CC BY
0DOI: 10.29141/2658-5081-2024-25-2-6 EDN: QWQCZQ JEL classification: M21, L81
Victor Ye. Kovalev Ural State University of Economics, Ekaterinburg, Russia
Ekaterina A. Antineskul Perm State University, Perm, Russia
Food retail in rural areas: Choosing the optimal format
Abstract. Tightening competition among food retailers stimulates them to develop new formats of stores for urban spaces, which also can be economically efficient in rural areas. Appearance of a new format of stores that excites clientele's interest and is able to compete with pick-up points and liquor stores may become a key to the domination in the market. The paper examines the prospects of creating an optimal format for food retailers that hold potential for spread in rural areas. Methodologically, the study relies on a systems approach, the cyclical theory of retail, and spatial development theories. The method encompasses three stages: first, holding a comparative analysis of the format structure of food retailers for 2015-2023; second, evaluating the territorial distribution of the two formats of retail chains (hard discounters and convenience stores) using the case of Volga and Ural Federal Districts; third, determining new formats of retail chains outside cities. Based on the analysis of market trends in the development of retail chain stores the paper suggests a conceptual model of the optimal retail format for rural areas with respect to product range, pricing, distribution of sales area, and additional services. The suggestions about the improvements in the model of the retail format for rural areas may spur the retail trade growth and promote the development of trade infrastructure outside urban areas.
Keywords: rural area; retail trade; retail format; food retail; hard discounter; convenience store.
For citation: Kovalev V. E., Antineskul E. A. (2024). Food retail in rural areas: Choosing the optimal format. Journal of New Economy, vol. 25, no. 2, pp. 108-129. DOI: 10.29141/2658-5081-2024-25-2-6. EDN: QWQCZQ.
Article info: received January 19, 2024; received in revised form February 26, 2024; accepted March 26, 2024
Introduction
Active urbanisation processes unfolding throughout the territory of the Russian Federation stimulate the interest of food retailers in the development of cities. At the same time, rural areas are lagging behind in terms of food retail. Firstly, these territories differ significantly in the level of economic development and growth potential for food retail. Secondly, demographic forecasts reduce the attractiveness of rural areas due to the prevailing proportion of the elderly population with a specific market basket. However, the expert community voices an opinion about the potential for retail trade development in rural areas through the creation of a special retail format that takes into account the specificity of consumer behaviour through the product mix and additional services (for example, assembly and delivery of goods, pick-up points, QR codes for product information, etc.). This standpoint is justified by significantly lower competition typical of remote areas [Bertrand, Kramarz, 2002; Basker, 2005; Jia, 2008; Ficano, 2013]. Hence, assessing the potential of retail formats for rural areas is becoming a tool for economic development and growth of retail trade and services.
Experts emphasise that fierce competition caused by the expansion of large retail chains and market consolidation is harmful to small formats of stores, especially in suburban and rural areas. However, it is possible for local authorities to develop food retail in suburban and rural municipalities through regulation of land use. In the retail industry, small retailers are more important for these areas in terms of enhancing their attractiveness to the population and increasing the quality of life. According to Peiffer-Smadja and Torre [2018], land use regulation by municipalities in retail trade is one of the government tools utilised by local authorities to develop rural infrastructure. Otherwise, rural residents make purchases in stores located in neighbouring areas, thus contributing to the development of other retail facilities [Reed, Yu, Hughes, 2023]. Ekstrom and Jonsson [2022] found that the future of retailing in small cities is not merely dependent on the retailers, but on collaborations with other retailers, landlords, and municipalities.
There is a significant gap in the spatial distribution of food retail chains in cities and in rural areas [Wang, Li, 2022]. Consequently, there is a need to create modern food retail formats in line with the socioeconomic parameters of the small territories that are forced to use the services of traditional trade. The need for such formats was highlighted in the studies on the specific needs of consumers in poor or rural areas [Bahn, Abebe, 2017].
Traditional food retail formats in rural areas are seen as a shopping destination used forcedly due to the lack of alternatives. Recent studies confirm that the population is ready to travel to remote supermarkets which, however, satisfy their needs for specific food products or offer more favourable purchasing opportunities [Hoenink
et al., 2023]. Other studies tested the demand for street petrol station shops as an alternative to missing local food suppliers [Neumeier, 2015].
