Expansion of the My Price soft discounter chain

In 2022, Magnit opened more than 500 My Price soft discounters across 62 regions of Russia. The new stores feature an area of 100–300 sq. m, easy-to-navigate zoning and an assortment of about 2,000 SKUs.

The new soft discounters were launched both in large cities and small towns with a population of up to 2,000 people, helping to improving the availability of products and enhance food security. Most stores opened in Tatarstan, the Chelyabinsk region and Krasnodar territory, and their total number went up to as many as 700 discounters.

Soft discounters offer a variety of special price value packs in the following categories: fruit, vegetables, dry foods, dairy, confections, baby food, drinks, pet food, household chemicals, and others.

This store format is popular with customers and meets the prevailing trend of lean consumption. Its prices are on average 15% lower than those in convenience stores, and may be 30–40% lower in some product categories. The soft discounters also benefit from optimised headcount (an average of up to 5 employees compared to 11 employees in convenience stores, without compromising the quality of service) and improved efficiency of retail space utilisation, which helps them save costs on purchasing additional equipment.

The discounter segment is underpenetrated in Russia compared a number of other developed markets where they are often seen as market disruptors, providing considerable room for growth. In 2021, hard discounters had 3.3% penetration in Russia, and their share is expected to grow to around 11% by 2025Alfa-Bank, INFOLine, December 2022.. Given the continued contraction of the real disposable income of households in Russia since 2012, the macroeconomic conditions are also conducive to the development of this format. Discounters fit well in small and remote locations, where opening a convenience store may be inefficient, and where consumer income is lower than average.

Approximately 20% of the My Price sales come from Magnit’s private labels. Going forward, we plan to increase their share to 50%and launch a dedicated range of private labels for our discounters.

2022 performance

• Higher sales productivity despite the limited product offering.
• Better merchandise margin vs convenience stores thanks to a significant share of private labels.
• Higher profitability of discounters converted from convenience stores vs their performance as convenience stores driven by higher sales density and lower SG&A.
• Higher inventory turnover owing to the assortment of highly rotated products.