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July 7, 2017 www.intellinews.com I Page 6
has felt little benefit from the increases in nomi- nal wages over the last few years.
The two pillars of Euroopt's commercial mod-
el are to offer a limited array of products that en- joy high demand at the most competitive prices, as this reaches the widest audience.
“Our key advantage is our commercial model of price leadership,” says Zubkov. “[A market research company] Nielsen study in [the large regional city of] Gomel found that 80% of the respondents said that Euroopt offered the best prices on the market.”
Belarus has been hit by three currency devalua- tions in the last decade and suffered the shocks transmitted from crises in the surrounding coun- tries, Russia first and foremost, as the republic’s main trading partner. But of all the firms in Bela- rus, Euroopt has been amongst the least affected as its business and supplies are all almost en- tirely domestically produced and so less exposed to FX risks. At the same time it has benefited from customers trading down to the cheaper goods the stores offer as the pain of the crisis bites, and has won customers from the premium retail chains.
“The share of food in shopping baskets is about 50% and that has hardly changed during the various crises; it is the other products – the little luxuries – that saw spending fall. We have been relatively insulated from the worst impact of these shocks,” says Zubkov, sitting in the modern office complex in Minsk that is the company’s HQ. “But the economy is stabilising now says the Na- tional Bank and the international financial insti- tutions like the EBRD and IMF say there are good prospects for economic growth.”
After a GDP fall of 3.9% in 2015 and 2% in 2016, the Belarusian economy is expected to return to growth in 2017 with the IMF forecasting a mild 0.6% expansion. The World Bank is more pes- simistic, saying the country will return to 1.1% growth, but only in 2018.
Expansion plans
While Euroopt is already well established and the first phase of building up the network is coming to a close, there is still more to do. The company has a mixed strategy of owning its stores and leasing buildings out; Euroopt owns about 45% of its stores and is in the process of assessing a few dozen new locations.
“We have a long list of potential objects under review. What we are studying is the return on capital in each of them,” says Zubkov, flanked by his younger colleague and CIO Andrey Matyavin, who cut his teeth in local corporate finance and is driving the expansion programme.
Zubkov says there is still plenty of growing room in the regions and Minsk but the focus is chang- ing from simply expanding the chain to improving the Ebitda margins and improving the efficiency
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