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November 2019 www.intellinews.com I Page 4
Another major competitor of VTB and Rostelecom's project would be Russia's largest lender, state-run Sberbank, which has been collected big data on its customers lately.
With 92.8mn individual customers, Sberbank is substantially ahead of VTB, whose individual customer base is 12.3mn. However, the addition of partners is expected to put VTB and Rostelecom in the same league as Sberbank.
Russia’s largest retailer
X5 group unveils long-term digital strategy
Akin Nazli in Belgrade
Russia’s largest retailer X5 Group on October 23 outlined its long-term strategy to investors during a Capital Markets Day in London, reiterating its focus on digital developments as the main source of growth.
As reported by bne IntelliNews, after taking the market leadership from Magnit, X5 improved its investment case by focusing on digital innovation. Most recently the company also announced
a refurbishing programme for the declining hypermarket format, which impaired its bottom line in 3Q19.
In 10 years, X5 hopes to reach ambitious 20% market share in Russia by 2029 from current 11.6%, putting a bet on online segment, ‘ready to eat’ food.
The company sees the transformation as a three- part process over the next five years: strengthen the current business (1-2 years), 2 part is a digital transformation (1-3 years), 3 part is to become a leader in online and marketplaces (1-5 years).
Still, when it comes to collecting customer data, the issue of security becomes extremely acute. The two companies are yet to provide details on how they plan to ensure security of collected data.
Meanwhile, another challenge that the project
is likely to face is of regulatory nature. Currently, Russia's legislation doesn't specify a procedure for exchanging customer data by different companies, and sharing data between companies within an alliance might lead to unpleasant legal consequences.
X5 will rely on data management, consisting of data collection, structuring, algorithms, decisions and predictive analytics based checks, coming from loyalty cards, which currently provide 14mn tickets per day. Previous reports also suggested that X5 could enter Big Data partnerships with other corporate, telecom and banking majors.
“Overall impression is good, if all goals of long- term strategy are successfully achieved,” BCS Global Markets commented on October 24.
As far as the traditional selling space is concerned, X5 reported that the quality of new openings have been improving last year. Cash return on new store opened was over 30% in 3Q19. Proximity store remains the key market for X5 and also serves as the basis for its online sales platform.
X5 estimated that the size of Russian food retail market amounts to RUB17.6 trillion ($275bn) in 2019 and is expected to grow to RUB30.2 trillion by 2029. The share of online segment of food retail market may increase from 1.2% in 2019 to 7% in 2029.
X5 Group rallied over 22% in June on strong first-quarter results, cementing its role as the innovation leader in the industry, but the rally has limited the 12-month upside, according to BCS. In August, the shares of X5 declined 5% off the peak values leading BCS to upgrade the name to Hold.