Ullmart’s three tier ecommerce distribution in Russia

An article in Bloombergbusinessweek (March 10,2014) titled “In Russia, call it You-Commerce”, describes the company Ullmart, that sells 55,000 fast moving items through a three tier distribution system. The company buys from manufacturers to three warehouses that supply 30 urban warehouses and 250 outposts, where customers can pick up for free, or get home delivery at a charge. Items are available seven minutes after the order is placed and can be paid for in cash, a preferred mode by many ecommerce customers in Russia. Will Ullmart strategy succeed against other ecommerce companies with greater variety but with higher supply chain inventories ? Does this strategy succeed because it speeds up delivery compared to the slow Russian postal service ? Will Ullmart benefit as Russian consumers’ ability to order directly from ecommerce sites outside the country are curtailed or is it in a different market niche ?

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41 Responses to Ullmart’s three tier ecommerce distribution in Russia

  1. Xin Liu says:

    It is a wonderful choice for customers to pick up their own products without waiting for many days. This strategy will definitely increase their sales and decrease the cost of labor for deliver. Although they need to keep higher inventories, I believed the quantity of inventory can be eliminated by better forecasting with variety new technology like artificial intelligence and machine learning.
    Three tier distribution system is also an instructive strategy for supply chain structure and coordination for it could economize the cost of transportation and integrate the resources of multiple manufacturers. In my opinion, this mode is suitable most consumer goods, except for luxuries, because the customer for luxury puts higher emphasis on shopping experience and will be more willing to get in touch with the products before purchase, thus, leading to higher risk for Ullmart.

  2. Yash Kothari says:

    The concept of customers can pick up the orders in seven minutes after placing the order sounds good, but It would be better if we had known the price comparison as all the costs which the company incurs for improved delivery time, in the end, will be charged to customers. Without knowing the price of products against the competitors, we cannot talk about its success or failure. Further, through this concept, Ullmart is not only fighting the E-commerce companies but also is competing against retailers, e.g., Walmart pick up order concept. So it would also be interesting to see the operational costs, as currently, retailers and e-commerce companies operate on shallow margins and this 3-tier distribution means adding one more stakeholder in the chain, thus increasing the final costs of products. If the prices are comparable, the company can have a long run, and that the benefits such as lightning fast delivery/pick up of orders vis-a-vis competitors, restrictions on Russian customers to order from international websites will help the company to grow in the market.

  3. Nobuhiko Kobayashi says:

    I feel it’s really convenient to pick up the products seven minutes after placing orders. It would be faster than getting delivery of products or purchasing in the physical store. The target customers are those who want to buy groceries or foods in urgent. Actually, this service is similar to Amazon’s prime now, prime members who live in a certain city can get delivered products within an hour after placing the order for free. However, Ullmart offers faster and more products compare to Amazon. In addition, customers can choose two options; free pick-up or charged delivery. These strategies are reasonable so that this service might be the potential rival of Amazon in many countries. I also think that this service’s rival is not typical e-commerce sites which sell fashion items or goods, but local delivery services like Walmart, Target, or Amazon prime now.

  4. Karim Fawaz says:

    The first thing to consider is the mentality of the average Russian customer. Is picking up their own items convenient to them, or would they rather wait an extra day or two and have it shipped to them?

    Case 1: Picking up orders is convenient
    55000 FMCGs is not a small variety of goods and definitely not something I would consider to be a weakness. Knowing that consumers are hindered by their inability to order products from outside of Russia, and that laws and regulations promote consumption of local brands, the 55000 figure seems to an even larger amount. Considering the fact that picking up their own orders isn’t a problem, orders are ready to be picked-up almost instantly, and the variety of their products isn’t a problem, then Ullmart should continue to enjoy a large market share. Other companies with larger varieties will tend to niche markets of consumers who are more particular about what items they shop for.

