— I met Kamil, my future business partner, when I was a student at Stanford. We decided to create Wikimart a year after we met. It’s an online trade site that any stores can display their products in without spending money on advertising until they sell them.
We really wanted to make the Russian eBay. But not like the 1995 model where one guy sold another guy stamps. We wanted the 2020 model where there are only new products, professional stores, no auction and—as it turned out later—a high percentage of our own retail.
In 2008, we came to Moscow on vacation sold our homes when prices were at their peak and used that money to start Wikimart. We put together a small team in Moscow, half of which still works for us. We left them to work while we headed back to Stanford to finish our studies.
For the first 10 months of the company’s existence, we managed it long-distance over Skype while studying and looking for investments at the same time. When we came to Russia, some local experts assured us that the model for online stores that existed at that time was going to be like that forever. You can’t see the big picture from up close.
After we finished our studies, we returned to Russia. The starting platform was ready by that time: the site had been designed and agreements had been made with the first stores.
We started out with a bang and had already added the first 500 stores on Wikimart by December 2009. Thanks to the fact that the site’s design was well thought-out for search optimization, our traffic grew by 20% per week. Based on this growth, we received additional investments and continued to develop. The first thing we directed the money we received towards was internal developments. By creating the company for ourselves and not for sales, we wanted to make sure everything was right and good quality. We concentrated on constructing our own technologies for integration with suppliers, tracking orders and warehouse systems. We built some things from open-source solutions and others using tools that already existed on the market.
Wikimart currently has about 5,000 stores and 1.5 million goods in wide-ranging categories: from scissors to mini-tractors.
— We built the whole business from the start so that the main engine of our growth was organic traffic. We depended just on this for the first year, during which, it grew 8 times. This strategic bet completely paid off.
When we understood that organic traffic is not enough for sure growth, we focused on using Yandex.Direct.
I can say that Yandex play a huge role in our development. If Google was the leader in Russia, as it is in practically the whole rest of the world, this growth wouldn’t have happened.
— We have 1.5 million products in wide-ranging categories. Individual ads are created for each product. It is well near impossible to work on that scale without automation. That’s why we used the Yandex.Direct API to start creating a system for working with contextual advertising that we call “Rocket”.
It took us a long time to put a team together for the launch. Back in 2010, it was really hard to find experts that were qualified enough. We spent more time searching for the right people than developing the system. We’ve always liked working with complex things and technology. Because of this, people who were also interested in these things joined our team.
“Rocket” debuted one and a half years ago and we have been constantly tweaking and improving it.
— Currently, organic traffic brings two thirds of our visitors. Contextual advertising is in second place. And coming in at number three is ad placement on price comparison services like Yandex.Market.
When we use paid channels, the conversion rate of visitors into buyers is a lot higher. Our ROI has always been 120-130% in contextual advertising. If you count losses on returns and unfilled orders, that gave 100% income. In plainer terms, we made back all our money on contextual advertising.
Right now, we are using all contextual tools and increasing volume. Depending on the season, we live with ROI ranging from 70% to 100% per month and get returns on advertising from returning clients. We try to provide buyers with a good selection, the best price, and quality service so that they come back.
We also place ads on social networks. But we don’t expect sales from this channel; we use it more to increase brand awareness, let people know about deals and discounts, and interesting events.
— We have our own analytics system that lets us estimate with high accuracy our sales volume in segments we need. We call it the Zykov Counter, named after the developer who created it.
We spent a lot of money creating our own analytics system. But it’s still less than what we would’ve put into servicing paid systems with advanced functioning. It was important to us to develop our system independently and in the necessary direction by make it quickly and relatively cheaply. We also integrated it deeply into our infrastructure: warehouse analysis and “Rocket”.
We also use Yandex.Metrica to get useful, helpful information. Statistics by region, socio-demographic profile, and WebVisor are important for us. These tools give us more information about site users’ behavior.
— As offline retailers move towards creating their own brands, online trade sites will sooner or later start their own retailing.
That’s why we built our own infrastructure at the end of 2011, and started to sell products on our own. In some categories, we just didn’t find enough partners and had to develop them ourselves. The share of our offer reaches 50% in the categories of “sports” and “children’s items.
But, overall, our business model is just as before: 70% deals with selling other stores’ products and the other 30 % are our products.
If a store comes to us and offers to completely fill up a category with their offer, we will be even happier to work with them and not worry about developing that area ourselves. For us, it’s more important to remain a trade site than to push our own sales.
— Russia’s problems are characteristic of developing markets. First of all, there is low consumer trust which is shown in customers’ refusal to pay with a bank card online.
Compared to the United States, the share of online purchases in Russia is rather low: 68 million people use the internet and only one third of them has bought something online.
We try to nurture buyers’ trust in online purchases through our marketing activity. Foreign countries’ experience really helps because the logical for developing an online business in Russia lies in comparing yourself to other markets. That is not necessarily the US, but it’s interesting to see other markets that are developing, like India, China, Brazil, and Turkey. These countries’ experience really serves to understand which tools work and which ones don’t.