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bne December 2021 Companies & Markets I 7
Goncharov agrees: “I see proximity stores becoming increasingly more popular. Hypermarkets are not doing well in Russia – people don’t want to spend much time anymore on driving to hypermarkets, parking there, shopping and driving back.”
The growth of Pyaterochka and X5’s supermarket chain Perekrestok has now taken priority over the company’s hypermarket operations, in a direct response to this change in consumer preferences. “At X5, we have made the decision to transform that part of our business,” said Goncharov. “Proximity stores will become increasingly more popular, following the trend that food is coming even closer to our customers through food delivery, and we use Pyaterochka proximity stores as part of that offering.”
Pyaterochka is also likely to have been helped by economic tailwinds. After a protracted period of stagnation, Russian
real wages are beginning to rise, and consumer spending is growing accordingly. Spending is also encouraged by plunging interest rates in bank accounts, which make it less and less profitable to park money in one place.
Community kudos
While these factors may be enough to explain Russia’s
retail boom, they do not account for Pyaterochka’s particular success. With 75mn unique customers per month, Pyaterochka has held on to the title of Russia’s favourite brand for the second year in a row in 2021, more popular even than ubiquitous tech giants like YouTube and Google.
“We have also increased the number of customers who trust us by more than 3mn this year, and this is a major accomplishment for us,” added Goncharov. “We’ve achieved this by focusing
on key aspects of our customer value proposition: low prices, comfort in terms of store location, incredible convenience within the store, and care for the community.”
At Pyaterochka, care for the community has taken the form of a pilot project that transforms the network’s physical retail locations into de-facto community centres.
“We call Pyaterochka a community store,” Goncharov explained. “We launched a pilot project in 50 stores where we invite customers from the community to take part in projects, donate books, exhibit pictures on the walls. The idea is to maximise the potential to impact the community that we have around us.” These community centres could be rolled out further based on the results of the pilot, Goncharov added. Other community initiatives include the Basket of Kindness programme, where customers can donate non- perishable products to those in need, and a partnership with Liza Alert to help people who are lost find their way back home.
Community principles may become increasingly important as a way for retailers to set themselves apart in Russia’s highly competitive market. Nine out of the top ten biggest retailers in Russia in the first half of 2021 were Russian companies,
as reported by bne IntelliNews.
The digital shift
Another major driver of the retail market transformation is the large-scale shift to everything digital, as reflected by the surge in online shopping. Russian e-commerce is booming, partly as a consequence of repeated lockdowns. In 2020 alone, the Russian e-commerce market expanded by 57% compared to the previous year to reach RUB2.7 trillion ($38.4bn), according to research by KPMG. In response, some Russian retailers have expanded their online offering and invested in logistics and infrastructure to enable faster order delivery.
As part of its digital transformation, Pyaterochka launched an express delivery service from its stores before the pandemic struck. “It was done at exactly the right time, as we learned later,” Goncharov explained. “We launched express delivery in February 2020 and the pandemic [in Russia] hit in March, and it helped us a lot in terms of growing demand for this service. Up to now we have fulfilled more than
9mn orders, and we operate in 20 different cities from 800 existing stores and 15 dark stores.”
“The pandemic has not only been a challenge for us, it also has become an opportunity to improve our leadership position”
Sergei Goncharov, CEO of Pyaterochka
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