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Special report: Why do Russian retailers grow so much faster than their global peers?
Get the special Russian Retailing report

According to Deloitte, two Russian companies have reached top positions among the fastest, organically growing retailers.

GENERAL MERCHANDISE

Special report: Why do Russian retailers grow so much faster than their global peers?

Magnit, a grocer, and M.Video, a consumer electronics retailer, are ranked 5th and 12th, respectively, among the fastest growing top 250 retailers (Global Powers of Retailing 2013). In the grocery sector, only China’s Wu-Mart and Westfarmers from Australia grew at a faster pace, but both have been expanding by acquiring other retailers. In the home appliances and electronics sector, only Apple and China’s Suning Appliance consistently grow at a faster pace than M.Video. 

Findings reported in Retail in Russia 2013: Discovering the Market, recently published by ARB Pro Group, a St Petersburg based consultancy, show that this success is down to executing a winning competitive strategy rather than insufficient competition. (You can order the report http://www.researchfarm.co.uk/?p=1157 here and receive a special 10% Retail Bulletin discount - enter 'bulletin' at the checkout stage)

Magnit initially focused on a discount model, characterised by a strong value proposition and quick service, which allowed the company to achieve good operating margins. After 2009, the retailer started to open hypermarkets with large areas that were often sublet. Additionally, since 2012, Magnit has operated the largest fresh vegetables production facility in Russia, and plans additional moves towards vertical integration - focusing on operations below the gross profit line and on competition for the right stores in high footfall locations. In comparison foreign rivals seem to fall short on these aspects.

M.Video’s is growing faster than Media Markt; this can also be explained by differences in strategy. Unlike Media Markt, M.Video clearly engages its consumers with a superior shopping experience. While Media Markt focuses on large footprints (>2,000 sq m), where shoppers can find everything under one roof with minimal interaction with shop assistants, M.Video has taken the opposite approach. M.Video helps shoppers with product selection and testing. While Media Markt stores are mostly located on ring road retail parks and huge city malls, M.Video seeks smaller spaces (300-500 sq m) on the high street and malls near traffic hotspots, such as subway stations. M.Video have also developed their online channel faster than Media Markt, with 7% of revenues coming from online in 2011, and are targeting 30% by 2014. 

According to ABR pro the success of Magnit and M.Video is a result of executing a smart strategy, rather than insignificant competition from global players in their domestic market. In both sectors, grocery and consumer electronics, the competition is far from weak. In grocery, Auchan, Metro, Rewe and SPAR consider Russia a strategically important market and in consumer electronics, Metro Group continues to invest in Media Markt. Nevertheless, domestic players, not multinationals, lead the market, and reward their stakeholders. 

As of mid-2013, Magnit and M.Video continued to expand and invest in organic growth well above market averages, while maintaining healthy net margins and financial positions. ABR pro Group argues that both pursue strategies that meet consumer expectations in their home markets much better than their multinational rivals.

To view the brochure, . (Don't forget to use the code 'bulletin' to receive a 10% discount at the checkout stage. 

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