Aiming for Victory in the Aisles
- Dec. 10 2014 00:00
Russia's top four retailers are all grocery chains, a sign of the tough competition in this sector. As President of DIXY Group since 2009, Ilya Yakubson has transformed the company through a mix of organic growth and acquisition. DIXY Group is a winner in the CEO of the Year Large Company category, for growth and operating performance.
What has been the reason for DIXY Group's successful record of growth on the Russian market?
The company has managed a number of important modifications over recent years. We completed the integration of the Viсtoria group of companies and neighborhood stores received a new image and positioning. We also carried out a legal restructuring and several complicated and expensive projects that enabled us to demonstrate impressive results both in terms of operating efficiency and growth rates.
The Russian grocery market has a lot of retail styles, with international and local influences. Are any characteristics unique to the Russian market or the Russian consumer?
The Russian retail sector is rapidly approaching the international one in terms of its technologies, assortment and other parameters. It can no longer be considered separately from global retail, especially in its use of marketing, logistics and IT which are as advanced as in any country. As to the consumer, the frontline issue here is a matter of general human needs and expectations: a store should be clean, products should be fresh and personnel should be polite. Everyone likes discounts, auctions and loyalty programs. We are part of a huge retail industry and all standard techniques are at work in Russia.
DIXY has a series of store formats: mostly neighborhood stores but also supermarkets and compact hypermarkets. Will market trends favor one format over another in the future?
All the three formats of stores operated by DIXY are popular and have their own customers. There are no signs of cannibalism among them and all the three types develop successfully. DIXY is a neighborhood store with a wide range of products for every day at fair prices. We call DIXY's customers "our neighbors", as they can call at a store five to seven times a week. Victoria is an ideal example of a sub-premium supermarket with lots of own food production, farmers' corners and ecological products. Megamart develops in the regions beyond the Urals; it's the most profitable division of the company. Stores offer a wide range of assortment of purchases for a week, a large share of local produce and the highest level of loyalty. More than 90 per cent of regular customers use loyalty cards.
DIXY Group is one of the top retailers in Russia. It bought the Victoria chain a few years ago and announced plans to double the number of its stores in Russia to 3,000. Is that still your target?
DIXY is the third-largest retailer by revenue, sales areas and the number of stores among national retail operators. We confirm all the earlier announced plans of expansion. Preliminary results for the year 2014 support our earlier announcements and they will be successfully carried out and even exceeded.
DIXY has announced plans to roll out its convenience stores in the Central Federal District. Which are your priority regions in Russia?
We continue to develop our regional presence and growth potential is immense here. We are starting to penetrate neighboring regions. The priority directions are Yekaterinburg, Tyumen and Nizhny Novgorod.
The group has nine distribution centers. What role does your logistics operation play in DIXY's success?
Logistics is the heart of retail. DIXY invests huge amounts into the expansion of this function: equipment for distribution centers, the purchase of automobile transport and improvement of logistical infrastructure. We will launch one more distribution center of 40,000 square meters in 2015 in the city of Noginsk. An active expansion into the Central Federal District would be impossible without it.
The Russian economic ministry has raised its forecast for food price inflation because of sanctions to about 13 per cent. How is DIXY reacting to the issue of price pressures? Will we see more own-label products?
DIXY actively promotes its private label. As of the moment, its share in the chain's sales is about 10.6 per cent, and we plan to double this figure by the end of 2015.
The company develops its own trademark in three directions: goods "of first price" under the Pervoye Delo (First Case) brand, which is an economical and simple solution in each category. The "D" brand offers goods of a similar or a better quality than those of brands-leaders with prices cheaper by 20 to 40 per cent. It also comprises exclusive trademarks for categories where the emotional component is important, such as alcohol, chocolate and the like.
The grocery segment has been the one of the fastest-growing segments of the retail market in recent years. Do you expect this to continue?
There are no signs of stagnation in the segment. The market has a huge potential for growth and improvement. The financial indicators of large trading chains back up this conclusion.†