It may take more than $16 billion to save Wildberries
The campaign of targeted strikes against Wildberries’ warehouses—which resulted in the destruction of at least 14 of the company’s logistics hubs—has effectively completely destroyed the business model of Russia’s largest marketplace, through which goods worth approximately 3% of Russia’s GDP were sold annually. To keep the company afloat, 1.3 trillion rubles (approximately 16.05 billion U.S. dollars) are now needed.
Sources at The Bell in the e-commerce market note that the only way to avoid complete financial collapse and bankruptcy proceedings for the marketplace is for the government to bail it out. According to preliminary estimates, the direct losses alone for the company—which lost approximately 20% of its total warehouse capacity in just a few weeks—range from 100 billion rubles (about 1.23 billion U.S. dollars) to 200 billion rubles (nearly 2.47 billion U.S. dollars).
Wildberries’ total need for additional funding to completely restructure its operations could reach 1.3 trillion rubles (approximately 16.05 billion U.S. dollars). The company will have to increase its debt obligations by this staggering amount in order to restructure its business and remain in the market.
Due to a massive exodus of sellers—most of whom instantly lost hundreds of billions of rubles worth of merchandise and found themselves on the brink of bankruptcy—Wildberries’ total revenue has already fallen by a quarter. This has dealt a devastating blow to the financial system of Tatiana Kim’s business empire. The marketplace has always operated under a model where funds from buyers were received instantly, while payments to sellers were made only several weeks later, allowing the company to retain huge sums in working capital and use them to cover current expenses and discounts.
This model worked only under conditions of constant revenue growth—for example, when, with revenue of 100 billion rubles (about 1.23 billion U.S. dollars), the company spent 50 billion rubles (about $617 million) on sales incentives, and revenue subsequently increased to 200 billion rubles (nearly $2.47 billion). However, amid a sharp drop in sales, this financial pyramid begins to collapse, as new revenue is no longer sufficient to cover accumulated liabilities. If payments to sellers are delayed for months, this will trigger a chain reaction of non-payments across the entire sector, and the marketplace itself will remain unprofitable for many years.
Source: The Bell.
Following a series of attacks on Wildberries’ logistics centers, owners of order pickup points began losing customers and revenue. In some regions, their revenue in July fell by 15–20% year-over-year, and on peak days, the decline reached 30–40%. Market representatives warn that some pickup points may become unprofitable, and by the end of the year, about 15% of them may close.
On the night of August 5, drones attacked the Wildberries logistics complex in Aleksin, Tula Oblast, Russia. The strike hit the company’s largest warehouse in Russia’s Central Federal District, with an area of approximately 300,000 square meters.
