Russia’s second largest grocery retailer, Magnit, has been investing strongly in the development of its physical formats as it looks to attract more shoppers. It is now investing online, a channel it has been reluctant to enter, with it only launching online in 2020. However, as it looks to drive growth Magnit is investing in several formats and online services to help it meet a wider range of shopper missions.
Magnit launches new kiosk format…
Magnit opened its first kiosk, under the M Go banner, in Q4 2020, at its headquarters. The 18 sq. m store offers a range of 650 products, with an emphasis on food-to-go. The pilot aims to test shopper demand for an ultra-small convenience format, which is focused on impulse buying, in high traffic locations. Magnit’s intention is to meet more to-go shopper missions.
The format’s scalability is positive for Magnit as it requires a relatively low level of capital expenditure to set up each store, while it also has low operational costs. Finding locations for new stores will be easier as there is less restriction on finding the right-type of real estate and location, due to its smaller size requirement.
Magnit also plans to pilot larger kiosk formats and branded vending machines, which form part of its strategic priority, which was announced by its president and CEO, Jan Dunning:
“At the heart of our approach is to respond to customer needs by offering different formats. We see opportunities for synergies between the kiosk format and our core business, therefore we see potential in the development of a new format…”
…A mini Magnit Cosmetic banner…
Magnit is also trialling a smaller version of its drugstore banner, Magnit Cosmetics. The retailer launched the 65 sq. m store, under the name MK, at the end of 2020. MK stores offer an assortment of 4,000 products.
The retailer is testing a standalone format before integrating it into existing convenience stores. It will look for cost-effective sites where it is either relatively costly to open a standard Magnit Cosmetic store or where an MK store can be incorporated into an existing Magnit convenience store.
…But a larger Magnit convenience store
The average size of a Magnit convenience store is about 350 sq. m. However, the retailer is set to roll out a larger version in major cities in the short to medium term. The first larger version of its convenience store was launched in Q4 2020. At 665 sq. m, the store’s extra space enabled it to include a café. To improve its efficiency and support its profitability, despite the larger size, Magnit has cut the number of products the store stocks, to 6,000 SKUs, down from the standard store’s 6,500. The retailer has said the smaller assortment is optimised to better fit local shoppers’ needs.
The assortment is focused on fresh food and food-to-go, with 35% of the sale area dedicated to these categories. The store also stocks Magnit’s growing selection of mid-priced and premium private label goods, under the Magnit Svezhest brand name. Local products are provided, such as wines, which are adjusted to local shoppers’ tastes. The concept also has a Magnit Pharmacy in it, which will help to boost footfall.
Launch of online delivery boosts convenience…
Magnit also announced six online delivery projects. One of the main ones is the launch of its own delivery service, Magnit Dostavka (Magnit Delivery), a project it first developed in cooperation with the Yandex.Eda, in H2 2020. Shoppers can select from an assortment of 5,000 products, which will be delivered directly from a Magnit hypermarket to a shopper’s home. Shoppers can request to receive an order at an assigned time, within two day’s of ordering.
The retailer is also testing its own fast-paced delivery service, with goods expected to be delivered within three hours. The key difference is that shoppers will have access to a wider range of 25,000 products, while product availability will be better managed.
In Q1 2021, Magnit has said it is fulfilling around 7,000 orders daily, with most made by customers new to the retailer’s offline stores. It expects to generate online revenue of RUB2.2 bn (US$30m) in 2021.
…along with express delivery
Magnit began its partnership with food delivery services Yandex.Eda and Mail.ru’s, Delivery Club to help it launch its express delivery offer in Q3 2020. Both services offer shoppers, in selected geographies, access to 5,000 products and provide express delivery in an hour.
Dunning said Magnit needed partners in its online project “to minimize investments, achieve rapid scale and gain experience. We will continue to develop the partner model, but we will also pay great attention to building our own delivery service in different customer missions”.
The trial was launched in September 2020 with the Magnit Apteka (Magnit Pharmacy) offer, then was extended to the Magnit Family and Magnit Cosmetic banners in the last two months of the year. Magnit's online shop delivers from over 900 stores across 69 cities. By the end of 2021 it plans to offer the service in at least 1,500 branches across its core banners.
Super app to help understand shoppers
Building on the online offer supports Magnit in its aim to develop its own retail ecosystem. This is being furthered by the development of its super-app Magnit Pay, which combines ordering from the online store, payment and credit services, lifestyle, other non-financial services and the Magnit loyalty card.
In the first half of 2021 more functions will be added to Magnit Pay. This is an important feature of the Magnit offer as it will allow the retailer to gather more data on its customers, which will help it create more personalised offers. Magnit’s executive director, Florian Jansen, stated that it “will hone the basic functionality of Magnit Pay and gradually add new services to expand opportunities for our customers and make the Magnit ecosystem as attractive as possible for customers”.
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