In 2020, the share of “trash” supermarkets will increase in Russian retail

In 2020, the share of “trash” supermarkets will increase in Russian retail


Russian retail adapts to the desires and opportunities of low-income Russians

Stagnation in the consumer market forces retail to adapt to the desires and opportunities of low-income Russians. In retail, the so-called “hard discounter” or “trash” segment is gaining ground: supermarkets with small areas and limited assortment, which are 20% cheaper than competitors, found

The heyday of the “hard” format is taking place in the wake of a decline in sales among the major players in the market. Since 2016, the income of the Russian division of the French Auchan hypermarket chain has been declining. Experts attribute his problems with insensitivity to trends, in particular, to digitalization and the transition – in the context of stagnation in the consumer market and the development of a delivery service – to the format of small stores. Two years ago, the company sold part of non-core assets in the Russian Federation, and from January to May 2019, almost 5.4 thousand employees left it. A number of analysts seriously allow the retailer to leave the Russian Federation in 2020, as well as its sale to the Chinese Alibaba.

In December 2019, the fourth, according to the estimates of the Federal Antimonopoly Service, St. Petersburg retailer TD Intertorg, which collected claims worth 5.6 billion rubles, announced the start of bankruptcy proceedings. The company had over 450 stores under the Spar, Narodnaya Family and Idea brands. Suppliers associated the retailer’s problems with a drop in sales and an unjustified network expansion.

See also: Supermarket chains are massively closed in Russia – what does this mean for the produce business?

Among the main factors influencing the specifics of the development of retail trade in the Russian Federation in 2019, experts note the low income of Russians, the restraining expansion of the range of pro-embargoes introduced by the Russian Federation in relation to the EU, the increase in the tax burden on business and the pressure of regulatory authorities. It is worth adding the activation of food delivery services to your home and office. The latest factor is the export of fruits from China blocked in the current quarter due to coronavirus.

Daniil Somov, managing partner of RETAILER, notes: “We have been witnessing the absence of growth in customer income for 5 consecutive years. China’s supply constraints are a recent factor. The common thing between them is that they all affect the development of retail trade negatively. Are there any factors that affect the market positively? I think no. In 2020, the buyer’s sensitivity to price, the lack of sales growth in traditional formats, and the reduction in the average check for most players will continue. But apart from economic issues, the evolution of retail trade is taking place in the world and in Russia. Those retailers who can identify and find their customers will increase their market share. ”

Ksenia Bezshlyah, Project Manager at NEO Center, has a similar opinion. She believes that today the “hard” discounter segment has enough prospects: “The formula for the success of such stores works in conditions of declining incomes of the population -“ hard ”discounters rely specifically on the audience who cannot afford to make purchases in other stores where the price is for basic products are almost double. While this category of consumers exists, and now there is no reason to predict the opposite, this format of trade will progress.

The interlocutor spoke about plans to develop hard discounters from the X5 Retail Group (runs Pyaterochka, Perekrestok and Karusel stores), which will contribute to the formation of a sustainable trend for this format. She admits that buyers of open markets, hypermarkets, even Internet sites are gradually moving into the “trash” segment. A decrease in the turnover of traditional networks will force them to abandon unprofitable points and reduce their number, Bezszlach reported.

However, the Federal State Statistics Service notes an increase in the income of Russians. In 2019, according to a preliminary assessment of the department, they increased by 6%, reaching an average of 35.2 thousand rubles.

According to the Federal State Statistics Service, the number of citizens with incomes below the subsistence level over the past 5 years has been stably kept in the region of 18.4–19.8 million, which is 12–13.5% of the country’s population.

This segment of stores does not necessarily mean poor quality, says Andrei Yarmak, economist at the investment department of the UN Food and Agriculture Organization. In Germany, such supermarkets sell, including a premium product, but very cheap. Nevertheless, in general, such points are intended for the consumer, aimed at maximum savings.

The format will be relevant in the Russian Federation, because the number of people living in poverty or below its poverty line does not decrease, Yarmak explains. The expert sees the level of poverty in the country as one of the reasons for the change in the specifics of large classic supermarkets. The second consequence will be the development of convenience stores, the source emphasizes.

The market recovery is possible only due to its recovery, that is, if de facto bankrupts leave it, which pull consumers and pull the entire retail down. This, in fact, is happening now.

Yarmak also spoke about a serious threat to farmers. However, he suggested that in this situation, small producers, if it is a family economy, will suffer less than some large ones.

“The most difficult situation is for greenhouse plants, which, on the one hand, have cut government subsidies, and on the other, are supported by imports from Turkey, Uzbekistan and low solvent demand. Bankruptcy is possible here, if initially there was no emphasis on production efficiency and reasonable investment. In general, life will be complicated for those who initially did not try to produce high-quality products without the “space” costs for it, ”the expert said.

According to food market analysts, a factor that can influence the paradigm shift is the timely adjustment of the strategy of traditional retailers: retention of “their” customers, expansion of the range of specific products, etc. Marketers will soon begin to pursue an aggressive policy in order to prevent “tough” discounters from strengthening their positions, shared the opinion of Bezshlya.

According to the results of 2019, the top 10 main retailers in Russia in terms of turnover, according to the InfoLine analytical agency, included the X5 Retail Group (operates Pyaterochka, Perekrestok and Karusel stores), Magnit, DKBR Mega Retail Group ( United “Dixy”, “Red & White”, “Bristol”), “Tape”, “Auchan”, Metro, “O’Key”, “Monetka”, “Traffic Light” and Globus.


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