Miratorg cuts retail chain across Russia
Miratorg CEO Viktor Linnik said the company launched the retail project in spring 2012 and promised to open 500 stores across the country within three years, in a total investment amounting to nearly US$250 million. All stores were focused on selling a wide range of Miratorg’s meat products, as well as a selection of vegetables and beverages.
By early 2014, the chain had grown to 86 supermarkets, but most of these were unable to reach the required level of profitability, so the project has been frozen and 40% of the shops have been closed.
"The truth is that all these shops have no chance of reaching the necessary level of profitability," commented vice-president of Miratorg Alexander Nikitin.
"We are currently considering the future of the whole project. The remaining outlets could change their operating concept. Before, we were looking at a large supermarket format with an area of more than 1,000sq m, but now the concept could be changed to a local shop format with an area of 600-800sq m, operating in more accessible points for consumers."
Miratorg started closing its stores in February, shutting down three stores in the cities of Togliatti and Perm. Shortly after that, it closed its retail project in Chelyabinsk where it had five shops in operation, as well as another three shops in Yuzhnouralsk and Yekaterinburg. In October, in St Petersburg, the company closed a further five stores out of a total 10 operating in the city.
Nikitin claimed one of the main problems faced by the Miratorg retail chain was the location of the shops. "They were opening ‘massively and quickly’ and not always in the right place. In addition, we probably expanded into the regions too early, as we should firstly have trialled the format in Moscow and the Moscow Oblast," he said.
Retail projects in Moscow and Moscow Oblast are usually more successful, due to a higher population concentration in the region, as well as higher prices. Of Miratorg’s remaining 53 stores, 11 supermarkets and four mini-stores are located in the Russian capital, while 14 large stores are based in the surrounding region.
According to Margarita Zaeva, head of retail consulting company Astera Moscow, up to 1sq m of supermarket space in Russia costs around US$500,000. If that is the case, then Miratorg is estimated to have spent about $43m on its retail project so far.
In addition, in order to close the 33 supermarkets, "Miratorg could have spent up to US$3.3m", estimated Andrey Karpov, executive director of Russia’s Retail Companies Association.
