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bne November 2020 Cover story I 31
after taking all this in. Their journey starts a long time before they go to the store. We are at the end of that journey and we want to be at the beginning
of the journey,” Salakhutdinov said in a video call with bne IntelliNews.
X5 has already been digitising its process, but now that process has accelerated as it strives to defend its market share and maintain its profit margins and revenues. The company has already become an investors’ darling and saw its share price double in 2017 as the equity market recovery got under way. This year the leading dollar-denominated Russia Trading System (RTS) index is down 26% YTD, but X5’s shares are up 32% in the same period as of October 28 as investors use the current crisis as a buying opportunity to get into their favourite blue chips on the cheap.
E-commerce is booming and the barriers for entry into the e-grocery business have come down. X5 is fighting back and amongst other things has announced it was setting up its own “hard discount” chain called Chizhik (English: Sparrow) at its capital markets day to compete with the explosive growth in discount stores.
But that is only half the battle. More
“E-commerce is booming and the barriers for entry into the e-grocery business have come down”
important is increasing efficiency and that means a root and branch rethink of X5’s business.
Logistics
The coronavirus (COVID-19) epidemic has actually been a boon for food retailers. They were already investing heavily into digitisation before the epidemic hit and were half ready when the demand for home delivery went through the roof. The emerging battle between the online majors like Sber (formerly Sberbank), Ozon Holdings, Yandex and Wildberries who are all rushing to create online ecosystems has spread to the leading traditional retailers as they become increasingly agnostic about which channel they
use to get their goods to the punter.
Its telling that the third biggest e-commerce player in Russia is already the leading electronics chain M.Video, which has been selling tellies and stereos from shops for over two decades, but just
reported 25% revenue growth in the third quarter, the epidemic notwithstanding, while overall retail turnover is down
5% year on year in same period.
X5 had launched its Express Delivery service in January that promised to
get your shopping to your front doors within 30 minutes after you click “buy” on your phone and the company’s existing online services were almost overwhelmed by the surge in demand.
“Some areas of retail have been negatively affected by the epidemic, but not food retail,” Salakhutdinov relates. “When the restrictions were most severe in the spring the food stores were still open. And there
was a huge surge in digital delivery. So there was no real impact on our business. We saw very strong growth and digital delivery doubled.”
Logistics has been the key to building a successful e-commerce business in
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