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July 7, 2017 www.intellinews.com I Page 5
markets. We are unique in that we are the only company that is present in all the regions of the country.”
From a standing start today Euroopt is the domi- nant player in retail, “by a wide margin”, accord- ing to Zubkov, with a 19% market share and faces no real competition in the modern organised retail space. In 2016, the company’s net sales of $1.83bn were 4.5 times more than its nearest competitor and net sales have been growing at a compound growth rate (CARG) of 58% a year for the last six years.
To put that into perspective, the fastest growing retail chain in Russia is Lenta, which has a com- pound net sales growth rate of 27.8% over the same period, while Russia’s investor darling, the supermarket giant Magnit, has seen net sales grow by 26%.
The same is true in terms of traffic density in the stores: the traffic density of Euroopt's conveni- ence format stores in 2016 was 1.9 times higher than that in Russia’s market leader Magnit and more than twice that of X5's convenience store format, according to Euroopt.
“We outperform our Russian peers in terms of net sales growth and also in terms of sales space growth, where we were growing at a compound growth rate of 37% over six years, with Lenta in second place again at a rate of 32%,” says Zub- kov, who has been with the company from the start of its transformation into a retail chain and was instrumental in building it into today’s mar- ket leader.
These impressive growth rates are partly possible due to the underdeveloped nature of the Belaru- sian retail sector versus Russia’s. The penetra- tion of organised retail is still low in Belarus
at about 45% and it has just 0.5 square metres
of space per capita, which is much lower than
its emerging market peers, so what consumption there is in stores like Euroopt's is much more concentrated than in other markets in the region.
By comparison Lithuania has 1.1 sqm per capita, Poland 0.9 and Russia 0.7.
Euroopt is also unusual in the region in that the first generation of managers are largely self- taught and almost all homegrown. Elsewhere in the CIS many of the leading managers cut their teeth at one of the multinationals that moved
in during the 1990s or have worked aboard and brought their expertise home to local companies. Euroopt has its own “tough” training programme and is drawing lessons from watching Russia’s development – but not only Russia’s. Zubkov says he remains agnostic to new ideas and is also watching markets like Lithuania and Poland, and remains open to taking the best from the West too.
“Russia is the nearby market that is similar to us and we benchmark to peers as they are also fast growing emerging markets. But as for the busi- ness models, procedures, IT etc we keep an open mind,” says Zubkov.
Slow economic growth affects the product mix
Euroopt’s concentration on the limited product mix of staples in high demand is a function of
the relatively low level of income in the repub- lic, compared with its regional peers, and the smaller middle class. Customers are very price- conscious as economic development has been slow thanks to the lack of economic liberalisation and the high level of state ownership in the Bela- rusian economy.
Wages have been rising steadily but the govern- ment’s targeted wage increases in the boom years were the overriding macroeconomic goal and done without consideration of their inflation- ary effects, according to a recent Berlin Eco- nomics study. “The social and political goal of increasing wages was divorced from the need for macroeconomic stability. The upshot was a sharp increase in inflation, which cancelled out any benefit the population derived from seeing wages increase,” the think tank noted in a recent report. As a result in real terms, the average Belarusian