​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Outlook and key priorities

The Russian retail market is expanding and consolidating​

​ 2017​2020 (forecast)​
Total size of food retail market, RUB trln14.4​17.2
Share of modern retail format, %7080
Share of top-10 nationwide chains, %2938

Economic and consumer trends​

​KEY TRENDS DESCRIPTION​CONCLUSIONS​X5 RESPONSE​
Changing demographics
  • ​​Growth of 60+ age population by 2-3% p.a. vs. reduction of 20-29 year group by 6% p.a.
  • Growth of price-sensitive consumer segment
  • Growth of proximity format popularity
  • ​Continued expansion of proximity segment (>75% of X5 revenues)
  • 5-10% discounts for pensioners from 9:00 to 13:00
  • Focus on mothers with children
Declining
incomes

  • Increased price sensitivitym and rational spending
  • Growth of “cherry pickers”

  • Growth in attractiveness of proximity/discounters
  • Increased pressure on margins (need for opex reduction)
  • Constant adaptation of value proposition to customers’ needs
  • Best-in-class “promo engine”

Growing
competition

  • ​Retail space saturation
  • “Value” format development (e.g., hard discounters, dollar stores)​
  • Increasing pressure on LFL
  • Increased pressure on margins (need for opex reduction)

  • ​Strong regional expansion with effective value proposition for small cities and towns
  • Development and rollout of new regional supermarket concept
  • Effective GIS system to help find optimal locations
​​Spread of new technologies
  • Growth of online shopping and price transparency
  • Increase in Big Data analytics
  • ​Opportunity to improve competitiveness through service and personalisation
  • ​Online retail initiative within the supermarket segment
  • Successful development of loyalty programme and personalised promo in Perekrestok
  • Further implementation of advanced analytics
Tightening  
market regulation

  • ​Retail trade legislation (back margin constraints) 
  • EGAIS and other control systems
  • International sanctions
  • ​Additional costs due to new regulation
  • Growing margin pressures
  • Product shortages and price inflation
  • ​Self-regulation approach
  • Switch to net-net pricing
  • Strategic partnerships with suppliers

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