It is of interest to address food retail market studies in Germany: researchers explore the regions with limited access to affordable and nutritious food, which they call 'food deserts'. This phenomenon can be identified by GIS analysis data, that is, by the location of retail stores [Neumeier, Kokorsch, 2021]. 'Food deserts' emerge in areas where residential properties are located, while there is no food retail chain within walking distance. This is also characteristic of the Russian market. It was proven that municipal land use policy can reduce the number of 'food deserts', since regulating the structure of retail trade in the region is the responsibility of suburban and rural authorities viewing retailers' activities as crucial for improving the quality of life of the population [Peiffer-Smadja, Torre, 2018].
In addition, rural grocery stores are a priority source of information about healthy foods available, since the assortment in such stores is tailored to the local population's needs due to closer contact with the client [Bustillos et al., 2009]. Research studies substantiate the high trust of rural residents in retail as a means of promoting healthy eating behaviour among low-income population, since they are unable to make regular purchases in stores located in urban areas. In particular, local stores strive to charge affordable prices for food products focusing on the limited budget of this consumer category [Fergus, Seals, Holston, 2021].
Economic efficiency with which retailers develop rural areas is confirmed by studies showing that sparsely populated localities, despite the lack of transport infrastructure, provide a similar level of profitability considering lower costs for staff training and maintaining the sales department [Patil, Borle, Singh, 2023]. It is proven that there is a high potential for profit through designing innovative and cost-effective retail formats in rural areas.
Thus, the search and introduction of the optimal food retail format for rural areas is a relevant topic that is worth being analysed based on data from the Russian market.
The purpose of the study is to evaluate food retail formats that are optimal for use in rural areas and focused on the economic development of the infrastructure across these territories.
In order to achieve this purpose, the following objectives were set:
- to review scientific works devoted to assessing the efficiency of food retail formats;
- to examine statistical data on the structure of food retail chains formats in Russia for 2015-2023;
- to analyse the distribution of two retail chains formats (hard discounters and convenience stores) in the Volga Federal District and the Ural Federal District;
- to establish a conceptual model of the optimal retail chains format for rural areas in the Russian Federation.
Development trends in food retail formats in Russia
In the last decade, researchers have repeatedly attempted to assess the economic efficiency and spread of food retail formats in the Russian market. According to the wheel of retailing theory, Russian retail chains have come the full cycle in the formats of stores: retailers started with small formats, then followed by supermarkets and hypermarkets gradually growing in popularity among shoppers, and now there is a slow return to small and convenient formats [Gauri et al., 2021]. Today's food retail formats differ in the size of retail spaces, location, width and depth of product variety, price level, method of sale, and service quality [Diyanova, 2009]. These parameters should be regularly inspected for efficiency, weaknesses or development opportunities. A number of studies confirmed that competition between the formats of retail chains stimulates the share gain of modern formats and consumers switching from traditional small store retailers (especially in rural areas) [Goldman, Ramaswami, Krider, 2002; Sharkey, 2009].
Over the past 15 years, Russian researchers have examined the popularity and efficiency of retail formats in Russia and identified the trends in formatting the food market (Table 1).
Table 1. Trends in food retail format transformation in Russia
Source Trends
Radaev [2007, p. 29] Waves of new retail formats: from premium to economy segment
Vysotskiy [2010] Hard discounters in Russia are less attractive. Even low-income consumers require a certain quality of service and do not expect the store to finally turn into a warehouse with a minimum range of unbranded products. Discount grocery stores are especially widespread in regions, districts and million-plus cities
Kalkova, Seitdzheliev [2018] Soft discounters are more common in rural areas, while hard discounters are mostly located in cities. Today, Russia's regions create favourable conditions for the development of discounters
Fedotov [2021], Fedotov, Shchepina [2018] It is very important for the final consumer to be able to choose between several retail formats, have access to high-quality, enjoyable, technologically efficient customer service and a broad range of goods and services. Hypermarket sales in Russia decreased, which is due to changes in consumer preferences switching to discounters and convenience stores
Table 1 (concluded)
Source Trends
Starkova, Khlusova [2019, p. 91] "The future of chain and other formats of retailing is impossible without its integration with financial and banking infrastructure, as well as e-commerce channels. And in this case, such interaction will be implemented not only in the context of using the latest payment tools, but also amid the formation of fundamentally new marketplace models"
Cheglov [2019, p. 185], Cheglov, Stolyarova [2020, p. 29] "... trends towards mixing discounter and supermarket formats ..."