    Case 2: Picking up orders is inconvenient
    Consumers might be more willing to make their orders a few days ahead of time and wait for their orders to be delivered rather than commute to an outpost and manage transporting their orders back with them. The larger variety of goods would further encourage them to opt to make their purchases from competitors of Ullmart. Unless Ullmart uses its more efficient supply chain to drive down their prices, Ullmart will end up splitting the market share of common consumers.

    • Mark Messick says:

      Karim,

      Do you think that Ulmart is also taking advantage of “traditional customers” that pay with cash and want to travel to the store to have the item immediately?

      The following is from the Ulmart Press Release website dated April 3, 2014.

      “Card payments account for around 15 per cent of e-transactions in Russia. “Russia has traditionally been a cash-based society,” says Souheil Badran, senior vice president at Digital River, a company that sets up payments systems on websites.”

      I think this highlights the need to incorporate cash sales, do you think that an all e-commerce based customer could incorporate this without losing a large profit margin? Is this perhaps why Amazon and other outside e-commerce giants have less success?

  5. Bhartula Peeyush Sharma says:

    The fact that items are available seven minutes after the order has been placed is pretty impressive and beneficial for both parties: Ullmart and customers. For Ullmart, it means that they will be able to have a high turnover rate and less holding cost on the items that customers choose to pick up as they will be out of the outposts within minutes. From a business perspective, this is a benefit as it can work as an excellent marketing/promotional strategy. Also, as cash is the most liquid asset, it can easily be used for transactions and can be converted into other assets if required. For the customer, even though they have to go through the hassle of picking up items themselves, it becomes very convenient and efficient given the seven minutes availability and no delivery charge. Even though the prices of items are not disclosed, the huge variety gives them more options to choose from and they could always choose to have the items delivered at a charge. I think this strategy combined with the law that prevents customers from purchasing from outside Russia works extremely well together for Ullmart. I don’t think its in a different market niche, it’s just protected by the laws and regulations that happen to act in its favor and promote customer purchases locally. To be able to compete stronger locally, Ullmart could look into expanding its outposts to make it easier for customers to pick-up items from, or it could have better promotional methods that attract customers such as having a points-based membership.

  6. Derek Curtis says:

    I think that Ullmart’s strategy is effective in terms of competing with other ecommerce companies. The seven-minute gap between when the customer places an order and when the customer can pick up the order is less than that for any other ecommerce company that I am aware of. Thus, the time that a customer has to wait for their order by placing it through Ullmart is certainly quicker than it is if they utilized the Russian postal service, making Ullmart that much more attractive. Also, I believe that Ullmart’s primary competition will be Amazon Prime, though Ullmart seems to currently have the competitive edge over Amazon Prime in terms of speed of having orders ready. In a local Russian sense, I think that Amazon Prime would have a tough time competing with Ullmart in the future given the latter’s local focus.

  7. Mark Messick says:

    I think that Ulmart is successful because it has adapted its e-commerce business to not alienate cash customers or customers that do not want to wait for delivery. I think Ulmart has essentially converted its warehouse into a retail location, with the exception that the customer does not pick their own items. The flexibility is what customers like. By keeping inventory SKUs low, it is easier to have a shorter wait time (7 minutes), but also better manage inventory to ensure availability of products. Ulmart has capitalized on servicing both e-commerce customers and traditional cash customers. Because of the slow postal system and large population of cash-only customers, I don’t think a competitor can easily topple Ulmart without copying their strategy and/or improving the final-mile delivery system with the ability to accept cash for the products.

    • Bhartula Peeyush Sharma says:

      Mark, I totally agree with you on your point that it is going to be quite difficult for the competitors to compete with Ulmart unless they adopt a similar/better strategy. The shorter wait time and cash payment option results in a great combination that works in Ulmart’s favor. Even though the number of SKUs may be low, the seven minutes option requires the company to have a very efficient inventory management and network communication system as the items move very quickly. I feel it could be even more efficient if the company can spread its outposts in a way that classifies the items according to demand requirements for that region and also hold a little bit of other stock to make sure most of the demand is met.

