X5 expands its retail ecosystem with new online services

Date : 14 December 2020

Amin Alkhatib

Senior Retail Analyst

In 2020 X5 launched several new online solutions and expanded the range of services it offered. This included an online marketplace, Perekrestok Vprok, and an express delivery service, Okolo.

The developments are part of its strategy to grow its share of Russia’s shopper spend on food and groceries. They are also aimed at helping it take a leading position in the country’s growing online grocery market. X5 is aiming to increase the share accounted for by online sales to almost 5% of revenue by 2022, from 1% in 2020.

Home delivery service expands geographic coverage

Perekrestok.ru, X5’s largest revenue generator of online sales, continues to invest to extend its services to reach more shoppers. As of July 2020, it began to service five new regions, and broadened its coverage in the Moscow and St Petersburg regions. To attract shoppers in the new locations, Prekrestok.ru offers delivery charges and services set to each area’s average delivery distances and shopper income levels.

Delivery to other cities

Source: X5 Retail Group

Perekrestok extends online channel presence with marketplace

X5 expanded the geographic reach of its online marketplace, Perekrestok Vprok, in November 2020, to two additional regions. This service differentiates itself from the online store Perekrestok.ru and operates its own logistics services and warehouses.

It also offers shoppers a choice of 42,000 products, 40% of which are not available in Perekrestok stores. It also provides a wider offer of non-groceries and handles heavier orders, with an average weight of nearly 30 kg, that contain between 60 and 80 items.

Source: X5 Retail Group

X5 launches its own last-mile grocery delivery service

X5 launched two new online express delivery services for its discounter and supermarket banners, under the names Pyaterochka.Dostavska and Pererestok.Bistro brands in April 2020. In July it launched its own food delivery aggregator, Okolo, to support the two new services.

Shoppers will continue to place orders on the Pyaterochka and Perekrestok sites, but delivery will be completed by Okolo. It has begun as a pilot project and is available from 439 X5 stores in the country’s five largest cities.

Source: X5 Retail Group

Having a single platform will help X5 drive efficiencies in the service and optimise the processes across the two express delivery banners. Okolo’s operating model is based on partnerships with small local companies, who specialise in express food delivery in different cities in the country.

COVID-19 pandemic is boosting online sales

X5’s new online services are helping to meet a growing shopper need and preference for online shopping. This increased strongly because of the impact of social measures around the COVID-19 pandemic. The retailer reported the number of completed express delivery orders has continued to grow after its earlier peak sales growth during the first lockdown.

Source: X5 Retail Group

X5 faces significant competition

Perekrestok.ru leads the online grocery retail market in Russia. However, apart from facing competition from incumbents such as Utkonos, its biggest threat comes from new channel or category entrants.

In the home delivery space Magnit launched its own service in November 2020, under the Magnit Dostavka (Magnit Delivery) brand. In relation to last mile delivery, Mail.ru acquired the Samokat delivery service, as part of a joint venture with local bank, Sberbank. Here, Mail.ru is looking to consolidate its market share in the express food delivery channel.

Meanwhile, partnerships are being developed by key competitors, such as Magnit cooperating with Delivery Club and Yandex.Eda. There are also online dark kitchens, such as Grow Food or Elementaree, that compete against X5’s Perekrestok.Bistro and Smart Kitchen offers, raising competitive levels further.

For more information on X5 Retail Group visit the retailer page on Retail analysis.