Ulmart, the former Russian e-commerce leader, is going bankrupt after three years of dire shareholder disputes.
Founded by Alexey Nikitin in St. Petersburg in 2008, Ulmart developed a hybrid online-offline model: “part IKEA and part Amazon,” as former CEO Sergey Fedorinov put it.
In its best days, the company had nearly 50 urban and suburban fulfilment centers deployed across Russia. Selling virtually everything from electronic devices, to home appliances, to books and music, Ulmart topped e-commerce rankings in 2013-2016, generating up to $820 million in yearly total sales revenues.
An inextricable dispute started in 2016 between the company’s main shareholders: Dmitry Kostygin, the main shareholder and company chairman; American businessman Augustus Meyer; and Mikhail Vasinkevich, a wealthy St. Petersburg businessman who invested in the company in 2010.
The conflict opposing Vasinkevich to Kostygin and Meyer seemingly originated from disagreements on Ulmart’s development strategy. Kostygin – who was also involved in a dispute over digital content company Dream Industries – ended up under house arrest, being accused of credit fraud in a criminal case initiated by Sberbank. Vasinkevich was declared bankrupt by a Russian court in late 2018 following Kostygin’s lawsuit.
Ulmart did not survive the conflict, in spite of a settlement attempt in May 2019. Last year, the company’s debt reached an unsustainable level, leading to lay off part of the staff, shut down support services and close regional business units. Site traffic fell from some 25.3 million users in January 2017 to just 3 million in December 2019, according to SimilarWeb.
The company’s online revenues collapsed from 38.8 billion rubles in 2016 ($580 million) to 9.9 billion rubles ($158 million) in 2018, according to DataInsight estimates cited by Oborot.ru.
Little hope is now left for the company, which “is likely to be dismantled by its creditors,” according to Mikhail Skigin, who lent Ulmart $30 million in 2016.
“But the core infrastructure still remains,” added Skigin in a media interview, still seeing some value in Ulmart’s brand, IT platform and “some human resources.”
Bankruptcies amid market growth
Ulmart is not the only recent case of bankruptcy among Russian e-commerce players:
- In December 2019 Bringly, the cross-border e-commerce marketplace of the Yandex Market group of companies, shut down just one year after launch.
- e96.ru, once a predominant player in several Russian regions, has been undergoing a bankruptcy procedure since mid 2018. The site has disappeared from industry rankings.
- The media have just reported the personal bankruptcy of Maxim Faldin, a figure of the e-commerce scene in its early days. His first site Wikimart shut down in 2017 after raising dozens of millions from international investors. His second e-commerce venture, Little Gentrys, ceased activities less than two years later. Now Faldin owes some 200 million rubles (around $3 million) to more than 30 creditors, according to Kommersant. The businessman did not answer EWDN’s questions.
In addition, three online delivery startups – Golama, Foodza and Superbro – shut down between late 2019 and early 2020, having failed to turn a profit or demonstrate viable business models.
These gloomy news are not reflecting the general state of the market. A variety of large and mid-sized Russian e-commerce sites see their sales grow extremely fast. Thus, market leader Wildberries generated nearly $3.5 billion in revenues last year, up 88% in one year.
Ozon claims an even higher growth performance in 2019, with sales revenues jumping 93% to $1.25 billion. Meanwhile Perekrestok.ru, the online branch of a leading food retail network, processed some 1.4 million orders, a threefold increase from 2018, as reported by its owner X5 Retail Group.
In total, domestic online retailers sold $22 billion worth of physical goods last year. Market volume is expected to at least double by 2023 (see EWDN industry report).
