Ilona Lepp, Business Development Director, North and Eastern Europe
Small may be the new big. The Russian retail universe remained virtually static in 2011, declining one percent vs. a year ago, but channel development has been dynamic. The number of minimarkets across the country increased by 10 percent, while hypermarkets and supermarkets increased by eight percent each. Pharmacies and traditional food stores saw smaller increases, while impulse stores and open markets decreased four and 10 percent, respectively.
Tapping Unmet Demand
The demand for minimarkets has been driven primarily by shoppers living in large cities. In communities with a population of more than one million inhabitants, the minimarket universe increased 13 percent in 2011, compared to a two percent increase in small, rural towns. This resulted in an overall boost in average sales per minimarket of four percent versus 2010. Traditional food stores declined three percent versus year ago.
The growth of the minimarket sector, or smaller “near-home” stores, represents unmet demand. There are 2.7 times as many of these “near-home” stores in smaller communities than there are in the biggest cities. The growth also comes as larger Russian cities deal with a critical lack of physical space in big Russian cities, especially Moscow. This trend leaves more opportunities for retailers to grow their presence in the form of minimarkets rather than larger format stores.
Convenience, Assortment and Price
Consumers today are putting priorities on convenience, product choice and favorable prices. A Nielsen survey reports that more than half (53%) of Moscow shoppers prefer to make quick shopping trips compared to about one-fourth (27%) of shoppers who like to stock up. And two-thirds (67%) say that shopping trips are “highly influenced” by stores that carry both food and non-food items.
Minimarkets are considered to offer additional assortment, better prices and more convenience compared to traditional food stores. A Nielsen analysis of top-selling products reveals that minimarket prices are 10 percent lower on average than traditional food stores and assortment is greater too—especially when it comes to a wider selection in the drug and health & beauty categories. More than 20 percent of minimarket shelf space is allocated to these products, while traditional food stores stock less than 20 drug categories on average.
Filling the Gap
While traditional food stores dominate the Russian retail universe with more than 120,000 stores and 19 percent of all commodity volume (ACV), minimarkets represent just 15 percent of that amount, but command 22 percent of ACV.
Today, there is a gap in what consumers want and what they experience. With only 63 percent of shoppers indicating they enjoy grocery shopping, there is an opportunity to improve the shopping experience. To bridge the gap, marketers have an opportunity to make shopping more convenient, provide a wider variety of products and offer sales incentives. Retailers who turn their stores into places where shoppers want to come back by providing an enjoyable shopping experience will be rewarded with customer loyalty.