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Fix Price is a Russian chain of discount shops that accounts for 4126 stores in Russia, Belarus, Kazakhstan, Uzbekistan, Latvia, Georgia, and Kyrgyzstan. The company was founded in 2007 by Russian entrepreneurs Sergei Lomakin and Artem Khachatryan, founders and executives of the former Kopeyka (supermarket) chain. Nowadays, Fix Price is the biggest Russian dollar-store retailer.
Fix Price introduces a new strategy
After the 2014 collapse of the ruble, Fix Price introduced a new strategy to protect against currency volatility. Fix Price reduced imports of non-food goods, the majority of its sales, and introduced a range of price points. Now prices range from 50 rubles to 199 rubles ($0.65 to $2.60). It also works hard to satisfy people’s desire for something new, introducing about 50 new products a week. The “treasure hunting” and thematic blogs became immensely popular on social media such as Instagram and YouTube, making the advertisement through the word of mouth.
Indicators
As real incomes have been shrinking also as a result of the lockdowns in the third quarter of 2020, consumers try to avoid shopping in supermarkets, preferring discounters instead. Fix Price reported a 16 per cent growth in sales for the first nine months of 2020, and it also opened 453 new stores during this period. The company’s revenue for 2019 was estimated at 142.9 billion rubles ($1,88 bln), net profit – 13.2 billion rubles ($170 mln). That beats any publicly traded retailer in Russia.
Fix Price goes public
Fix Price began to think about raising capital for the development of the network in 2018, says the cofounder Lomakin. In early 2020, the investment bank Goldman Sachs bought a stake (less than 10 per cent) in the retailer. Now Fix Price intends to go public through an IPO in the first half of 2021. The company expects to receive a valuation of $6 billion in the initial public offering, Bloomberg reports.
State of retail in Russia
Russian annual retail sales throughout the country exceed $427bn. The discount channel is currently the fastest-growing retail channel in Russia, the major players in the segment include X5 Retail Group (Pyaterochka) and Magnit PJSC. Hypermarkets are the second most significant channel, the leader here is France-based Auchan. The supermarkets’ segment accounts for the smallest stake, which includes local and regional chains, i.e. X5 Group’s Perekrestok chain. Another essential part of the distribution is carried out by informal means, such as open-air markets.
However, retail sales in Russia declined by 3.6 percent in December of 2020 compared to the last year. The fact remains that Russians still shop for necessities and goods. Amid the fall in living standards, discounters of all types have been expanding in Russia. The country’s biggest grocery chains such as Svetofor, X5 Retail Group, and Magnit have concentrated on no-frills retailing, opening stores with limited assortment. But not all retailers have adapted to the decreasing payment ability, for example, Tsentrobuv, co-owned by Lomakin, was declared bankrupt in 2017, according to the RBC online newsgroup. Others, such as Russian online retailer Ozon, seek for foreign capital, it filed for an IPO in the US, looking to raise as minimum as $500 million.
Retail in times of coronavirus outbreak
The breakout of coronavirus (COVID-19) throughout the world contributed to the unprecedented panic shopping of grocery products and household stuff, so it did in Russia. Russia’s largest retailer X5 Group reported 13 per cent year-on-year sales growth in the fourth quarter of 2020. Analysts argue that coronavirus related consumption patterns created a benevolent environment for large chains such as X5 and Magnit.
Online retail
Likewise, online retail grew exponentially during the lockdown period. With Wildberries as an irreplaceable leader, which accounted for an online sales value of 210.6 billion rubles in 2019 ($2,77 bln), the Russian online retail industry is evolving at a fast pace and is estimated to reach a 60 percent penetration rate by 2023.
Online commerce was among the few industries that benefited from the global lockdowns to some extent. Russian online commerce, which was still in transition in the past decade, is expected to experience enhanced growth over the post-pandemic period. The major market players, such as Wildberries, Ozon, and Mvideo, are growing amid customers’ intention to shop online in the future.
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