      • Mark Messick says:

        Peeyush,

        I agree. I also think that the use of a warehouse almost like a retail space allows for them to store more items in a small space compared to traditional retail stores limited by the average persons reaching height.

  8. Asmita Parashar says:

    A very interesting idea with great potential for success but there are too many questions that need answers.
    1. Where are the 250 outposts located? How do customers get to them?
    2. What happens to the order in case it is not picked up? How do you manage collection and storage at these outposts?
    3. Cash transactions – what about handling the case? what kind and how many resources are required?

    The system, though seems very customer-centric (and I wouldn’t blame them given the advent of Amazon’s customer-centric supply chains), seems to be very labor intensive to the point of sounding outdated. Though the customers prefer cash payments, when incentivized, customers would be willing to move from their preferred mode of payment to cashless payments. The benefit – less labor, more reliability, higher accuracy. Ulmart has the option to be a breakthrough company with cashless transactions. Rewards may be delayed but they will present themselves.

    I did not have access to the entire article but what happens to the orders if they are not picked up? What if the customer changes their mind? Assuming these orders wait in a “collection area”, they occupy space and add no value to the chain while they wait. Pick up in 7mins sounds like a great selling point but without enough reference or information, it sounds like an investment in the wrong direction. 55,000 goods is a big number – 7min pick up will add more complexity to forecasts. What measures does Ulmart have in place to take on that complexity?

    To conclude, very interesting but seems quite flawed.

    • Mark Messick says:

      Asmita,

      If you look at Ulmart’s press releases, you would see that the seven minute wait time is actually vary important. Below is a post from April 3, 2014:

      “The number of Russian households with internet access exceeded those without for the first time in 2013, according to a report by PwC. Home internet penetration is projected to grow to 68 per cent by 2017, reaching 38m households.More significantly, the number of people with mobile internet is increasing. In 2013, 41 per cent of respondents of PwC’s survey said that they use their mobile phone for shopping. About 61m people in Russia (43 per cent of the population) have mobile internet, which is expected to rise to 100m by 2017.”

      With the low number of customers with internet availability, many customers go to Ulmart’s location to place orders via a kiosk. Customers then wait, the seven minutes, for their order. Do you think if a customer is already at Ulmart they would want to wait for the item to then be shipped to their home?

      Also, if you look at this press release from the same day.

      “Card payments account for around 15 per cent of e-transactions in Russia. “Russia has traditionally been a cash-based society,” says Souheil Badran, senior vice president at Digital River, a company that sets up payments systems on websites.”

      You can see that many customers prefer cash over credit. If you exclude these customers, could Ulmart be successful by only targeting the customers that generate the 15% of e-transactions?

  9. Carlos Mario Pelaez says:

    Being as responsive as Ulmart by giving the chance to customers to pick up their orders just 7 min after the orders are placed can raise many questions such as: How much inventory is actually handled by Ulmart? What are the extra cost paid by them to handle all this inventory? Can products incur less costs by not having that amount of inventory? Are customers willing to wait a couple of days (~2 days) like amazon for a better price?

    If the information is correct about the avg Russian to pick up the product right away then a company like Amazon will need to change its way of operating to enter this big market. If another research finds that customers are willing to wait a couple of days for a better price then the opposite will happen, a company built as Amazon is can crush this market by implementing their strategies used in other countries. Not everything will be easy, since the postal service in Russia is not as fast as needed.

  10. Mark Messick says:

    Asmita,

    If you look at Ulmart’s press releases, you would see that the seven minute wait time is actually vary important. Below is a post from April 3, 2014:

    “The number of Russian households with internet access exceeded those without for the first time in 2013, according to a report by PwC. Home internet penetration is projected to grow to 68 per cent by 2017, reaching 38m households.More significantly, the number of people with mobile internet is increasing. In 2013, 41 per cent of respondents of PwC’s survey said that they use their mobile phone for shopping. About 61m people in Russia (43 per cent of the population) have mobile internet, which is expected to rise to 100m by 2017.”

