1.2.3 Geography of operations
Expanding our presence across Russia’s diverse regions
Russia is a diverse country with over 185 ethnic groups living within its borders. As we expand our presence into new regions, we aim to ensure that our retail formats’ customer value propositions are adapted to the needs and expectations of local communities. This is reflected in the fact that we source a significant portion of the products our stores sell from local producers, and we regularly conduct training events for local suppliers across our network of distribution centres. The share of local goods across all X5 stores reached 17% in 2017, and we aim to reach 20% in 2018. In some regions, the share of locally produced goods in Pyaterochka stores in 2017 was above 25%.
X5 continued its rapid expansion in 2017, bringing its modern food retail formats to around 500 new population centres (approximately a 25% increase in cities and towns where X5 operates compared to 2016) and six new Russian regions during the year.
Our strategy to the end of 2020 calls for rapid and profitable expansion of X5’s business in Russia, which we aim to do by:
- Strengthening and expanding X5’s presence in our core geographies
- Building critical mass in attractive new regions through both organic growth and tactical M&A
- Tailoring CVP to new regions with our regional supermarket model, working with local suppliers and “clusterisation” of assortment in stores covering a small geographic area
- Accelerating expansion into rural areas while achieving investment return criteria
- Expanding logistics operations to support ongoing development of business in existing and new regions
- Leveraging innovations and big data to enable our business to adapt and meet the needs of local consumers across Russia’s diverse regions
|Number of stores, eop||2013||2014||2015||2016||2017|
|Central and North-Western||2,958||3,373||4,107||5,172||6,614|
Note: based on federal districts of the Russian Federation
Multi-format presence in seven federal districts
Geographic Information System
We are constantly updating our in-house GIS tools, which have helped us to make efficient and informed choices about where to open new stores, including in areas where there is cannibalisation. The GIS system is constantly gaining new data, which helps us to further refine selection criteria and better predict a new store's sustainable performance.