5 March 2018
Russian Toy Retailer Shrinks its Stores in Regional Expansion Plan
Slimmed-down Detsky Mir outlets double as O2O pick-up points in many of the country's more remote locations.
While Toys R Us – one of the largest toy retailers in the US and Western Europe – has been forced into receivership, Detsky Mir, its Russian counterpart, has quietly gone about reinventing itself. This has seen it launch a new, more compact store format, one it hopes will meet current market demands, while also allowing it to extend its geographical reach to areas unlikely to deliver the sales volume required to sustain its larger operations.
Defining this format as "super-small", these new outlets typically vary from between 600 sq m to 800 sq m and carry around 5,000 product lines. By comparison, the standard Detsky Mir store extends across 1,400 sq m and offers up to 15,000 products. Even this, however, is dwarfed by the company's e-commerce platform, which features more than 40,000 items.
In line with their diminished display space, the company expects these super-small outlets to deliver scaled-down receipts. While the typical receipt in a standard store is about US$30, their more compact counterparts are budgeted to yield average receipts at about the $15 mark.
This is largely because the more dinky Detsky Mir stores will not carry many of the big-ticket items – such as prams, bikes and junior furniture – that are a mainstay of the larger outlets. Shoppers, however, will be able to order such items online and collect them at the smaller stores, with the retailer seeing this enhanced O2O offering as one of the added benefits of extending its geographical reach.
Overall, though, the intent behind these trimmed-down toy shops is to target Russia's more remote-residing consumers, a market that has been notoriously neglected by many of the country's bigger retail brands. This thinking will see the super-smalls opening in the satellite suburban areas that ring many of Russia's bigger cities, as well as in many of the country's less populous urban districts, typically in cities with fewer than 20,000 residents. All of the proposed sites, however, are said to be in locations where the local populace has a high purchasing ability.
The company sees the prime customers of these new stores as young parents in the 20-30 age bracket with one or two children aged three or below and a monthly household income of about $700. As a secondary target, it is also looking to attract parents in the 25-40 age bracket with two children aged below 14 and a monthly household income of $1,100. It does, however, acknowledge that the competition to secure the spend of these particular demographics is already intense.
Despite its apparently trailblazing approach, Detsky Mir is not the only Russian toy retailer to have been converted to the virtues of smaller premises. Last year, Dochki-Synochki, Detsky Mir's principal competitor, launched five slimmed-down outlets – one in Moscow and the others in the Nizhny Novgorod region, set some 350 km from the capital and home to a number of substantial manufacturing businesses.
According to industry analysts, the two chains have been smart to consider shrinking the average floor space of their outlets. By and large, such stores have a higher per sq m yield than their more spacious counterparts, while also effectively doubling as O2O pick-up points – a facility hugely valued by customers who live well removed from the country's larger cities.
In terms of the opportunities opening up for Hong Kong manufacturers and distributors, these smaller stores are likely to be stocked with relatively low-cost own-label toys rather than expensive licensed merchandise. With this in mind, Hong Kong companies would be well advised to offer good-value toy products in many of the more popular toy categories, including model cars, dolls, educational games and nursery stationary.
Leonid Orlov, Moscow Consultant