Europe’s largest retail market may see sales from small local shops offering low-price basic items more than double over the next five years.
Russia has seen strong growth in demand for “ultra-convenience” stores located a short walking distance from shoppers’ homes. Ultra-convenience food store sales may reach almost a quarter of total food retail sales in Russia by 2025, up from 10% last year, said Mikhail Burmistrov, head of InfoLine-Analitika in an online interview.
“Ultra-convenience became one of the main beneficiaries of the change in consumer behaviour and of the redistribution of traffic in 2020-2021,” Burmistrov said. The number of ultra-convenience food stores in Russia may more than double by 2025 from 2020, he added.
The trend could be a showcase for the rest of Europe. And it will continue, as high inflation rates prompt consumers to seek low prices for most products. Busy lifestyles and higher incomes, decreasing household sizes, urbanization, and aging populations will also be drivers for the convenience format outside of pandemic-driven shifts, according to Deloitte, which also sees growth.
Online shopping is also rising and also certainly a trend. The two may not be mutually exclusive. Rising demand for convenience helped online food sales in Russia, yet Moscow and St. Petersburg account for more than two thirds (more than 70%) of the segment’s sales, which make up just 1.8% of total food retail sales in the country, InfoLine data shows.
Food-delivery services such as the ones run by X5, Yandex and Sberbank have been helped by the lockdowns introduced to help fight coronavirus. The segment’s sales surged by 2.5 times in the first half of the year to more than 150 billion rubles (about $2 billion), InfoLine’s Burmistrov wrote.
Yet local ultra-convenience stores will be the most dynamically rising food-store format in the mid-term in Russia, with annual sales forecast to increase by as much as three times to more than 5 trillion rubles by 2025, according to the analyst.
While well-known names such as X5 and Magnit remain Russia’s leading food retailers with their traditional and discounter formats, in ultra-convenience the emerging powerhouse is Mercury Retail Holding, which identified the promise of the ultra-convenience segment early and is becoming a strong competitor with its Red & White and Bristol chains. Mercury’s two brands have a combined market share in the ultra-convenience segment of 43%, according to InfoLine, and about 4.6% of the total food retail market.
Red & White and Bristol, the leaders in the ultra-convenience segment in Russia both by market share and on price, have been the key drivers of the segment’s growth in the first six months of 2021, according to InfoLine. The two chains’ like-for-like sales rose 20% in the period while total sales jumped 27% to 330 billion rubles in the first half of the year, the researcher estimates, compared to 580 billion rubles for the whole of 2020.
Red & White was founded by Sergei Studennikov in Russia’s Chelyabinsk in 2006. Mercury Retail was created in June 2019 after the merger of Red & White with the Bristol and Dixy supermarket chains, controlled by Sergei Katsiev and Igor Kesaev. This year, the three partners agreed to sell Dixy, which operates larger stores, to Magnit in order to focus on the ultra-convenience format and accelerate the store-network’s expansion. Even without Dixy, though, Mercury has some 13,500 stores across its two brands – one of the biggest networks in Russia.
In convenience, online sales have gained much attention amid changes in consumer habits, and quite legitimately so, as some of the changes, such as the pandemic, were forced upon all. Yet the shift in consumption is not only online. Grabbing the consumer on the street out for the quick local purchase looks like it’s just as much the future.