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bne April 2018 Companies & Markets I 17
problem of how to sell them. We were in the business of solving those problems,” says Shagarina.
The app was launched in 2013 and since then the site has been growing by leaps and bounds. Originally funded out of her own pocket, her former employer Yandex bought a 10% stake for an undisclosed sum and has given her both a work space in its building at Park Kultury in Moscow and working capital in the form of loans that can be redeemed for equity later, while Shagarina builds the business up. Shagarina loves working inside the Yandex ecosphere, surrounded by some of Russia’s brightest online entrepreneurs and engineers.
Russia has embraced e-commerce, which saw sales volumes up by a quarter in 2017 to $30bn. The sector has grown so
fast in recent years it is starting to disrupt traditional retail as punters shun traditional malls for online services. E-commerce already accounts for about 8% of Russia’s entire retail turnover and is growing at twice the pace of more traditional retail services, which themselves are growing at twice the pace
of the economy.
And the surprisingly advanced state of Russia’s TMT sector also lends itself to this kind of service. Russia has skipped
over several stages and gone straight to state-of-the-art. The country missed out chequebooks entirely and both stores
and consumers use the most modern contactless debit and credit cards by default. Smart phone penetration is high and still growing fast. And most revolutionary (as we will see in a moment) all stores in Russia have contactless card terminals, bar code scanners and cash registered hooked up to the internet, putting Russia far ahead of even the US on this score.
Discounts galore
Discounts play a very large role in what Russians buy. The crisis that started in 2008 and got worse by many measures
in 2014-2016 has seen average incomes halved in dollar terms. Shopping habits have changed dramatically. Shoppers traded down en masse to cheaper goods, Russian-made goods, while groceries have increased its proportion of the shopping basket from a boom-year low of 35% to 50-60% now. To retain customers all the leading Russian retailers launched generous discount programmes to maintain their market share and revenues. And the punters have become addicted to discounts, says Marat Ibragimov, a retail analyst at BCS Global Markets.
“There are some products that people won’t buy now unless there is a discount. Dishwasher soap tablets are expensive
and I would never buy them unless there is at least 30% off the cover price, but I am willing to walk an extra 500m if I am shopping for a dinner party,” says Shagarina in English she taught herself when working for missionaries as an interpreter in the early 1990s at the age of 12.
During the worst of the crisis years shoppers actively sought out deals but now the crisis is ending the habit has stuck. A Nielsen survey showed that 62% of Russian consumers pay attention to special offers and 33% seek them out, reports Reuters.
On the other side of the checkout, regional supermarket king Magnit sells 80% of its household products on a permanent special offer basis and urban rival Lenta's special offers
make up 40% of total sales. The use of discounts has been so widespread that it has eaten into profit margins in the whole supermarket business, complain equity analysts.
All this has created an opportunity for Edadeal, which has imposed some order on the discounting mechanics.
“Coupons and discounts are very popular, but it is very unorganised. Stores have piles of boxes full of paper and they send us pdf documents or photos of this paper work if you ask for data. We ran 40 coupon campaigns in 2017 and about 6% of the shoppers saw and used the coupons,” says Shagarina.
Getting the coupons to the punter remains a problem. Traditionally they are printed in newspaper or on fliers
posted as junk mail to households, which is an expensive and inefficient distribution system. A lot of money is spent instore as well on promotions and advertising. But one of the biggest problems is the vendor and manufacturer remain cut off from the customer using the discounts as the coupons are redeemed anonymously.
Part of the appeal of Edadeal is that it is a perfect platform to offer these deals and discounts. And as Edadeal knows its customers shopping habits, it makes the missing link so that deals can be custom built for individual groups.
“What the app does is take over the whole coupon clipping idea. Instead of cutting coupons out of a newspaper and keeping them in your purse, the companies can look for say young mothers and give them a special discount on nappies
“There are some products that people won’t buy now unless there is a discount”
that can be redeemed using a scanned code on your smart phone. We are going to completely change the way companies offer and use discounts,” says Shagarina.
Cashback revolution
One of the first victims of the change might be discount coupons themselves. Edadeal and many of the leading fast moving consumer goods (FMCG) companies are already moving slowly to cashback offers to promote sales: customers are paid a reward in cash for buying their product.
Moreover, in a strange twist two recent innovations by the Russian tax authorities – QR codes on all Russian shop receipts that connect to the tax authority’s database, and every store
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