    With the low number of customers with internet availability, many customers go to Ulmart’s location to place orders via a kiosk. Customers then wait, the seven minutes, for their order. Do you think if a customer is already at Ulmart they would want to wait for the item to then be shipped to their home?

    Also, if you look at this press release from the same day.

    “Card payments account for around 15 per cent of e-transactions in Russia. “Russia has traditionally been a cash-based society,” says Souheil Badran, senior vice president at Digital River, a company that sets up payments systems on websites.”

    You can see that many customers prefer cash over credit. If you exclude these customers, could Ulmart be successful by only targeting the customers that generate the 15% of e-transactions?

  11. Nikeeta Brijwasi says:

    From a customer’s perspective, the Ullmart is like any other retail store, only with a higher variety of goods (ex: Walmart). The customer places the order and receives the product almost immediately (in this case, 7 mins). The implementation of a three-tier system may incur additional warehouse and workforce costs which will add to the final cost of the product. If the 55000 products are the ones that are either daily-consumer products or products that are available only outside the country, then Ullmart can benefit from their system. If the customers don’t mind waiting a few days for a lower price, then Ullmart may not be able to compete in terms of price. However, Ullmart has an upper hand around the seasonal sale period in terms of quick delivery, as we see that orders are delayed due to large volumes even in countries with quick delivery services.

  12. Puneet Pandey says:

    Less no. of “fast moving” SKU’s helps the company to better forecast the inventory. Also, the number of outposts are only 250 which, I suppose, will be very near to the pick up points. The strategy would succeed if the customers would find more variety than a normal nearby shop. Not all customers would go to supermarkets/malls to buy items of daily needs. Moreover, as the customers develop trust and get habituated, they will order more and more home delivery. The company would also succeed because as the sales grow the manufactures would also start believing in the company,s potential thereby giving the company greater bargaining power.

    In India, Reliance is also trying to launch a service wherein its will have tie-ups with local mom and pop retail stores to deliver goods to the customers which are ordered on its website. This would be a win win situation for the local stores which are under stress because of e commerce as well as Reliance which will get a greater reach. Ullmart should also get a similar benefits.

  13. Sai Krishna Jayakumar says:

    I believe Ullmart definitely stands to gain with its USP of getting the product ready in 7 minutes. Not just in the absence of competition but also if Russian consumers get access to other ecommerce vendors, this USP should help Ullmart sustain their market share. Essentially, the 7-minute order preparation time and the cash payment option make Ullmart more of a store rather than an ecommerce vendor and will probably be the first choice of customers who want to purchase fast-moving items. In fact, for these kinds of items which people use frequently in their daily lives, people will prefer to get them quickly from Ullmart rather than place an order from an ecommerce site and wait for a long time to have it delivered. Ullmart is in a niche market space – operates in a low-variety, high volume environment – and this, along with its quick service and cash payment option, is what gives it an edge over potential competitors.

  14. Jiangxu Chen says:

    From the perspective of the supply chain, Gao Company sells fast-moving items through the distribution system, so it has high logistics convenience and facilitates the transfer of goods from different warehouses, so its inventory level is easier to control because the sales speed is faster. The situation of cargo backlog is not easy to appear, but the requirements for the logistics system are high, and frequent ordering is required, and delays will cause losses. From the customer’s point of view, the company’s services can be taken for free, or to buy home delivery services. Items can be obtained in seven minutes after the order is placed, and a variety of payment methods are available. Numerous preferences give consumers a good shopping experience, and customers naturally make choices after comparing with the slow Russian postal service. This is also a reason for his success.
    If Russian consumers’ ability to consume directly from overseas websites is limited, this is a good thing for Ullmart, because more consumption will be done through the company. But different markets can also be unified. Ullmart can expand its business, integrate overseas purchasing services into the supply chain system, maintain consistent high-quality logistics services and consumer experience, that is, it can win different shopping groups and compete for different market share. To improve the company’s revenue.

