Ulmart’s Hybrid Approach continues to disrupt Russian E-commerce: Sales grow by 30%

Ulmart’s half year results put the company at just below GMV of $610 million (VAT included). The company is forecasting GMV of $1.6 billion for the whole year which would put year-end sales at 33% higher than 2013.

Ulmart’s hybrid model which allows customer access to company’s fulfillments centers (currently there are 29 in the European part of Russia) continues to be a disruptive element in e-retail. Due to the particularities of the Russian infrastructure, reliance on last-mile delivery, the obsession of so many other world e-commerce leaders, is simply not a profit-creating option in Russia.

“Russia is a different market. Why should force consumers to request home delivery if culturally it is not really a sought after service” commented Brian Kean, Ulmart’s Director for Communications and Investor Relations.

Ulmart’s “web of fulfillment” has three main elements for receipt of the purchased item: last mile delivery (roughly 15%); pre-last mile or what the company refers to as pick-up points (currently there are 412 situated throughout the European part of Russia and around 22% is picked up here) and the company’s 29 urban-based fulfillment centers (63% of sales are picked up at FC’s).

Expansion into faster-growing categories like auto parts, children’s clothes and toys and home design items has also had a positive impact on Ulmart’s growth as the formerly—and low-margined—leading category of consumer electronics dropped by 5% to 46% of the overall sales. The electronic catalogue has increased from 55,000 SKU to 75,000.

Another interesting development is that St. Petersburg and North-West Russia no longer drives all sales for Ulmart. The company’s 2013 expansion into the regions has paid off with growth of 76% in a year-on-year comparison. In the first half of this year, regional sales currently make up 42% of company sales; St. Petersburg and North-West Russia 36% (up 6%) and Moscow makes up 21% (up 12%).

“Success in e-commerce is not solely about ground-shaking technological breakthroughs. It is really about logistics: getting the right product at the right price to the right customer when and where he wants it. This is what Ulmart excels at.” Believes Ulmart’s Chief Marketing Officer, Alexandra Savina.