X5’s new businesses, online contribute significantly to sales growth

Date : 27 January 2021

Amin Alkhatib

Senior Retail Analyst

X5 has reported an improved performance in 2020, versus 2019, with it generating revenue of RUB1,975 bn (US$26.31 bn).

The retailer saw total sales grew 14.3% year-on-year, while like-for-likes rose by 5.5%. Both rates improved on the previous year when the stood at 13.3% and 4% respectively. Although more than 81% of the growth was derived from the Pyaterochka banner, X5’ new businesses contributed almost 6% to the total growth.

X5’s new businesses support online sales growth

X5 has launched new businesses to support its wider retail ecosystem and help it gather shopper data as part of its strategic focus to ‘be at every stage of the customer journey’.

Source: IGD Research, X5 Retail Group

It expanded its multichannel portfolio with the launch and expansion of the online marketplace Perekrestok Vprok, hard discount banner Chizhick, 5Post pickup points and express delivery services, such as Okolo.

New businesses’ sales grow more than three-fold

New businesses accounted for almost 6% of the total business’ revenue growth in 2020, after reporting sales increased by more than 360% in 2020. This increases the businesses’ share of the retailer’s total sales to 1% in 2020, from 0.3% in 2019. The retailer’s target is to grow the share of sales accounted for by new businesses to 5% by 2023.

Source: X5 Retail Group

The pandemic encouraged shoppers to change their buying habits. This saw a shift towards buying more online, while spending in-store was affected by fewer visits (6% drop), which was partially offset by an increase in average basket spend, which rose 5.5%, just ahead of food inflation, which stood at around 5%.

Marketplace banner drives growth in new digital sales

Perekrestok Vprok accounted for the biggest contribution to revenue growth, at two-thirds, from the new businesses. The banner more than doubled the number of orders it dealt with in one year, to more than 3.6m in 2020, from nearly 1.4m in 2019.

Perekrestok Vprok saw a 15% increase in its average basket spend, to RUB4,142 (US$55.17), making it the highest across X5’s retail businesses. This reflects the expansion of the store’s assortment to 50,000 SKUs in Q4 2020, from 27,000 in Q4 2019, and the opening of five dark stores in 2019 and 2020, which enabled it to process and fulfil the orders more effectively and efficiently.

Expansion of the Express delivery service

X5 continued to expand the areas covered by its express delivery services. By the end of 2020 express delivery was available from 991 stores, 594 Pyaterochka and 397 Perekrestok, across 13 Russian regions. The retailer is planning to expand this coverage further by increasing penetration in cities it is already present in and by making the service available in smaller cities too.

Pickup points business, 5Post, helps drive traffic to stores

Although the retailer reported a 6% drop in like-for-like store traffic in 2020, it said this was softened by the presence of in-store 5Post pick up points, which generated additional traffic. The ecommerce delivery service, 5Post, delivered around 2.5m orders to 11,500 in-store pickup points. This is estimated to have contributed a 2% to 3% uplift in traffic to stores.

Want more insight on X5?

To read more about X5 Retail Group, subscribers can access our strategic priorities presentation here.