the initiative, saying: “the consumer will get access to a wider assortment of goods of a high quality for reasonable prices.”

Wildberries itself has come under scrutiny for continuing to sell clothing from Inditex, the owner of Zara, even after the group left Russia. In a statement in June, Wildberries insisted that “we are buying goods that we sell from Wildberries without intermediaries, only directly from producers or official distributors.”

bne IntelliNews has attempted to contact Wildberries to clarify whether Bakalchuk’s support for legalising parallel imports represents the company’s position, but did not receive a response at the time of publication.

Another brewing scandal comes in the form of the payments systems preferred by Wildberries. The website introduced a commission for payments via Visa or Mastercard, which caused sales using Russia’s homegrown “Mir” payments system to increase by 62% on the site.

Mir was set up by the Russian Central Bank (CBR) as a way to wean Russia off using Western financial services providers for the transfer of payments. Economic news and analysis outlet Nebrekhnya points out that Wildberries has been a client of state-owned VTB bank since 2006, and Bakalchuk has now been made an independent member of the bank’s supervisory board, so the policy of incentivising payments via “Mir” could raise some uncomfortable questions about the company’s allegiances.

“There is an understanding at Staraia Ploshchad [the colloquial term for the president’s administration responsible for internal politics] that it is necessary to assert control over the largest internet companies. It all started with Yandex News, which now belongs to VK, but now it extends to the largest online cinemas, ad services, and, of course, marketplaces too,” a source with knowledge of the Russian tech sector told bne IntelliNews.

 

Sanctions

In July 2021, more than six months before the start of the war, Ukraine introduced sanctions against both Wildberries and Tatiana Bakalchuk. It claimed that Wildberries was selling both Russian military uniforms and propaganda on its site, contributing to the anti-Ukrainian sentiment which was taking hold in Russia.

“Wildberries has always been perceived as an ‘orthodox’ market player and had very close ties with the regulators,” said bne IntelliNews’ source. “It was a system player, and received a lot of preference and support for this,” they added.

At the time, Wildberries said that it expected no negative impact as a result of the Ukrainian sanctions.

Poland followed suit after the outbreak of war, sanctioning Wildberries for its ties to state-owned VTB Bank, from which the company had received a RUB17bn credit line in 2010.

Sanctions notwithstanding, however, the company has continued growing rapidly.

As Western brands began to pull out of Russia, more consumers turned to online clothes options, where Wildberries dominates. In April as war raged and patriotic fervour swelled, the company launched a “Made in Russia” section which now boasts over 10,000 brands.

Wildberries is now doing a roaring trade. In the first nine months of 2022, it has already significantly exceeded its 2021 results, even with a final quarter in hand. The soaring wartime revenues of homegrown Russian companies like Wildberries will be welcomed in the Kremlin, where they provide a much-needed extra source of tax to boost its depleted coffers.

Wildberries commands more than a sixth of Russia’s e-commerce space, with further room for growth, which may well be provided by AliExpress’ alleged plans to bow out of Russia. As it continues to gain traction in this market, investors in the West will be watching the company closely, but not uncritically.