Shchepina [2021, p. 9] "...the grocery retail industry will have to come to terms with the fact that the retail landscape will change forever: buying groceries online will become the new norm for many, consumer preferences and purchasing behaviour will inevitably change, and it will take some time to restore the purchasing power of the population"
Munshi, Aleksandrova, Munshi [2022] Diversification of retail formats and product positions (opening a pharmacy chain, pet supply stores, etc.), multiple formats, expansion of the discounter segment, primarily hard discounters (Svetofor, Mayak). Offline-to-online penetration processes through creating online stores and launching mobile applications, and online-to-offline penetration through opening pick-up points, parcel terminals, showrooms, and points of sales
Efremenko, Mikhaylyuk, Reznikov [2023b] The market share of hard discounters is expected to increase in the medium term. A partial transfer of demand to the less expensive online format (cost economy, D2C - direct-to-consumer) and social polarisation of the population have generated a need for economical consumption, as well as convenient online shopping
Kuralbay, Smolentseva [2023] The development of discount stores in the regions depends on how well they can adapt to the local economy and the needs of the population. Prices for products may vary from region to region and discounters should be prepared to adjust prices to suit local market conditions
Efremenko, Mikhaylyuk, Reznikov [2023a, p. 408] "Analytical parallels with modern European experience in the development and more detailed division of discount trading made it possible to deeply comprehend the prospects for the transition of Russian retail into soft and hard discounter formats and the entry of new anti-crisis formats into the market"
In the long term, the identified trends boost competition between large retail formats, which stimulates the opening of small retail stores that provide consumers with a greater number of convenient and free platforms and are cheaper to open [Klimanova, Basaev, 2022]. The need to optimise the formats of food retail chains is also
due to the fact that "... agricultural production and food consumption will be increasingly localised within national borders, and international supply chains will be inconsistent and partially degrade" [Paptsov, 2021, pp. 294-295].
Thus, the key objective of the study is to determine the optimal and promising format of food retail in the Russian market for rural areas.
Research methodology
The study is premised on the provisions of the systems approach to determining the optimal format of food retail in Russia suitable for implementing in rural territories (Figure 1).
1. Comparative analysis of the structure of food retail formats for 2015-2023
2. Assessing the spread of two retail chains formats (hard discounters and convenience stores)
in the Volga and Ural Federal Districts
3. Identifying parameters for retail chain formats development outside cities and suburbs
Fig. 1. Stages in defining the optimal food retail format
The research question was to examine the temporal and spatial difference in retail formats from a traditional retail outlet to a convenience store. In particular, it is supposed that only convenience stores and discounters are promising food retail formats able to distribute products in rural areas in a cost-effective manner.
Research results
Comparative analysis of the structure of food retail formats in Russia for 20152023. Over the past nine years, food retailing in the Russian Federation has undergone significant structural changes (Figure 2). The key aggregators of retail formats are the T0P-10 retail chains, the market share of which, according to statistics, is getting bigger every year.
According to INFOLine, the driving force of market growth is discounters, i.e., stores and retail chains offering products at prices below the market average. Among them are Moya Tsena, Chesnok, Svetofor, Rubl, Chizhik, and Narodnyy Ambar1 in the city of Kerch. In addition to the market leaders, creative companies following modern food retail formats are also emerging in the regions (Zhiznmart in Ekaterinburg, Kvartet Vkusov in the Siberian and Far Eastern Federal Districts).
1 Discounters are strengthening their position in the T0P-200 largest FMCG retail chains in Russia, INFOLine analysts note. https://infoline.spb.ru/news/index.php?news=283121. (In Russ.)
