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Magnit super App
The most recent addition to the family was the launch Magnit Pay on December 15, a payment system within the Magnit app developed in partnership with VTB that will be a key digital platform in the future.
Registered users can obtain a virtual card that can be used to pay for purchases both in-store and online. The card can be topped up via bank transfer and can also be used to send money to any Russian card.
Magnit Pay's functionality will be expanded in the first half of 2021, with users able
to pay for third-party services (utilities, telecommunications and fines) and transfer funds to other Magnit Pay users. Magnit customers will be able to withdraw cash from VTB ATMs using only a QR code.
“We consider the development of
a payment system as a promising niche considering Magnit's unmatched customer base. Similar systems have made a material contribution to EM and DM retailers. [Rus- sian regional shoe retailer] Obuv Rossii has already had success with a similar scheme in the Russian retail space. That said, the take-up for the service could take some time, so we see no impact over the medium term,” Sova Capital said in a research note.
Discounter and Private label
Another new feature of Russia’s retail has been the rise of the hard discounters – another bricks and mortar business that is geared towards the impulse buy rather than the convenience of online sales.
Stagnant incomes have made punters
a lot more price conscious and Russia’s new discount chains are flourishing, as bne IntelliNews featured in its profile of Fix Price. Indeed, they have been doing so well the discounters are starting to cut into the sales of the major chains and now the big boys are fighting back.
Magnit opened its first three Moya Tsena (My Price) discount stores in July 20 in the Samara, Ulyanovsk and the Volgograd regions. Moya Tsena is a hard discount store, earlier than its rivals; X5 announced it was launching its Chizhik discounter at a strategy day in October, partly to counter the rise of firms like Fix Price that has been enjoying double-digit growth for several years now.
“It has been very successful. The store has 1,500 stock keeping units (SKUs) and one item per need,” says Dunning, who adds that more stores will be rolled out in the New Year.
Keeping the costs under control is doubly important to discounts and like the other firms, Magnit is investing into production to produce its own private label goods for consumer commodities.
With the ruble’s devaluation in 2014 and the growing demand from domestic retailers Russia’s light manufacturing and food processing sectors have enjoyed a renaissance, as local firms strive to meet the demands of the domestic consumer using domestic
producers who are now cheaper than China, the traditional supplier to the Russian market.
Magnit currently has 11 factories producing goods for its own in-store products, including things like pelmeni, pasta, chocolate, sweets and buns as well as a variety of common fruit and vegetables such as mushrooms and carrots, potatoes and onions.
“Russia’s doesn't grow bananas and coconuts but it is much more able
to provide for its own needs,” says Dunning. “We still need international sources, but we can find things like plastics, textiles, seasonal goods on the Russian market. There are lots of quality suppliers. And the devaluation of the ruble and the sanctions have pushed industry to develop fast.”
Magnit stock rallies
Investors seem to approve of all the changes being made at the store, as the company’s stock price performance has come back to life.
After Galitsky sold his shares to VTB in 2019 the stock became a dud. As the Russian stock market began to recover again that year, Magnit shares remained flat, ending the year slightly down 6.8%, while rival X5 Retail Group gained 37.6% over the same period and became the new hot name in retail.
This year the story has reversed again. Both companies saw their shares
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