Russia: Second largest retailer Magnit starts piloting Discount Retail Chain format
The second largest Russian retailer has launched its first three pilot stores under the new discount retail chain format in Samara, Kamyshin and Staraya Kulatka Village, replacing three unsuccessful convenience stores. Goal is to assess the performance and decide on the potential for a full-scale roll-out. The concept is a store of up to 300m2 operating in a predominantly residential area and offering a limited assortment fast-moving basic needs assortment of around 1,800 SKUs with a strong focus on quality private labels and the lowest EDLP price.
The discounter concept is aimed at the price-sensitive Russian consumers. Limited staffing levels compared to convenience stores, and will require significantly less capital expenditures for merchandising including costs for repairs and refurbishment.
After X5 Group, Maria-Ra and Svetofor, Magnit is the fourth Russian retailer with a discount retail chain concept and second non-discount retail chain to start-up a discounter. The Russian discount market is expected to grow after COVID-19 with 8.4%, the second highest growth rate after E-commerce, according to Edge by Ascental.
Based upon experiences with other international non-discount retail chains, it is hard for existing retailers and its management to start-up a discount chain within its own organisation as there is - in many cases - no fit in and understanding of the basic discount DNA. As Jan Dunning, President of Magnit, has long time experience at Aldi he certainly is aware of this.
Let's see how this pilot stage works out for Magnit, if the company structure will be adapted and if a first wave expansion will evolve soon.