Russia's M.video raises game in online with price match
By Maria Kiselyova and Olga Sichkar
MOSCOW (Reuters) - Russian consumer electronics chain M.video, wary of the impact of the Ukraine crisis on the Russian economy, is aiming to grab market share from online rivals by matching their prices.
Russia's e-commerce market has boomed as telecoms operators have reached even the most far-flung regions of the world's largest country with broadband and mobile networks. In 2011 Russia became Europe's biggest market by number of Internet users.
Online sales at M.video, Russia's largest and only publicly traded consumer electronics chain, soared 115 percent in 2013 to 9.7 billion roubles (161 million pounds) as it expanded its online offering to more regions along with opening physical stores.
Now, in an effort to lure shoppers away from online competitors, M.video plans to bring its prices into line with a pool of retailers, such as Ulmart, that account for 80-90 percent of the market.
"Only the price factor can still potentially limit shopping with us... We will take this issue off the table," M.video Chief Executive Officer Alexander Tynkovan told Reuters.
Russian consumers are growing nervous about the impact of the Ukraine crisis, which has raised the prospect of Russia falling into recession.
Asked about the potential impact of the tensions in Ukraine, Tynkovan said: "Certainly, the political situation may have a negative impact on the economy. And we are in a consumer market, we are dependent.
"If the economy starts cooling down, disposable incomes will decline, consumer sentiment will worsen and it will clearly impact the market. This year, if it's flat, it will be good," he added.
PRICE MATCHING
M.video has started to match competitors' prices if customers request it and will soon track and match prices automatically, said Tynkovan. The move, expected to be completed over the next two years, is backed by suppliers, which will adjust their prices to meet M.video's target gross margin.
M.video is a major distribution channel for home electronics producers - it has a 13 percent share of the Russian market, leading rivals such as German retailer Metro AG's Media Markt and Czech investment firm PPF's Eldorado.
Revenue rose 11 percent last year to 175 billion roubles, with the share of online sales rising to 7 percent from 4.4 percent in 2012.
Consumer electronics is the most popular category among Russian online shoppers, accounting for 42 percent of the $17 billion (10 billion pounds) e-commerce market last year, according to industry association AKIT.
Tynkovan said M.video was pushing online shoppers to pick up their orders in stores rather than requesting home delivery - a model which sees them make additional, spontaneous purchases.
In the first quarter, M.video grew sales by 8 percent, year-on-year. Tynkovan said the Sochi Winter Olympics contributed to that increase as sales of TV sets jumped. Consumers also brought forward purchases to hedge against a weakening rouble and uncertainty caused by the Ukraine crisis.
"The first quarter even exceeded our plan but we don't expect this effect to last through the second quarter, which will show how much the negative factors are impacting the market," he said.
More than $50 billion has fled Russia over Moscow's annexation of Crimea and its backing of separatists in eastern Ukraine, as the United States and the European Union have imposed targeted sanctions and threatened to extend them.
The capital flight hit the rouble, raising prices for imported goods. Most types of white goods such as washing machines and TVs that are sold in Russia are produced locally although many components are still imported.
Tynkovan said M.video did not raise prices in the first quarter as it sold off stock, but in time all suppliers and retailers would have to gradually increase prices because of the currency moves.
(Additional reporting by Polina Devitt and Zlata Garasyuta; editing by Mark Trevelyan)