4.6 3.4
20.0
Markets and fairs 6 7 <$.7 6.7 6.7 6.0 4.6
Modern non-chain, independent stores 14 q q ¡3,2 12.0 11.5 16.0 Regional retail chains
(700 chains excluding TOP-100) 18.4 1 7.9 19.9 1 7 6 19 8 17.4
TOP-100 retail chains ¡q q ¡qq ^
(excluding TOP-10) ' ' '
Traditional retail format 2 ¡5.3 22,
25.7 26.7 30.9 32.9 29.1 27.5
4.2 9.5
4.1 8.8
15.0 14.1
19.2 13.1 14.2
38.5 40.7
TOP-10 retail chains 22.6
2015 2016 2017 2018 2019 2020 2021 2022 2023
Fig. 2. Forms of trade in the Russian food market in 2015-2023, %1
Segmentation of Russian retail chains' turnover by retail formats in 2015-2023 (Table 2) shows positive changes in the share of online commerce (by 18.9 %) and hard discounters (by 33.9 %).
Table 2. Segmentation of Russian retail chains' turnover by retail formats in 2015-2023, %
Retail format 2015 2016 2017 2018 2019 2020 2021 2022 2023 2023 to 2022
Hypermarkets 19 18 18 16 16 14 13 12 12 -3.7
Supermarkets 12 12 12 12 11 10 10 10 10 1.3
Specialty grocers 2 3 4 5 6 7 7 8 9 16.3
Traditional retail 29 26 24 21 19 18 16 14 14 -7.8
Online commerce 1 1 2 2 3 4 5 6 7 18.9
Discounters 23 25 25 27 28 29 29 31 31 8.4
Hard discounters 1 1 1 2 2 4 5 6 7 33.9
Source: Food retail and consumer market in Russia. https://infoline.spb.ru/upload/iblock/9be/9beb7 db36c0d4db274a79020e501ddf3.pdf. (In Russ.)
The data from Table 3 confirm the positive growth rate of sales area by retail format.
As shown in Table 3, the share of discounters in the T0P-200 FMCG retail chains in Russia amounted to 63 % by 2023. The growth of discounters' sales area in 2023, except for the chains Pyaterochka, Magnit, Svetofor, and Verny, is the result of the opening of hard discounters Dobrotsen, Chizhik, Nakhodka, and Pobeda! The share of hypermarkets and supermarkets in the structure of sales area continued falling in 2022, which was caused by a cut of investments in large formats, a decline in shopping mall
1 Food retail and consumer market in Russia. https://infoline.spb.ru/upload/iblock/9be/9beb7db36c0d4db274 a79020e501ddf3.pdf. (In Russ.)
traffic, increased competition from discounters and small retailers, including liquor stores and chains specialising in the 'fresh foods' category (own and fresh products), online retailers and marketplaces.
Table 3. Dynamics of sales area by retail format among TOP-200 FMCG retail chains
in Russia, 2015-2023
Retail format 2015 2016 2017 2018 2019 2020 2021 2022 2023 Average rate, %
Dynamics of sales area by retail format among TOP-200 FMCG retail chains in Russia, million m2
Hypermarkets 5 6 6 6 6 6 6 5 5 0.44
Supermarkets 3 3 3 3 3 3 3 3 3 0.00
Discounters 8 10 12 13 14 16 18 20 20 3.51
Convenience stores 2 2 3 3 3 3 4 4 4 0.59
Structure of sales area by retail format among TOP-200 FMCG retail chains in Russia, %
Hypermarkets 28 27 25 22 21 19 17 15 15 4.00
Supermarkets 16 15 12 11 10 10 10 10 10 1.85
Discounters 46 47 52 56 58 60 61 63 63 5.31
Convenience stores 10 11 11 11 11 11 12 12 12 0.52
Source: Food retail and consumer market in Russia. https://infoline.spb.ru/upload/iblock/9be/9beb7 db36c0d4db274a79020e501ddf3.pdf. (In Russ.)
Hypermarket chains are actively transforming facilities in order to promote online sales, highlighting dark-store1 zones in them. Federal chains continue to develop micromarket franchising projects Avocado, Pervym Delom, and FasoP.
Private labels are becoming the core product variety of discounters and convenience stores due to the poor quality of the entire work cycle of Russian manufacturers, starting from product quality to compliance with health and safety regulations, and lack of production capacity that does not meet retailers' needs. In addition, private labels substitute goods prohibited for import into the Russian Federation in accordance with the Resolution of the RF Government of July 31, 2015 No. 774 "On approval of the Rules for the destruction of agricultural products, raw materials and food included in the list of agricultural products, raw materials and food, the country of origin of which are the United States of America, countries of the European Union, Canada, Australia and the Kingdom of Norway and which until August 5, 2016 (inclusive) are prohibited for import into the Russian Federation". The most popular private labels are Lenta and 365 Dney (Lenta), Krasnaya Tsena (Perekrestok, Pyaterochka), Nasha Semya (Auchan), and Aro (Metro Cash and Carry). On average, private label products yield about 11 % of profits for retail chains [Kraponina, 2015].