  15. Zibo Meng says:

    Compared to the slow Russian postal service, no doubt someone will pay for Ullmart’s fast logistics speed. At the same time, more warehouses mean that there will be higher inventory in the supply chain as a whole. It must be said that Ullmart’s move has many similarities with China’s Jingdong company. JD also has strong competition with other e-commerce companies by establishing its own warehouses everywhere to increase the speed of distribution.How to improve inventory performance is the most critical issue in front of Ullmart.In addition, Russia has a large number of Internet users, which will also help Ullmart attract more netizens to buy online. Finally, I think Ullmart is also faced with the following risk issues: how to balance the different purchasing power between regions or the shortage of goods during the peak shopping period etc.

  16. Mitesh Somani says:

    What I believe is comparing Ullmart to ecommerce websites is not correct. It is more of a store next door kind of chain where you can order from when needed and pick up quickly.

    Regarding the success of this business model, I think as the variety of products increases in the market, it might fail because to keep it working, high and diverse inventory have to be maintained at every store to maintain it’s promise of 7 minute pick up. This will attract high costs.

  17. Nachiket Joshi says:

    Smaller number of SKUs, Lesser inventories and quick delivery sounds like a great business idea, but requires strong planning, forecasting and operational capabilities especially in a country as spread out as Russia. I believe that this is a totally different niche as Ullmart’s business plan is “Less variety, quick delivery”, whereas other e-commerce companies in Russia are focusing more on offering wide range of products. However the quick delivery facility can also mean higher prices. Thus the company needs to conduct an in-depth analysis to identify the range of products for which the customer is ready to pay a higher price to get a quick delivery. This will be the segment where Ullmart will have advantage over other e-commerce companies. If the company can identify the right range of products and successfully develop necessary operational capabilities, then I believe that there is a great potential for success in this business plan.

  18. Chiao-Ya Lin says:

    In my opinion, yes, Ullmart strategy succeed. We can tell why this case would be successful by looking at how the Amazon works. Amazon can catch up the one-day delivery or one-day pick up because it has its warehouse. Inventory overturn rate speeds up when delivery is fast. Besides, I do think Ullmart benefit when Russian consumers’ ability to order direct from eCommerce sites outside the country are curtailed. The main point of the strategy of Ullmart is pick-up-for-free service. Putting all resource on the primary policy is more cost efficiency.

  19. Logan Aven says:

    Ulmart is a privately held company that does about $1 billion USD in revenue per year. This company holds fast moving SKU’s in its different warehouses across all of Russia that delivers products to its store fronts. You would think that this means they will need to carry tons of inventory and therefore have high inventory costs. While some of that might be true but i think that they can overcome this issue by having a short SKU list and by ordering in bulk. By having a short list in SKU’s they can save in terms of supply chain complexity and by ordering in Bulk Splitting it and then sending it out to the regional warehouses they can save in purchasing costs. Comparing this to other Ecommerce customers Ulmart should have a very good understanding of exactly how fast their short number of SKU’s is going to turn over. Once this business is started and the demand is understood Ulmart could start to reduce its inventory. Through this process i think that Ulmart will succeed in this market. I think there main competition is not with other ecommerce companies but with convenient stores, and if they are more convenient then there competitors i think they will succeed.

  20. YingruiWang says:

    i think that ullmart will have a success over this strategy because it gives custoemers more options for puchasing goods. Customers can either pick up by themselves or wait for delivery and also, this strategy will reduce the inveltory level for the warehouse. However, there might be some concerns about this strategy like how the local grocessary stores react to this compnay because basically, the ullmart has opened like three super-supermaket for customers to choose. the influence of that strategy might not be that large because there are only 3 warehouses.

