Five tips for Russian retailers from INSEAD business school marketing professor

Marcel Corstjens, INSEAD marketing professor and creator of retail business simulators Storewars and Mar-Pro , believes that the turbulence in the Russian economy is a good time for bold decisions. In November, Marcel came to Russia to judge the Mar-Pro competition between Russian retailers and suppliers. How to beat your competitors and take your business to a new level in conditions of stagnation?

Give yourself permission to do some things badly.

There are many stores, and we constantly have to offer customers something special. Retailers have not been very successful in this, not only in Russia, but also in other countries. The reason is that they do not understand one simple principle of the service industry - if you want to be the best at something, you must be bad at something . This must be accepted. You can't be the best at everything. There will always be someone better than you at the details.

The one who grabs at everything inevitably loses.

To be the best requires a lot of investment, but resources are limited and buyers are price sensitive. Therefore, the retailer must find its own way to differentiate itself from the rest. I communicate a lot with the retail business, I sit on the boards of directors of several companies, and every time they say “Yes, of course! We won’t spread ourselves thin.” But then they return home to their favorite goal - to surpass everyone in everything. And this is impossible.

, for example Take IKEA . A very successful retailer, but far from ideal in terms of product longevity and in-store service. When you buy furniture from IKEA, you have to take it home, assemble it, and sometimes paint it yourself, which discourages many people. However, IKEA products are affordable and look pretty good. And low prices make it possible to regularly change furniture and furnishings, show your own creativity and keep up with the times. At the same time, IKEA does not pretend that it is the best retailer, and if it tried to do so, the prices would be higher.

Set your priorities

Of course, there are things that should not be overlooked. Firstly, prices. In conditions of declining purchasing power, you cannot afford to keep prices high. Secondly, quality. You need to look for sources of growth elsewhere. You need to accept that you can beat your competitors while remaining worse in some respects. German retailers Aldi and Lidl do not offer a wide selection, and their stores are unpretentious, but the prices of goods are very low and the quality of goods is decent. Not the best, but quite decent. And there are only 1000 items on the shelves, while others have 25,000. And they don’t hide it. They say: yes, this is the choice we made. If you want to do everything at once, be prepared to be beaten in all directions. This applies to many things in life.

Strike a patriotic note

The current situation with restrictions on imports due to sanctions and rising prices for imported goods opens up a lot of opportunities for retail. Instead of tormenting and complaining, someone should capitalize on the patriotic theme that has arisen. I used to sit on the board of directors of the Portuguese company Jeronimo Martins, which has a retail chain Biedronka in Poland. This is a fantastically successful business. When the first president of republican Poland, Wojciech Jaruzelski, left and Poland opened its doors to business, all European retailers rushed there - Carrefour, Casino, Tesco, Metro, Auchan. The Poles began to complain that the Europeans now monopolized all retail. And Biedronka (translated from Polish as “Ladybug”) played on this perfectly. The chain said: “90% of our chain’s fresh produce comes from Polish companies, and we are a Polish company.” This became her calling card. The chain grew and was later acquired by Jeronimo Martins.

I think Russian retailers should do this right now. For example, you can establish cooperation with small suppliers and farmers and buy local products from them. You can cooperate with local authorities and ask them to help with infrastructure. People should like this idea. They will go to such a retailer, even if its prices are slightly higher than others.

Patriotic sentiments in Russia are now strong, and they are obviously underestimated by retail.

This is not manipulation, but a response to the deep feelings of consumers. I'm surprised no retailers have taken advantage of this opportunity yet. The one who does this first will get a big advantage.

Fewer generals, more soldiers

To create a victorious company, you need a couple of generals and a lot of good soldiers. The local retailers have a lot of generals. It is not right. We need a very small circle of people who define the strategy and inspire the team to implement it. And after that - no discussion. Retail companies should not be one of those companies where every employee has an opinion. Two basic principles of good execution are important:

1. Just do it. There is no need to argue or question decisions. There is a leader, he has ideas, and at the moment you need to follow the given course.

2. Measurable criteria tend to improve.

Set clear performance indicators for employees and encourage them to do their jobs well. There is a strategy, an agenda, you know where to go. Employees need to accept this and follow the plan. Those who do it well make good money. Employee performance must be measured constantly. This scheme has been used for a long time at Lidl and Tesco. All you need is creative ideas and fast, high-quality execution without talking. It works great when these two things go hand in hand. For Tesco, since the departure of Terry Leahy (former CEO of the British chain Tesco. - Forbes ), difficult times have come. There are a lot of employees there - very good performers, but ideas are tight, and the strategy has become stale. The result: Tesco's performance is only getting worse. Large organizations try to form a staff of average and reliable performers. But strong leaders and their ability to inspire their team are important. And these leaders must determine priorities: where we can be the best, and where we will be less strong. Proper leadership and proper execution are very important.

Now I see a balance of quality leadership and execution at Magnit . And I’m not at all surprised that Magnit’s capitalization is higher than Tesco’s. I deeply believe in the fairness of the financial market. The average ratio of market capitalization to company revenue in retail is 0.5. For Walmart today it is 0.5, for Tesco - 0.2, for X5 - 0.3, and for Magnit - 1.6. This is one of the few retailers in the world that shows such growth rates and maintains profitability that is interesting to investors. There is also BIM, a Turkish retailer, a copy of Aldi, which is also very successful.

See things through the buyer's eyes

For a long time, retailers considered their task to resell goods and capitalize on shelf space. Then they realized that this was not quite the right path: not every square meter and not every brand brings the same profit. Some brands bring customers to the store, others improve the image, and others bring profit. That's why category management emerged. Then individual chains said they no longer wanted to be part of just the supply chain, but a business that met consumer expectations. This is the starting point. You need to know your buyer well, proceed from his interests and desires. This is a challenge for retailers because different people in different categories have different goals. Buyers enter into transactions with suppliers. Line staff in stores are not involved in this at all; their task is simply to sell. This will not work. The goal is to understand that you don't need 50,000 SKUs if customers now really need 5,000. You need to synthesize category management, purchasing and store operations. All this should meet the buyer's needs better than competitors.

Keeping all this in mind, you can turn the situation to your advantage.

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