Wikimart: Building a Russian Version of Amazon

Ashley Sutherland
Nikkhil LaCoul
Carlos Almeida
David Hoang
Daniella Sanlaeid
Tiffany Pennington
Zachary Stewart

BPS 4305.502
Dr. Zhiang Lin
October 12th 2016

Introduction
Wikimart was created by two Stanford business school students. Their target audience
consisted of Russias primary retail consumers and the surrounding former Soviet Union Russian
speaking countries. Wikimart had all of the potential energy for success; however, their first four
years of business they did not see any profit. In their initial stages of business, they were seeing a
constant flow of visitors. Their goal to reach a younger more tech savvy age group was able to
help them in gaining financial support. With the help of angel investors, the two men were able
to get their company up and running. Placing all of their operations in Moscow was an excellent
strategic move. Moscow is a centralized location that not only attracted online sellers but brought
investors in Russias capital. The two owners were determined to run their own company. They
were in favor of investors who didnt want to influence how they ran business. Wikimart is in a
billion-dollar industry that is continuing to grow. It was interesting to see Wikimart not turn a
profit in an industry that saw a 3-billion-dollar increase. Wikimart and the industry as a whole
were seeing a steady increase of consumers and sellers. Wikimart was given all of the
opportunities to achieve their goals as the industry leaders; however, they were struggling to
keep their business at a break even.

Purpose of the case

Wikimart started in 2008 as an online marketplace that focused on B2C platform that
charges 1.5% per transaction. They serve mainly in Russia however; they also serve other
Russian speaking countries. Wikimart strategically raised some private capital to expand their
business and increase their market share. Despite the fact that the Russian e-commerce market
shows a very promising steadily growth, Wikimart has struggle to be profitable since early 2012.
So how was Wikimart able to obtain the large amounts of financing in the early stages? Russia
was said to have great potential in Internet users. More specifically, the estimates of the
ecommerce market in Russia were growing substantially. These impressive estimated growth
rates made investors very attracted to the idea of investing into the Russian ecommerce market.
The partners of Wikimart wanted to make it clear that their goal was to continue to develop
Wikimart in Russia even after expanding to new markets. Also, the online retail area in Russia
did not have a substantial amount of competition.

Industry Analysis
The threats that this particular industry faces can be identify by looking at the Porters
five forces framework. The exponential future market growth of about 40% annually has made
the threat for potential entry much easier and the rivalry among competitors more intense.
Ozon.ru, is its largest competitor in Russia. Other companies such as Groupon and KupiVip
which offers group discounts on products and services also represent industry rivals that are
leveraging from foreign investments to create a threat of substitutes. Ozon.ru was Wikimarts
largest competitor, however, following by KupiVip and Groupon. Because there was not much
competition, besides the sites just mentioned, the online retail space in Russia was almost like an
oligopoly. Again, making Wikimart look like an attractive investment. It was also being brought

up that investors like Amazon and eBay could potentially target Wikimart if the increase in
revenues continued, but could such growth continue for Wikimart?.
Wikimart having an established competitor such as Ozon.ru is actually an advantage in
some aspects. Instead of viewing already established sites like Ozon.ru as competition, the
partners of Wikimart could study this competitor and possibly learn what not to do. Of course
every company has its pitfalls, but Wikimart could have less if they learn the reasons behind
some of the problems Ozon.ru ran into. Also instead of trying to avoid problems Ozon.ru had,
Wikimart could place itself in the areas where Ozon.ru is not so effective.
There are several viable exit strategies for the founders of Wikimart. Selling their stake in
the company to one of its competitors is always an option. They also have the option of an
acquisition with its competitors. In order for the founders to recover their investments into the
company and benefit from electing to take one of these options, Wikimart would have to have
profit or growth. Another viable exit strategy for Wikimart is to search for another internet
company who may be interested in intermingling Wikimarts model into an existing platform.

Organizational Analysis
To help with structural organization of the business, both co-founders decided to adopt a
more corporate- like structure. Maxim Faldin will become the CEO of the company, responsible
for the operation and development of the business, while Kamil Kurmakayev took charged of the
strategic role including forecasting, budgeting, and development.
The restructuring of the company is going to contribute to solve one of the main issues which is
the order completion rates (68% in 2011) mostly because the retailers often do not have enough
IT support neither the supply chain capabilities to support and fulfill customer orders.

Recommendations
U.S. technology companies benefit from having abundant domestic private capital that
can be allocated towards venture-style start-up firms (Crunchbase). Russia, due to its economic
volatility and the uncertainty in the soviet market, shun away venture capital investors and other
forms of foreign private capitalthus leaving a small group of sophisticated investors with
previous experience and understanding of the foreign market. For Wikimart to sustain its
funding, emphasis should be placed on growth into domestic markets that have yet to be
explored. These considerations should include growth in product delivery efficiencyproviding
single-day shipping options for the target market of young technology professionals in Russia.
This would entail investing in warehousing and supply chain improvement. Imitability can be an
issue in the general business model for an ecommerce platform; however a competitive
advantage in the fulfillment process of consumer product requests can greatly differentiate
Wikimart among its peers.
Wikimart also needs to create a strategic partnership with the Russian government to
penetrate the greater soviet market that lacks access to Internet (Ecommerce Strategy). If
Wikimart is the first ecommerce tool to be introduced to new users of the Internet, consumer
adoption of the product is more likely to be sustained given the strong utility received
disrupting the conventional retail market in Russia. Technology companies, while private, is
fueled with private capital given that their expected growth rate serves to mitigate the risks
associated with allocating capital that will remain illiquid for years to come, therefore the
suggested emphasis on constant high growth is paramount to the success of the firm.

Conclusion

The implementation and proper execution of global and domestic strategy is paramount
to the success of Wikimart in its endeavors to become a Russian ecommerce giant. By focusing
their strategy in new market entry and delivery efficiency, the firm can leverage its proficiencies
to outcompete its peers.

Works Cited

"WikiMart.ru." Crunchbase Accelerates Innovation by Bringing Together Data on Companies and the People
behind Them. N.p., n.d. Web. 14 Oct. 2016.

"Analysis & Strategy." Ecommerce Strategy & Analysis. N.p., n.d. Web. 14 Oct. 2016.