  21. Puneeth Shetty says:

    From Amazon Prime’s success, we can clearly state that customers prefer faster delivery of orders. A lot of e-commerce sites are trying really hard to reduce the delivery time by offering fewer items that can be delivered on the same day, but Ulmart has succeeded with it’s strategy by offering 55,000 items and delivering them in record time. This feat is extremely hard to be replicated and Ulmart will enjoy it’s success for a very long time if it continues to operate efficiently. Ulmart can add more items to it’s list and be an industry leader by competing with top e-commerce sites such as Amazon apart from competing with retail stores such as Walmart, Target etc. Russian rules on regulations also benefit Ulmart and International brands would find it extremely hard to compete on the same platform. It would be really interesting to see Ulmart grow and whether the company vision and goal would change if the company decides to offer more products in the future.

  22. Chenxi Wang says:

    Ullmart will succeed with this strategy that people are more likely to order online. However, if the market enviroment change, this strategy might not succeed. For example, many of the products need to be compared in physical, wchich means that doing purely ording online will increase the risk of returned good. Too many reuturns will make the original invetroy reduction plan fail and mess the whole warehouse management. Another example would be that many products will stimulate the willingness of purchasing from cusotmers when the customers acctually see the products. In this way, the ullmart might not have strong competitiveness with other local retialors or grocess stores.

  23. ashish chandra says:

    Ullmart’ ability to ensure the availability of ordered items within 7 minutes at outpost stores, poses a strong competitive threat to its competitors. An article in 2017 from WSJ (https://on.wsj.com/2Mm9vph) suggests that Russia’s online shoppers prefer to pick up items from a warehouse. With a large network of low-cost fulfillment warehouses (after mid-2016) within and just outside the city centers, delivering via drive-through windows provides customers a flexibility to buy what they want where they want and when they want. This possibly is due to the limited variety of fast moving SKUs, coupled with low holding costs and a tendency of the buyer to pay cash only at Ullmart’s outposts.
    This article on Ullmart dates to 2014. I couldn’t find a strong reference literature on how Ullmart was able to maintain a 7 minutes window from order to availability. However, other references from Supply Chain history in Russia for retail and e comm., reflects the presence of poor development of warehousing and logistics network till 2016, as compared to other similar global developments. (Ref: https://bit.ly/2NycSOK, https://bit.ly/2x5c7U1 ). Amazon and Otto (German retailer) in the past have faced last mile logistical challenges with local carriers like Russian postal service. Therefore, an innovative service model in times like then must have given a great competitive advantage.

  24. NAICONG NING says:

    Three tier distribution system is used by the company Ullmart while 30 urban warehouses and 250 outposts are included. One thing special is that customers could have two choices pick up free or get home delivery at a charge, which gives the supply chain more flexibility. However, when talk to 30 warehouses, there must be a high inventory which will rise a high holding cost. So Ullmart should have a trade off of that such as forecast of potential number of these two choices. Delivery could be outsourced which could decrease the uncertainty and deeply decrease delivery time and inventory. Compare to Russian postal service, it deserves a better benefit due to the short lead time which is regard as the core competition for logistics. Finally, Fewer competitors mean a big space, just as getting a protect, Ullmart will definitely get benefit from Russian current situation.

  25. Ying Yang says:

    Ullmart will succeed against other ecommerce companies with this strategy. Actually it will benefit both the retailer and the manufacture. For the retailer, they are able to in a zero inventory situation that can save them a lot of cost. Also, they can earn a better cash flow and develop more variety of SKUs. For the market, the competition allows zero margin to exist. Therefore, seven minutes after the order is of great advantage because it benefits the whole supply chain. As for the order from ecommerce sites outside the country, it does not share the same market niche with Ulmart as the customer of it is those who are in need of products that can be delivered in a short time.

