X5 Retail Group has revealed plans to open Travellers’ Service Centres at transport hubs such as airports, train and bus stations containing a grocery store, a pharmacy and a food service provider under one roof. As retail.ru disclosed, the leading Russian retailer aims to open up to 1,000 stores by 2021 in cooperation with two investment companies: Acmero Capital Ltd specialising in food service and Marathon Group, which operates pharmacy chains A-Mega and Da-Zdorov. X5 had already announced last autumn that it would open more than 3,300 points of sale for pharmaceuticals in existing Pyaterochka locations. Now this number will increase through the newly organised joint venture.
We have become accustomed to X5 striking deals that boost its store network by four-digit figures. Aside from pushing growth for its minimarket banner, this arrangement might additionally tap into a totally new niche, securing the retailer a long-term advantage over its peers on top of expanding its sales areas and increasing revenue.
It is obvious that the Russian market has not yet reached the development stage of some Western economies. Income disparities are still high and the middle class is virtually non-existent. Until now, the Perekrestok Express minimarket banner – a format leading market growth in maturing countries like Poland – has been whiling away its existence as problem child in the shadow of Pyaterochka, Perekrestok and even Karusel. Considering rising purchasing power associated with a rebound, however, the importance of convenience and food-to-go concepts will increase immensely.
We believe that until this market segment takes off, the new venture will provide X5 with the opportunity to fill a gap and to gather experience that will come handy in the medium-term. Likewise, the pharmacy segment is expanding fast – main competitor Magnit currently prepares to launch its own pharmacy chain – so this expansion project can be seen as a prudent long-term investment. At the same time X5 is gearing up to relaunch its online activities. Considering the ambitions of the Russian Post Office (Pochta Rossii) to launch a click & collect scheme with a so far undisclosed federal retailer and TelePort and Igooods postamat pick points operated in cooperaton with Lenta, Metro and Prisma in St.Petersburg, it appears that other retailers agree that the Russian market is ripe for grocery e-commerce. Extending its footprint in high traffic locations therefore might even be closely interlinked with a future roll-out of the group’s online banner.