own production

On Friday, St. Petersburg retailer Lenta LLC announced an actual change in format. The network decided to sell not only goods, but also services under its own brand. Market participants, many of whom have already mastered the new approach, consider it not only expedient, but also very profitable.
The Lenta chain, operating in the format of a warehouse store, began with the sale of food products. Then the non-food sector was added to food products, which currently accounts for about half of the chain’s assortment. At the beginning of this summer, Lenta also turned into a developer: Chairman of the Board and owner of the company Oleg Zherebtsov announced that the retailer would rent out land next to its stores on the Tallinn Highway and in Shushary. Last Friday, at a press conference, Mr. Zherebtsov announced another innovation: now in Lenta, visitors will be able to receive various services and buy goods produced by order of the network itself.
According to Lenta development director Vladimir Senkin, the network will sell tourist packages, as well as financial, insurance, auto repair, and household services under the brand of the same name. Lenta plans to provide them in partnership with specialized companies. For example, the organization of tours will be handled by one of the travel agencies with which negotiations are currently underway - “Riviera” or “Neva-tour”. The partner for processing loans will be Delta-Credit Bank, for currency exchange - most likely Petroenergobank, and for making utility payments - the company Petroelectrosbyt. Companies operating in Lenta, according to Mr. Senkin, will pay the retailer up to 10% of revenue or up to 20% of net profit from operations in stores. If the experience is successful, then Lenta may begin providing services independently. However, this will not happen until 2006.
“Our stores in St. Petersburg are visited by 50 thousand people every day,” said Mr. Zherebtsov. “With such a flow, we can sell a thousand trips to Egypt in two hours, we don’t even need to do anything for this.” In addition to providing services, Lenta decided to produce goods under its own brands. According to the company's sales director Denis Brause, the chain is currently already selling some products under the “365” and “Eight Hours” brands, which account for 2.4% of the retailer’s turnover. This year Lenta's sales volume should amount to 13.5 billion rubles. Next year, the range of the chain’s own products will increase; their share will already account for 4-5% of turnover. “We know the cost of the goods whose production we order, so we can control their price,” said Mr. Zherebtsov. “By reducing advertising and promotion costs, we get a low cost on the shelf.”
Indeed, according to the calculations of former vice-president of Pyaterochka Felix Stetoi, advertising can save up to 40% of the cost of the product. In addition, such steps allow us to stabilize the assortment and accustom the buyer to it. “Producing goods under your own brand is very profitable: in Russia, people pay less attention to the promotion of a brand, and more to price and quality, so ‘local’ brands sold in a specific chain are in demand,” Mr. Stetoi told Kommersant. According to him, Pyaterochka considers the launch of a drink under its own brand, “Cola,” to be a very successful experience. Director of External Relations for the Paterson chain, Eva Prokofieva, in turn, notes that by the end of the year her company plans to sell about 50 products under its brand.
IVAN STUPACHENKO

Newspaper "Kommersant St. Petersburg" No. 174/P dated September 20, 2004, p. 4

Themes:

Activities of the retailer "Lenta"

Merchants stocked the shelves with brands