Russia: Magnit launches its second discount concept B1
Updated: Mar 1
Russian largest retail chain Magnit (owned by Marathon Group and list on MCX: MGNT, LSE: MGNT) launches its second discount format B1. The first three pilot stores were opened in Stupino, Elektrostal and Tuchkovo in Moscow region.
For this new discount project, Magnit appointed Anzhela Ryabova who has a wide spread retail experience where off discount retail at the Siberian-based store chain Baton (part of Krasny Yar).
The new format B1 will strengthen the presence of Magnit in the segment of discounters, where Magnit is represented from 2020 by the soft-discount proximity small size concept "My Price", and will allow to cover even more consumer missions. B1 are stores with a focus on a limited quality assortment at attractive prices, covering the basic needs of the consumer.
The new discount format is close to the classic discount concept and is aimed at consumers who do not accept compromises in quality, but strive for rational purchases. The range of B1 with 1,000 SKU is narrower than the soft discounters "My Price" (average of 2,500 SKUs), and own brands (private labels) in the future will occupy about 50% of the B1`s product offer.
B1 will adhere the EDLP (every day low prices) pricing strategy. But the basis of the assortment of the discount format will be products of the middle price segment with a small share of goods of the "first price".
Due to a deeper optimization of operational processes in stores and logistics, prices in B1 will be lower than in "My Price" and in "Magnit" stores. In the B1 assortment emphasis is placed on offering high-quality fresh categories, as well as fruits and vegetables. Another key category of the new format is fresh pastries: in B1 stores there will be bakeries for the production of fresh bread, buns and pies.
Another distinctive feature of B1 will be a wide offer of weight goods such as cereals, confectionery, frozen foods, seafood, etc. At the same time, a significant proportion of goods in B1 will be presented in large packages, which will also help customers optimize their spending.
The store area of B1 stores will be 330 - 400 sqm. Only pallet and boxed goods are presented, which requires additional merchandising space. In addition, the B1 layout provides wide aisles for the convenience of buyers, fast shopping and store productivity.
Another element of B1 will be the use of modern technologies in stores, such as self-service cash registers. It will test the so-called "cold rooms", separate rooms with a special temperature regime for chilled products (meat, fish, salads, dairy products). Cold rooms will allow B1 to reduce operating costs, as well as the time of personnel for laying out goods.
B1 is managed by Angela Ryabova, who joined Magnit in November 2022. Before that Ryabova headed the Krasny Yar group of companies, developing the Baton discounter successfully.
In the future, B1 will set-up a separate logistics, maximally adapted to the needs of the format in terms of speed and cost of operations. It is assumed that the first own B1 distribution center will be opened in the fourth quarter of 2023. In the near future, Magnit will open up to 15 pilot B1 stores in different configurations and types of locations in different cities of the Moscow region to test several hypotheses, operating models and business processes. After that, the company will form the optimal model of the hard discounter and will decide on scaling the format, supported by DRC.
"Discounters remain one of the fastest growing segments of the market and retain high potential for further development. We want to create a standard of "high-quality" hard discounters on the Russian market, a format that is very poorly represented in our country. Our hard discounter is a store for modern consumers who rationally approach their budget and time, but are not ready to sacrifice the quality of life," says Angela Ryabova, Director of B1.
Magnit is presented in all grocery retail formats covering basic consumer missions. The company develops a network of convenience stores for frequent purchases of basic basket goods, large-format stores (supermarkets and superstores) with a wider range for future purchases, drug stores for purchases of non-food products. The new B1 format is focused on purchasing a basic food basket for a few days and daily purchases of fresh goods, while "My Price" covers the wider needs for daily purchases of basic goods on a smaller space.
In 2022, Magnit expanded its network of soft discounters to 700 stores and in 2023 it will continue to expand this format.
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