1 Dark store is a warehouse store that provides goods exclusively for online shopping.
2 Industry overview. The state of the Russian consumer market and the FMCG retail chains rating. Results for 2022-2023. https://infoline.spb.ru/upload/iblock/613/6138b92a7e5e5c6ffa547cc2a739f974.pdf. (In Russ.)
As a result, the need for unique retail formats with personalised product offerings was established due to high competition in the food chain retail market. In practice, the adaptability of new food retail formats within the constituent entities of the Russian Federation can be assessed using turnover rates of retail chains and online trade in foods (Table 4).
Table 4. Turnover rates of retail chains and online trade in foods in federal districts
of Russia, 2020-2023
Federal district Average growth rate of food retail chains turnover Average growth rate of online food trade turnover Average share of online food trade, %
billion rubles % billion rubles % average value growth rate
Russian Federation 2,940.0 29.1 135.7 19.9 3.7 1.5
Northwestern Federal District 281.4 28.1 16.7 18.5 5.1 1.9
Central Federal District 1,081.4 31.0 41.6 12.8 5.5 1.9
Southern Federal District 346.1 32.6 13.8 24.5 2.6 1.3
Siberian Federal District 269.4 28.9 10.5 21.9 2.7 1.2
Volga Federal District 494.2 27.9 19,446.4 21.9 2.6 1.2
Ural Federal District 234.1 28.5 7,312.5 22.2 2.2 0.9
North Caucasian Federal District 136.8 32.8 2,105.4 21.1 1.2 0.6
Far Eastern Federal District 173.6 27.7 2,369.8 15.9 1.5 0.5
Source: Retail and catering. https://rosstat.gov.ru/statistics/roznichnayatorgovlya. (In Russ.); Analytics - AKIT. https://akit.ru/analytics/analyt-data. (In Russ.)
As seen from the turnover average growth rate of food retail chains and online food trade, three Russia's federal districts - Northwestern, Central and Southern -have a high potential for adoption of new retail formats. These districts provide various options for using retail formats with highly competitive advantages.
Among the territories in question, the Siberian, Volga and Ural Federal Districts demonstrate comparable growth rates of retail chains and online food trade (Figure 3).
As for the average e-commerce share of food retail sales in total retail turnover over a longer period (2015-2023), the Central Federal District holds the leading position in terms of introducing the new online food retail format (4.0 %), while Northwestern (3.4 %), Siberian (2.5 %) and Ural (2.4 %) Federal Districts are lagging behind. Having performed a correlation analysis, we have identified a strong direct relationship between the development of food retail chains and online food retail throughout the RF Federal Districts (the correlation coefficient is over 0.7, and the significance level for the F-test is over 0.05) (Table 5).
North Caucasian Federal District I 0 5 &0
Far Eastern Federal District ■ 0.9 14.2
Southern Federal District J 2.0 33.6
Russian Federation ^2.8 39.3
Volga Federal District U 1.8 41.4
Central Federal District 4.0 40.3
Siberian Federal District H2.5 42.8
Ural Federal District -2.4 47.1
Northwestern Federal District ^m 3.4
■ Average e-commerce share of retail sales Average share of food retail turnover of retail chains
Fig. 3. Average share of food sales through retail chains and online services in total retail turnover in 2015-2023, %1
Table 5. Correlation analysis of retail chains' share in food retail turnover and the share of sales via the Internet in federal districts of Russia, 2015-2022
Federal district Average share of food retail turnover of retail chains Average e-commerce share of retail sales Correlation coefficient F-test
Russian Federation 39.3 2.8 0.904 0.014
Northwestern Federal District 61.7 3.4 0.870 0.617
Siberian Federal District 42.8 2.5 0.859 0.001
Central Federal District 40.3 4.0 0.909 0.022
Volga Federal District 41.4 1.8 0.833 0.001
Ural Federal District 47.1 2.4 0.883 0.001
Southern Federal District 33.6 2.0 0.865 0.828
Far Eastern Federal District 14.2 0.9 0.843 0.001
North Caucasian Federal District 8.0 0.5 0.906 0.002
Source: Retail and catering. https://rosstat.gov.ru/statistics/roznichnayatorgovlya. (In Russ.); Analytics - AKIT. https://akit.ru/analytics/analyt-data. (In Russ.)
