proximity stores
We set new all-time records for Pyaterochka, passing RUB 1 trillion in net retail sales and adding more than 1 million square metres of new selling space for the first time in our history. With 29% year-on-year growth in net retail sales in 2017, we achieved the fastest pace of growth of any public food retail banner in Russia. Pyaterochka was operating 11,225 stores in around 2,500 cities and towns across Russia at the end of 2017.
While achieving this rapid expansion, we have maintained a focus on adapting to the needs of local customers. Russia is an economically and ethnically diverse country, and we want to meet the different needs of our customers in every store that we operate. We have successfully adjusted our operating model to enable greater localisation of assortments at the level of operational clusters, meaning we can adapt to demand more flexibly. Another constant focus has been on leveraging data analytics to offer personalised promotions for higher-quality relationships with our customers.
Pyaterochka is one of the top brands in Russia, and is the fastest-growing retail format in our portfolio. Our proximity stores aim to deliver a satisfactory shopping experience and offer a wide assortment of high-quality goods to consumers in Russia. Pyaterochka’s highlights include convenient locations, a unique loyalty programme with personalised offers, attractive weekly promotions and reasonable prices. On average, a Pyaterochka store is 394 square metres in size, with more than 4,500 PLUs on offer.
Performance highlights
as of 31 December 2017 4,427
ths sq m +33.0% year-on-year
as of 31 December 2017 11,225
+34.2% year-on-year
as of 31 December 2017 44% and 61% of retail sales attributable to loyalty card holders
Strategic highlights
| 2013 | 2014 | 2015 | 2016 | 2017 | |
|---|---|---|---|---|---|
| Number of stores, eop | 3,882 | 4,789 | 6,265 | 8,363 | 11,225 |
| Selling space ‘000 m2, eop | 1,414 | 1,754 | 2,423 | 3,329 | 4,427 |
| Net retail sales, RUB bln | 348 | 436 | 585 | 776 | 1,001 |
| Customer visits, mln | 1,450 | 1,645 | 1,990 | 2,543 | 3,267 |
Strategic priorities for 2017
| Our priorities | What we did | What we plan to do |
|---|---|---|
| Rapid, high-quality growth |
| Maximise the share of customers, and maximise the share of these customers’ wallet:
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| Expand to new geographies and strengthen position in existing locations |
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| Continue to adapt value proposition and improve customer experience |
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| Effective loyalty and promo programmes |
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| Optimise efficiency and costs |
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Rapid and high-quality growth
We continued to set new records for growth in 2017, passing the threshold of 1 million square metres of new selling space added and RUB 1 trillion in net retail sales. This continued expansion is only possible with robust and effective systems in place to enable us to efficiently select locations, open stores and offer customers the best value proposition.
GIS: GIS has been one of the core tools for selecting the right location for our new stores. In order to increase the quality of the system, we are constantly adding new data and algorithms to further improve its accuracy.
Adapting organisational structure: We are constantly seeking to enhance our ability to effectively manage our decentralised business, enabling Pyaterochka to adapt to local needs while maintaining a single strategic focus. As of the end of 2017, we were operating 13 divisions and 158 clusters, and we had begun piloting a new level of “macrodivisions”.
Efficiently building an excellent team: Recruitment plays a major role in our successful and rapid expansion. While continuing to focus on training, development and motivation for employees, we have also started automating parts of the recruitment process with advanced IT solutions that conduct online searches, analysis of CVs and even call potential applicants before requiring one-on-one human interaction.
Refurbishment complete, increased focus on in-store improvements
We renovated just 267 stores in 2017, down from 1,185 in 2016, as we completed Pyaterochka's renovation programme. At the same time, our stores are constantly changing: a Pyaterochka renovated in 2013-2014 when we launched this programme will look significantly different today due to the day-to-day improvements we have introduced over the years.
We monitor trends and innovations, and we can rapidly introduce new practices at our stores, such as optimising the produce selling space to make it more convenient and easier for customers to get a broader range of products. These include testing of new equipment and shelves, placement of products and other innovations aimed at continuously improving the shopping experience for customers.
into smaller cities
While Pyaterochka continues to grow its share in existing markets and enter new regions, the format is expanding into smaller cities and towns, where it is the primary provider of modern retail services.
Effective promo and data-driven loyalty programme
One of the key achievements in 2017 was the launch and rollout of the Helping Card (Vyruchai-Karta) loyalty programme, which goes beyond offering points for purchases, using advanced data analytics based on customer behaviour to automatically generate personalised offers to encourage shoppers to choose Pyaterochka. Personalised promotions are now being rolled out across the entire Pyateochka network in 2018, after successful testing in 2017.
In addition to Helping Card (Vyruchai-Karta), we launched a new debit card offering with Post Bank, a mobile loyalty card based on a mobile phone app, the “children’s club” add-on for parents that use Helping Card (Vyruchai-Karta), and a partnership with A-MEGA pharmacies enabling customers to collect points on their Pyaterochka card when they shop at A-MEGA.
| Programme | Highlights | Customer benefits | Geography |
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| Helping Card (Vyruchai-Karta) loyalty programme |
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| Co-branded Post Bank debit card loyalty programme partnership |
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| Children’s club loyalty programme add-on |
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| Earning points for New Year’s loyalty programme promo |
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| A-MEGA pharmacy partnership loyalty programme partnership |
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programme
Localisation
One of the key elements of Pyaterochka’s CVP is its focus on localising assortment based on customer demand and products sold by regional producers. We are working with food producers and farmers in the regions where we operate to increase the share of their goods in our stores.
In 2017, the share of local assortment offerings at Pyaterochka stores reached 17%. We plan to increase this number, and we have already achieved a 25% share of local products in some regions.Another aspect of our focus on meeting demand at the local level is “clusterisation”. We have adapted our operations to enable aggregation of merchandising at the “cluster” level, meaning that the assortment matrix for Pyaterochka stores can be better tuned to local demand.
Human resources and recruitment
Pyaterochka is a major employer in Russia: we employ over 160,000 people across all of the format’s operations, from the head office to stores to logistics. Finding the right people to staff the stores we open is significantly more important and challenging than selecting a location and opening a store.
We pay close attention to building Pyaterochka's HR brand, and we engage in a wide range of activities to make sure our staff feel like part of the team and have opportunities to develop professionally. These include "cashier of the year" and professional competitions for employees of DCs, as well as regional conferences. Conferences cover a range of topics and are one of our key forums for engaging in dialogue with our employees and sharing ways to create value for them in their professional careers with Pyaterochka.
Another area of focus is motivation, team building and developing an internal staff reserve within each format. One of the annual highlights for the Pyaterochka team is Turboliada, our annual company-wide sports competition aimed at strengthening corporate culture and team building.