KRASNODAR: Magnit PJSC, one of Russia’s leading retailers, began testing e-commerce services in the second half of 2020, with the most recent pilots launched in early December.
During the first three months, the pilots’ growth dynamics exceeded original expectations and showcased the high potential of this market. Despite being a new entrant in the segment, Magnit already fulfills around 7,000 orders a day, with that number growing steadily by 25% on average every week.
According to the Company’s analysis, most of the orders are placed by customers who didn’t shop at its brick-and-mortar stores before.
The run rate for Magnit’s online segment currently stands at 2.2 billion rubles based on sales turnover for the last week (December 7-13).
In total, Magnit currently runs six online delivery projects, both independently and in cooperation with partners. The Company started developing its food-tech business together with industry specialists, joining forces with Delivery Club in late August 2020, and with Yandex.Eda in late September. Both services provide express delivery within 1 hour.
In September, the Company introduced online ordering for its Magnit Pharmacy format; in early November, it launched its own Magnit Delivery app for express deliveries within Moscow; and at the end of the same month, it started a regular delivery service from Magnit Family stores in Krasnodar. In the beginning of December, Magnit and Delivery Club launched deliveries from Magnit Cosmetic stores in Ekaterinburg and Krasnodar. All of Magnit’s e-commerce projects are currently in the pilot stage.
Among all these segments, convenience store-based express delivery has the highest sales and shows the best growth dynamics.
As of today, the average ticket for Magnit’s own delivery service is 1,500 rubles, which is approx. 5 times higher than in the convenience stores (283 rubles in Q3 2020). This is mostly due to a larger number of items per basket; in addition to that, the delivery fee also depends on the ticket amount.
The Company expects the average ticket in e-commerce to continue growing, bolstered by the roll-out of the Magnit Delivery service, as the latter focuses more on customers looking to stock up on products from Magnit’s large formats. At the moment, the service is available only in Krasnodar.
Magnit’s e-commerce services today encompass over 900 stores in 44 regions and 69 cities, with around 50% of the current revenue from these online projects generated outside Moscow and Saint Petersburg. During 2021, the Company plans to expand online delivery adding not less than 1,500 convenience, drogerie and large-format stores in more than 50 regions across Russia.
“We managed to enter the online segment very quickly. We deliberately made our initial bid on partnership projects to minimize the investment, ensure fast roll-out, and get the necessary experience. The Company will continue developing the partnership model but will also pay a lot of attention to establishment of our own delivery service across various shopping missions,” commented Jan Dunning, President and CEO of Magnit Retail Chain.
“Despite all our projects currently running in pilot mode, they are already demonstrating good results. We’ve set very ambitious growth targets for this business: we want to provide our customers with a high-quality offering and different services, both in offline and online segments.”