Russian retailer X5 Retail Group has launched a farmers’ market project under the patronage of the Russian Ministry of Industry and Trade. As business portal retailer.ru reports, X5 will organise farmers’ markets on all of its Karusel hypermarket premises. This will provide local growers and artisans with the opportunity to offer their produce during time-limited sessions. The presented products will include vegetables, meat, honey, dairy products and handcrafted folklore items.
Traditional markets barely contribute a double-digit market share, according to official Russian statistics. Although continued crackdowns by the Putin administration targeting vendors at pop-up street stalls, kiosks and open markets have reduced the share of unregistered businesses, they still play an important role in Russian consumers’ everyday life. Direct purchases from the producer guarantee freshness, while cutting out the middle man and reducing costs due to tax evasion and unfulfilled administrative requirements leaves room for bargaining and better prices than in organised retail.
In times where the big box format is struggling to maintain customer loyalty, Karusel is heading into the so far uncharted territory of traditional retail. Maybe even more importantly – the retailer is doing so with government backing. After X5’s minimarket banner Pyaterochka started tapping into the potential of unorganised retail by joining forces with consumer cooperatives in remote territories of Russia, the hypermarket format is now promptly following. Complementing the standard hypermarket offer with time-limited farmers’ markets will increase local anchoring in its catchment areas, while at the same time win political support – a fact not to be underestimated in an environment where politics and economic development are closely-knit.
Although Karusel saw impressive like-for-like growth rates in its last reporting period, we must remember that these results are still coming from a low base. Despite the fact that X5’s hypermarket network is located mainly in cities of the Russian Northwest, Central and Volga districts with high purchasing power, Karusel is bringing up the rear in terms of space productivity. According to LZ Retailytics data, sales densities for 2016 were at EUR 3,400/sq m compared to a channel average of around EUR 4,800/sq m. As announced in the group’s annual report, the retailer considers the first half of 2017 will be key in determining a new operating model for the big box banner. The plan is to amalgamate best practice and new projects into a concept that will be rolled-out across all stores, with the aim of increasing footfall and driving like-for-like growth.
Without doubt, farmers’ markets alone are not a silver bullet to revitalise the Karusel concept. However, we believe that the consumer’s need for fresh(-er) produce, combined with traditional shopping behaviour and a strongly patriotic attitude might increase footfall and win sympathy in local catchment areas. At the same time, we are convinced that these strongly localised actions reflect X5’s newly implemented changes in management style, granting more responsibility and empowerment to each store manager.