Thus, the development of new retail formats (using the case of e-commerce) is proved to be dependent on the development of the existing retail chain formats in the territories. The analysis was carried out for the RF constituent entities and allowed
1 Retail and catering. https://rosstat.gov.ru/statistics/roznichnayatorgovlya. (In Russ.); Analytics - AKIT. htt-ps://akit.ru/analytics/analyt-data. (In Russ.)
categorising them into three groups by the largest share of retail chains and their growth rates: over 54 %; from 27 to 54 %; less than 27 % (Table 6).
Table 6. Groups of Russia's constituent entities by the share of retail chains in food retail turnover, 2015-2023
Group Number of entities Share, % Average value Average growth rate
retail chains e-commerce retail chains e-commerce
Over 54 % 31 36 65.3 4.8 5.79 1.24
From 27 to 54 % 42 48 43.7 4.1 4.43 1.26
Less than 27 % 14 16 12.2 0.9 2.11 0.31
Total 87 100 40.4 3.2 4.11 0.94
Source: Retail and catering. https://rosstat.gov.ru/statistics/roznichnayatorgovlya. (In Russ.); Analytics - AKIT. https://akit.ru/analytics/analyt-data. (In Russ.)
Having systematised current changes in the food retailers' growth rates in the RF constituent entities, it is possible to single out the areas among those in the "Over 54 %" group that encompass regions with high growth rates for 2015-2023 by share and win the interest of the target audience. These subjects of the Russian Federation (Kurgan, Chelyabinsk, Sverdlovsk, Kirov, Saratov, Tyumen, Ulyanovsk and Novgorod oblasts, the Chuvash Republic, etc.) are recommended to be used as objects to determine the optimal retail format for rural areas.
When examining the subjects of the Russian Federation, the current structure of retail formats and their development dynamics were analysed. The modern format of retail chains should be integrated with the retailer's digital software and logistics system. However, the format will not pay off in the absence of regular monitoring of compliance with its performance indicators.
The spread of two retail chains formats (hard discounters and convenience stores) in the Volga and Ural Federal Districts. The efficiency of the client interaction within the optimal retail format is confirmed by Rosstat1 data on the number of retail outlets opened. The structure of retail chain formats was assessed based on 2022-2023 statistical data for federal districts of the Russian Federation (Table 7).
According to data from Table 7, the most popular format by the number of retail outlets opened is convenience stores; the next popular format, specialty grocers, accounts.
To assess changes in the number of retail chain formats in the RF constituent entities and determine the current growth trend, the territories are divided into groups according to the increase in the store numbers by format for 2022-2023 (Table 8).
1 Retail and catering. Rosstat. https://rosstat.gov.ru/statistics/roznichnayatorgovlya. (In Russ.)
Table 7. Changes in the structure of retail trade by retail chain formats in federal districts of Russia in 2022-2023, %
Federal district Hypermarkets Supermarkets Specialty grocers Convenience stores Department stores
2022 2023 2022 2023 2022 2023 2022 2023 2022 2023
Russian Federation 0.20 0.20 4.23 4.44 11.13 11.64 29.28 28.59 0.27 0.25
Central Federal District 0.21 0.20 4.92 5.14 12.14 12.90 20.77 20.26 0.29 0.28
Northwestern Federal District 0.21 0.21 4.61 4.73 8.55 9.18 29.33 29.06 0.10 0.07
Southern Federal District 0.13 0.13 2.83 2.99 8.68 8.90 33.50 32.97 0.08 0.08
North Caucasian Federal District 0.08 0.10 2.50 2.54 15.20 15.52 32.56 31.45 0.28 0.25
Volga Federal District 0.23 0.23 5.31 5.80 10.57 11.23 33.12 32.50 0.42 0.40
Ural Federal District 0.37 0.39 4.06 4.08 12.06 12.67 25.69 25.45 0.08 0.07
Siberian Federal District 0.19 0.18 4.38 4.62 13.05 13.10 34.66 33.48 0.51 0.43
Far Eastern Federal District 0.12 0.12 2.60 2.53 8.13 8.49 34.55 33.06 0.20 0.09
Source: Retail and catering, https://rosstat.gov.ru/statistics/roznichnayatorgovlya. (In Russ.)
