X5 launches new hard discount banner

Date : 02 November 2020

Amin Alkhatib

Senior Retail Analyst

X5 announced the launch of its new discount banner Chizhik in its Capital Markets Day event in October 2020. The industry perceives this as a reaction to the fast-growing presence of hard discount retailer, Svetofor. They also question whether the new banner will cannibalise the sales of its sister discount banner, Pyaterochka.

New hard discount banner to compete for value shoppers

X5 opened its first two Chizhik stores in Moscow, both averaging at around 250 sq. m. of selling space and offering an assortment of 800 SKUs. The format will introduce its first range of private label products in February 2021, with the aim for this offer to account for 30% of the assortment by the end of that year. Its target is for 60% of the assortment to be own brands.

Source: X5 Retail Group

Chizhik differentiates via its price offer

The hard discount banner is designed to be the most competitive of X5’s businesses in terms of low-price offer. Its pricing strategy aims to offer shoppers a food basket significantly lower than the market average. The price offer is built around the motto ‘low price every day’, which indicates a clear Every Day Low Price (EDLP) strategy. This suggests that the retailer will be limiting the share of sales that go through promotions. As indicated before, it will also have a high private label share helping it to invest in prices and have better control of product pricing, quality and mix of assortment.

Why another discounter format?

Chizhik is seen by the industry as X5’s reaction to the market’s fast-growing hard discount chain, Svetofor. The competitor is a no frills, price-focused, retailer that opens around 250 stores each year to reach over 2,000 stores by 2022.

Source: X5 Retail Group

The industry also questions if the new format will cannibalise the sales of its sister banner, Pyaterochka, which is also regarded as a discounter. The two X5 banners do have their distinct differences and aim to attract different shopper income groups. Pyaterochka stores are significantly larger at 389 sq. m. and offer 4,500 products, catering for more shopper missions. Whereas Chizhik focuses on a carefully curated assortment of essential products that are offered at competitive prices.

Visit IGD’s Discount hub for more analysis about the channel.