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The [Russia’s] grocery retail market is growing steadily. Federal chains are moving to the regions, opening new stores, order collection points and actively cooperating with local manufacturers, Vedomosti Capital has figured out how retail is developing and what challenges it is facing.

Steady growth In 2023, retail trade turnover in the country exceeded 46 trillion rubles, an increase of 8% compared to 2022, Denis Manturov, head of the Ministry of Industry and Trade, noted in a December interview at that time. The share of grocery retail in the total volume amounted to 49% – 22.7 trillion rubles. Of these, 9.1 trillion rubles were accounted for by the ten largest food and consumer goods chains. In particular, the revenue of VkusVille increased by 26.9%, X5 Group (Pyaterochka, Perekrestok, Chizhik, etc.) – by 20.6%, and Magnita – by 9%, Infoline analysts recorded.

Both online and offline sales are increasing, but the first segment is developing more confidently. In 2023 alone, the grocery delivery market increased by 47%. The active growth is also confirmed by large retail chains. "Over the past year, we have delivered almost 107 million orders, increasing the share of the e-com segment to 50%," says Anna Platova, VkusVilla's online marketing leader. Commercial director of X5 Digital Evgeny Chechetkin claims that the division's revenue in the e-commerce segment increased by 75%. 

Regional expansion

According to NielsenIQ research, the dynamics of FMCG sales in the regions significantly outpace the capital's rates. In the first half of 2023, sales of everyday goods in Siberia and the Far East increased by almost 16%, while in Central Russia this figure grew by only 7%.

"The regions have much greater potential for developing online sales. According to our data, we see that 45% of people outside the capitals did not use delivery in the first quarter of 2024. But the number of search queries with this word in the regions is steadily growing: in 2023 alone, it increased by 11%. For comparison: in the central region, the increase was only 5-6%," shares Victoria Luzgina, industrial leader of the FoodRetail category at Yandex.

The consequence of such growth is the active entry of federal networks into the regions. For example, VkusVill has already opened distribution centers in Kazan and Rostov, and, according to Platova, is confidently expanding its presence in the Urals and Krasnodar Region.

Sometimes the path to regional expansion lies through mergers and acquisitions. For example, in 2023, X5 Group acquired two chains: Saratov's Grozd and Khabarovsk's Amba. That same year, Magnit became the owner of 33% of the Far Eastern retailer Samberi and 100% of the KazanExpress marketplace (now Magnit Market). Lenta bought the Monetka chain of convenience stores, which operates primarily in the Urals and Western Siberia. 

In search of the best shots

Business development is inextricably linked with the personnel issue. Grocery retail is one of those industries where the problem of recruiting mass personnel is particularly acute. Experts from the Institute of Economics of the Russian Academy of Sciences have recorded a shortage of couriers, salespeople, loaders, warehouse workers, online order pickers, drivers, call center operators, and system administrators. In order to maintain the level of service and delivery speed, chains are actively investing in attracting new employees. According to Yandex, over the past year, companies' advertising expenses related to recruitment have increased fivefold.

As Minister of Labor and Social Protection Anton Kotyakov stated in September, the demand for labor will grow until 2030. By that time, the volume of the food retail market could reach 29.5 trillion rubles, Infoline expects. 

Local color

For federal chains, entering new cities is not only about opening new stores, but also about driving the development of local production. When choosing higher quality goods, consumers prefer to buy products with a short shelf life. According to a Yandex study, in 2023, 39% of search queries about food products concerned vegetables, fruits, mushrooms, berries, dairy and meat products. Working with local producers helps ensure fast delivery of perishable goods. For example, VkusVill is developing the Regional Shelves project, the main goal of which is to expand the base of local producers for direct deliveries to retail outlets. In addition to working with local suppliers, when entering new cities, the retailer actively studies customer preferences: for this purpose, VkusVill enters each new city with the widest possible assortment and carefully analyzes which products are in high demand for the first two weeks.

As Chechetkin notes, often in new regions where X5 Group stores appear, high demand is noted for those products that were previously difficult to buy - vegan or lactose-free products, exotic fruits. A striking example is mango and papaya in the Perekrestok product line. According to the expert, in the regions where new stores have opened, these products are bought much more often than in Moscow.

Not only the grocery basket differs in different regions, but also the approach to shopping, adds Luzgina. According to Yandex, in the capital, 43% of consumers need delivery within 30 minutes, 42% of Muscovites are not ready to adapt to the courier in principle, and it is the long wait for the order that becomes a stop factor for many users. As for the regions, residents there often have concerns about the quality of goods and the security of online payments.

Fighting prejudices about delivery, ensuring high product standards and attracting not only new customers but also employees are the most important tasks that federal chains are currently facing. Despite the challenges, retailers will continue to develop their business in the regions of Russia. Experts note: this is one of the priorities for the near future.

Source: https://www.vedomosti.ru/kapital/trends/articles/2024/08/23/1051476-produktovii-riteil?utm_campaign=vedomosti_teaser_300x600&utm_medium=teaser&utm_source=vedomosti.ru