The popularity of discounters in Russia is gaining momentum. A new player under the name Smart can be created by Spar Middle Volga, which develops the Dutch supermarket chain Spar through a franchise. The key problem of the chains operating in the segment of discounters is the lack of premises at low prices, experts say.
Spar Middle Volga, which develops the supermarkets of the Dutch chain Spar under the franchise, plans to open its own chain of discounters under the Smart brand. Kommersant was told about this by a source in the commercial real estate market. Another source of Kommersant is aware of the company’s new project. According to them, Spar Middle Volga has already begun searching for premises for a new network in Moscow and the Moscow region with an area of 700 sq. M. m and 1 thousand sq. m respectively.
The Smart brand belongs to the Dutch SPAR Russia BV Spar Middle Volga uses the name under license as its own trade mark (Private Label), under which it sells about 250 items, including food, household goods, etc. To Spar Middle Volga and SPAR Russia BV did not answer questions.
According to our own data, Spar Middle Volga operates nearly 200 of 350 Spar stores in Russia. According to the Unified State Register of Legal Entities, the company is controlled by Nizhny Novgorod entrepreneurs Albert Gusev and Yuri Markin. In 2020, the revenue of Spar Middle Volga increased by 17.83%, to 61.7 billion rubles, the net profit increased almost six times, to 86.8 million rubles.
Discounters are one of the fastest growing formats in the Russian retail market. According to 2GIS, from September 2017 to September 2020, the number of discounters in Russia increased by 24.7%, to 139.6 thousand properties. The largest player in the segment, Svetofor, operates more than 2.2 thousand stores with an assortment of up to 2 thousand items. According to Infoline, in 2020, the network’s revenue grew by 38.8%, to RUB 189 billion, year-on-year. Almost all the largest players on the market have already launched their own discounters. Thus, X5 Retail Group (Pyaterochka, Perekrestok, Karusel) is developing the Chizhik chain, Magnit – My Price, and Lenta – 365+.
Infoline Analytica CEO Mikhail Burmistrov estimates the investment of Spar Middle Volga in the development of a discounter project, adaptation of the private label portfolio and the opening of the first two pilot stores at approximately RUB 50 million.
However, he warns, the market of Moscow and the region is competitive, and its key problem is the lack of suitable locations.
The shortage of premises is largely due to the discrepancy between the expectations of owners and operators on the rental rate and the discounter’s ability to pay it, says Marina Malakhatko, head of CBRE retail space: “Discounters are forced to keep the share of rent in turnover no more than 5% in order to maintain a margin by saving on all costs, since the margin on the product is minimal. “
Colliers partner Stanislav Bibik estimates that renting a suitable Spar Middle Volga retail outlet in the Moscow region will cost RUB 12–18 million. in year.
Ms. Malakhatko adds that a classic discounter can pay rent up to 10 million rubles. per year and usually stores occupy semi-basements, located on the second line of the point or having an ineffective layout of the premises.
The economy of discounters can be more complex than that of stores with regular prices, warns National Rating Agency analyst Alla Yurova. She refers to the data of O’Key Group of Companies, which at the end of 2020 has a discounter EBITDA margin of “Yes!” was 3%, which is three times less than that of hypermarkets. Lenta said that they are continuing to test the format in Siberia, but the decision to replicate it has not yet been made. X5 has opened ten Chizhik stores and plans to evaluate the project’s results for the year. In “Magnit” they say that they have opened about 60 discounters on the basis of their own outlets in the “near home” format.