  26. Adam M Hook says:

    I think Ullmart is succeeding because of not only its speed of product availability, but because of consumer habits such as the frequent use of cash payments and the regulations against outside eCommerce competition. Having the option to pick up the product without a delivery charge within 7 minutes will catch any consumer’s eye as people continue to desire things quicker when they place an order. While Ullmart ultimately has to carry a lot of inventory with the magnitude of warehouses and outposts it has in conjunction with the 7 minute guarantee, I think it can be successful because as of now a competitor is not able to match its product to consumer hands speed. Government regulations restricting outside ecommerce helps take pressure off of Ullmart in terms of pricing, so it seems until a local competitor is able to match their capabilities Ullmart should be able to continue being successful.

  27. Chushi Yang says:

    Ullmart succeeds because of its quick response to the customer demands and its extensive product range. Compared with other ecommerce companies with greater variety and higher inventories, Ullmart’s success is due to its lower inventory level and extremely short lead time. Moreover, with a great deal of urban warehouses and outposts, operation costs may occupy a large proportion of Ullmart’s total cost. Compared with suburb warehouses, urban warehouses require larger investment as well as operation costs but those warehouses have closer distance to customers, which shorten the lead time to a large extent. For the company, making a trade-off between the cost and quick response is the key to success. Thus, reducing the operation cost and optimizing management may be a challenge faced with the company and the problem to be solved.

  28. Mayank Daga says:

    Ullmart has opted to have a responsive supply chain by reducing the lead time for customers to as low as 7 minutes. I bet that even e-commerce companies fail to provide such an offering. However, in order to provide this service, Ullmart must incur higher costs and risks related to inventory vis-a-vis its competitors. The answer to the question that whether this is a good strategy for Ullmart in the long term depends on what is the behavior of consumers in Russia? If Russian consumers are more sensitive to faster delivery and variety rather than price, then this strategy could work out. But, for instance, in India, this strategy was a no-go for e-commerce companies because Indian consumers are price sensitive. Therefore, all e-commerce companies in India switched from Inventory holding model to a market-based model for sustainability.

  29. Mayank Daga says:

    Also, one more question to think about is to what extent are the Russian consumers price sensitive and will Ullmart be able to fit its operating costs within that window a and provide value to its customers, without losing out in competition.

  30. Yun (Winnie) Lo says:

    I think this is an innovative concept. However, I think this is not a long-term idea. Since the company has higher inventory, it will incur greater holding cost. Additionally, this is depend on the demand. If the customer’s demand fluctuate, the company will incur substantial loss. However, since this has lower lead time, the customers are more likely to be satisfied. This creates a differentiation among other competitors. Therefore, I think even though the customers are attracted to the fast deliver/pickup services, the company should come up with a better way to predict the demands or find a way to lower the holding costs. This will benefit it in the long run.

  31. Adam McKinney says:

    This is basically a variation of what Walmart in the United States, only faster. I think this is certainly a niche role for customers who don’t want to wait and are able to get to one of the warehouses but ultimately I don’t think this will necessarily put the Russian postal service or other competitors out of business as there will always be people willing to wait a little longer to pay a cheaper price. I do think this will allow Ullmart to capture significant market share, however, as they do offer home delivery but at a premium.

  32. Charles Nwaokobia says:

    With fast moving items you are sure of constant demand and the emphasis, for any successful business in this market, should be on availability and speed to customer. With a 7-minute service level promise to customer, I believe Ullmart is very competitive in both the ecommerce and retail industries.

    Succeeding against competition with greater variety but higher supply chain inventories would depend on who can do a better job at keeping a lower days of inventory as well as a lower inventory holding and transportation cost. Customers would also prefer the ecommerce company that can deliver quicker and provide a positive total experience, hence the preference to the Russian postal service.

    Ullmart has targeted a niche market of customers who want instant delivery, and they are doing a good job at satisfying this market. I believe this is a good choice that can ensure sustainability of their business as majority of us consumers buy items that we have immediate use for. The inability of customers to order from other ecommerce sites outside of the country also helps to reduce competition for Ullmart.

