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March 23, 2018 www.intellinews.com I Page 4
barrel to a peak of $150 some 15 years later.
The petrodollars primed the pump and started a virtuous circle of spending, profits, investment and wage hikes turning that fuelled the boom.
As the business became seriously large, Tynkovan realised that they needed to go to the next level and started looking around for advice.
“We couldn't afford to hire the likes of McKinsey or Deloitte so I approached people that had been running other retail networks but were now re- tired and hired them as consultants. They taught us how to do catalogue, retail, store and distribu- tion management.”
The next step was also to hire expats to work in management due to the perennial shortage of qualified mangers in Russia, which remains a problem to this day.
Finally, on the recommendation of his friends, he set up a board of directors. This was also unusual as most businesses were run in the Soviet fashion where the owner sat the top of a narrow chain of command and simply ordered their minions about. Tynkovan set up a board of directors four years be- fore the company eventually went public in Novem- ber 2007, making the transition to listed life easier.
“We started to run the business using the board of directors just because it was a more efficient way to run the company, and adopted all the best corporate governance practices even before we became a public company. If you are serious about creating a serious company then you just need to do it,” says Tynkovan, who is widely seen as a pioneer of Russian retail, setting trends that have become industry standards.
M.Video was also the first to embrace unsecured consumer credits to boost sales. In the early noughties the new kid on the financial block was Rustam Tariko’s Russky Standart (aka Russian Standard), an upstart bank that offered unsecured credit to customers on nothing other than a copy
of their passport and the promise to pay the money back.
At the time these highly risky loans were considered a flash in the pan, but the volumes of credit went ballistic and super-charged the retail consumption was the fuel for Russia’s economic boom.
“We were the first to have credit brokers in store. Russky Standart's first consumer credit was made to a consumer in an M.Video store,” says Tynkovan, who adds that credit increased the store’s sales by 20-30% almost overnight until
at its peak a third of M.Video’s sales were being made on the never-never. The economic crisis has reduced the share of credit in sales somewhat, but even today 19% of sales are made on credit.
The Omni store
Now the business is changing again thanks to the explosion of e-commerce which is already seriously disrupting traditional retail and the role of stores. M.Video launched its website in 2000 but it has only been in the last eight years that the Russian consumer has really embraced online shopping and Tynkovan is meeting the challenge with his “omni-store” concept.
“When Russians started to shop online in 2010- 2011 it totally changed the retail landscape.
We had to see it either as an opportunity or as
a threat. We chose to see it as an opportunity,” says Tynkovan, who has built up the online business on three pillars: an “endless shelf,” price competitiveness and offering a superior service.
The assortment of the goods a store offers is obviously a core part of the business, but the advantage of online shopping is you can offer an unlimited number of goods.
“The store space footprint doesn't matter now. It makes no difference if you shop is 5,000 square meters, 1,200 or even 800 at a good location.
The customer can come in and see the display samples, but if they want a different colour TV or a fridge with some extra functions they can simply