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Russia: Local Discounters Challenge X5 and Magnit

Russia: Local Discounters Challenge X5 and Magnit
Photo: LZ Retailytics
Local Russian discounters are strongly anchored in their home turf in Siberia.
In Russia, local discount players are challenging the supremacy of national grocery leaders. The two dominant federal banners – X5 Retail Group’s Pyaterochka and Magnit minimarkets – must rethink their recent flash-flood expansion strategy when it comes to extending their reach beyond the Urals. Simply overwhelming their competitors with a high volume of stores may not work anymore.

Siberian retailers such as Maria-Ra and Svetofor can successfully counter the duopoly’s standardised lowprice strategy with locally tailored ranges and a high share of economy private label items. With bannerbased own brand strategies still work in progress at X5 and Magnit, this poses a major challenge. At the same time, long-term price investments to erode entrenched local heroes is not feasible for retail giants, who are required to report profitability every quarter.

Against this backdrop, we expect local chains to continue extending their footprints in the medium term, at least until the federal players can develop new logistics capabilities.

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Topics: Magnit Okey Maria Ra X5 Retail Group Torgservis