  33. Geetali Pradhan says:

    Some key terms to note here are fast moving items and relatively less number of SKU’s. For the customers who had to depend on the Russian postal service for delivery of products, this must be a very lucrative option as long as they are willing to pay the premium price for home delivery. Considering that the fast moving items are generally available in retail stores, the option for pickup does not seem to offer any added advantages.
    To succeed in making the items available within 7 minutes, Ullmart must be keeping relatively high inventory and safety stocks in all their warehouses. As long as the inventory holding costs and the transportation costs associated are in check compared to the revenues earned, this strategy sounds competitive and convenient. However, this system might not work well for companies with greater variety of products solely due to the costs associated with excessive inventory. In that case, the company might have to choose from products with relatively higher demand to stock up their inventory, similar to what Amazon does.

  34. Aatira Benn John says:

    7 minutes from the time of order with cash only payment sounds terrific. This is clearly difficult to imitate thus giving Ulmart a strong competitive advantage. Thus this answers the first question on whether Ullmart will be successful in a market where there is greater variety. Yes it will, in the short term, until competitors are able to effectively imitate this strategy. Additionally the trade regulations in the region make it more difficult for e-commerce companies such as Amazon or Walmart to replicate this strategy. Lastly, I do not think this strategy is successful solely because of the long lead time offered by Russian postal service. That would imply that both Ullmart and Russian postal service have comparable supply chain structure. While Ullmart offers a responsive supply chain, Russian postal service offers an efficient supply chain. Considering all else similar between Russian postal and Ullmart, customers will still be drawn to one or the other depending on their requirements and ‘willingness to wait time’.

  35. Devin Ewell says:

    The speed of which the customers can receive their merchandise is a huge competitive advantage over other companies. The question I pose is that it does not mention the cost of the home delivery, which I would assume would be quite high. Many expedited home delivery services charge large delivery fees, so I assume the primary benefit of Ullmart’s program to the consumer is that the items can be picked up at a local location quickly.
    I also wonder how sustainable this model will be, with Ullmart having to carry high inventory levels in order to make this system work. The holding costs and overall transportation costs are going to be high, with Ullmart having to operate initially at a loss or realistically pass the costs on to the customer.

  36. Anesh Krishna J N says:

    Products dealt by Ullmart are Fast Moving Consumer Goods(FMCGs), which have frequent purchases by customers because of rapid consumption and low prices of the products. Such items being available just 7 minutes after the order is placed is one of the utmost important selling points of Ullmart. Especially in a country like Russia, delivery of FMCGs shall never be entrusted with postal service as it takes weeks, even months in some cases to reach the customer. So, the e-commerce firms needed to come up with faster delivery terms to meet the increasing demands of the customer and ever-increasing rate of consumption of FMCGs. This is what is captured by Ullmart.
    If other e-commerce doesn’t deliver these FMCGs faster than Ullmart, it’s strategy will succeed against other e-commerce companies even if they provide greater variety with higher inventories.
    As the market research suggests, Russian consumers order those products which are not yet found in Russian territory or those products which are found only in a few states, directly from e-commerce sites outside the country. These products considerably take a longer time to get delivered. Hence, it’s highly unlikely that the customers will buy FMCGs online from abroad.

  37. Siddhanth Rajagopalan says:

    Ullmart’s strategy in Russia is effective and competent within their zone of operation given the consumer mindset and the Russian commerce laws. Their USP in reducing lead time for delivery as well providing options for customers to get their product within 7 min is a huge achievement and a tough feat to accomplish by any other. The only problem that they would face if the consumers in Russia would start ordering from out of country e-commerce giants such as Amazon and Ali baba where the product range is extensive and their supply chain is efficient due to third party logistics collaboration along with their own delivery service. So far, even providing cash on delivery option is a huge benefit to the customer as they do not need to worry about losing money on delayed or lost delivery items.

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