My name is Aerate Sungatullin, I am a serial entrepreneur, Kazan Express partner in food products and author of the business podcast “Don’t Stand Still”. During my work in food tech, I figured out how this area works and how it will develop in Russia. In this article, I will highlight six trends that will influence the development of grocery stores and delivery services.
Trend 1. Russians will save even more on food
In the second half of 2021, the number of Russians with incomes below the subsistence level was estimated at 19.1 million people, that is, 13.1% of the population. According to Ross tat, 33.6% of employees receive wages below 30,740 rubles.
Imagine that there are two brands of pasta on the shelf: one sells a pack for 28 rubles, and the second for 31. The difference is small, but in fact, pasta from the first brand will be sold out in an hour, and the second brand will have to sell its goods for several more weeks.
One way to keep your price low is to save on associated costs. The hard discounter “Traffic Light” works according to this scheme, which saves on everything that is possible. For example, the network allows to open a store in a 1000 m² building with only light, ventilation and a concrete floor. Showcases and shelves are also not needed – you can sell directly from pallets, as if from a warehouse.
Thanks to such savings, in 2020, Svetofor’s revenue grew by 38.8%, and the volume of retail space – by 17%. X5 and Magnet decided not to stand aside, and a year ago they launched their stores with low prices: Chichi and My Price. Like Svetofor’s, the two new discounters focus on their own products, limit their assortment and save on advertising.
In the long term, this means that the cost of goods will rise, so companies will cut all associated costs in order to lower the price of food. This means that even more “hard discounters” will appear in Russian cities.
Trend 2. Small companies will compete for niche markets
It is too difficult to compete with large retailers – smaller stores do not have enough capacity to sell regular goods at low prices and remain in the black. Instead, companies can focus on products that are not available on most networks. Exclusive products can be sold at a higher price, as it will be difficult for customers to find them elsewhere. It can be:
Farm products: milk, cheese, meat. You can promote such food as organic or emphasize nostalgia – for example, milk, like a grandmother in the country.
The store can fully concentrate on selling French wines, Italian cheeses, Portuguese port or other products that are hard to find on the shelves of large chains.
Products for vegans and vegetarians. It is usually difficult for this audience to diversify the menu if they buy only in large chains. Therefore, a small store can compete here if it sells coconut yoghurts or sausages based on pea protein.
Statistics show that focusing on a narrow audience can pay off. So, at the end of 2020, the VkusVill chain, which specializes in healthy eating, increased its revenue by 38.3%. Therefore, over time, more stores designed for small niches will appear in Russia.
Trend 3. There will be more private brands (Private Labels)
For a long time now, supermarket shelves have been stocked with “first price” goods, which stores sell under their own brands: from “Every Day” products from “Ahsan” to “Red Price” from “Pyaterochka”. The advantage of such brands is that the company can buy food directly from suppliers, optimize logistics and not overpay for someone else’s advertising.
Darks ores have taken a similar path: local warehouses where orders for express delivery are collected. For example, in 2020 Yandex.Lavka launched the Is Lava brand, under which it sells water, ice cream, eggs and ready-made meals. In some categories, the share of private label products sales reached 80%.
Besides being cheaper to produce your own brand, it can also be used as a tool to increase loyalty. The better and cheaper private label products are, the more often customers will buy them from a particular store.
For example, companies will be able to develop multiple brands, one for low-cost products and one for premium products.
Trend 4. Express delivery will get even faster
High competition in the delivery market is forcing large players to open new points – at the beginning of 2021 there were just over 650 darks ores in Russia, and by the end of this year their number is approaching a thousand. In addition, Ozon recently announced that it plans to launch its own Ozon Express store and become a new player in the 15-minute delivery market.
The market is growing, which means that the fight for customers will become even tougher. Therefore, companies are already thinking how to deliver goods not in 15 minutes, but in 10 or even 7 minutes. To increase speed, darks tore executives must hire just enough couriers to keep them busy and deliver goods on time.
There is another way to optimize personnel – for example, to give orders to “stranger” employees. If there is a Scooter courier near the Lava client, he can accept an order from another dark store. Due to this approach, companies will be able to speed up delivery and not keep unnecessary staff on the staff.
Another way to increase speed is to provide all couriers with bicycles and electric scooters or other personal transport. Darks ores find it difficult to do logistics manually, so new contractors will come to their aid. So, in Moscow, the company “My device” is already cooperating with express delivery.
Also, the media often write that couriers will soon be replaced by drones. However, I believe that this trend is overestimated – it is still too expensive to buy and maintain robots in bulk, and we do not live in California – there is mud, snow and temperature changes. No technique will survive. Therefore, in the coming years, darks ores will accelerate delivery by optimizing store areas, staff and other available resources, but it is too early to invest in drones and drones.