Table 8. Prevalence of retail chain formats depending on changes in the store numbers in 2022-2023
Changes in store numbers by format Hypermarkets Supermarkets Specialty grocers Convenience stores Department stores
Number of the RF subjects in the group Group share, % Number of the RF subjects in the group Group share, % Number of the RF subjects in the group Group share, % Number of the RF subjects in the group Group share, % Number of the RF subjects in the group Group share, %
Format in rise 30 35.3 64 75.3 68 80.0 25 29.4 14 16.5
Format in decline 51 60.0 21 24.7 17 20.0 60 70.6 63 74.1
No change 4 4.7 0 0.0 0 0.0 0 0.0 8 9.4
Total 85 100.0 85 100.0 85 100.0 85 100.0 85 100.0
Source: Retail and catering, https://rosstat.gov.ru/statistics/roznichnayatorgovlya. (In Russ.)
In 2023, the share of territories displaying a downward trend in the number of department stores and convenience stores was 74.1 % and 70.6 % (to 2022). The third retail chain format in the group 'formats in decline' is hypermarkets. In general, in 2023 an upward trend was recorded in the formats of supermarkets and specialty grocers that penetrated into 75.3 % and 80.0 % of the RF constituent entities.
The difficulty in examining the data is that the discounter format is not considered. However, we suppose that discounters were included in the 'Supermarkets' category. These statistics indicate a change in consumer priorities regarding retail formats (depending on the RF constituent entities). Among the promising territories under review, grouped by changes in the store numbers by retail chain formats (Table 8), the subjects of the Volga and Ural Federal Districts were selected to scrutinise the issue of determining the optimal format of food retail stores for rural areas.
As part of the study, we have looked at the number of leading hard discounters geographically located in cities and rural areas of the Volga and Ural Federal Districts in February 2024 (see Appendix). This format, according to Table 2, demonstrates the highest growth rate (33 %).
Based on the data from Appendix, the share of hard discounters in rural areas is significantly smaller compared to urban areas (8.4 % in the Ural Federal District and 10.4 % in the Volga Federal District). It was found that retailers, as part of growing competition, occupy the best sale areas and are ahead of the pack in terms of expanding their presence in certain constituent entities of the Russian Federation. For instance, Chizhik and Svetofor outnumber their competitors in the Sverdlovsk oblast, and Pobeda is the leader in the Samara oblast. Limitations in the spread of this format in rural areas are primarily associated with the demographic aspects and poorly developed infrastructure.
It can be assumed that in rural areas there is high potential for micromarkets to develop. However, the statistical data obtained for the RF constituent entities in the Ural and Volga Federal Districts refute this assumption (Table 9).
The share of convenience stores in the examined regions is still declining at the average rate of less than 1 %. However, the emerging trend indicates that the format's current parameters are becoming less attractive for the local population and need to be optimised.
Thus, we have refuted the assumption that convenience stores and discounters are promising food retail formats that can be cost-effectively spread in rural areas of the RF constituent entities, provided their current parameters are maintained. Accordingly, these formats need to be adapted for replication outside agglomerations.
Table 9. The share of convenience stores in the structure of retail chains in the Volga and Ural Federal Districts of Russia, 2022-2023
RF constituent territory Convenience stores, units Share of convenience stores in the structure of retail chains
2022 2023 2022 2023 change
Volga Federal District 54,675 54,557 33.12 32.50 -0.61
Ural Federal District 17,008 17,082 25.69 25.45 -0.25
Republic of Bashkortostan 8,686 8,678 37.04 0.24 -0.27
Mari El Republic 1,038 1,025 24.26 0.10 -1.01
Republic of Mordovia 1,961 1,980 42.01 0.06 0.39
Republic of Tatarstan 5,198 5,379 30.13 1.42 -0.99
Udmurt Republic 3,646 3,608 40.56 0.63 -1.13
Chuvash Republic 2,433 2,427 39.53 0.20 -0.70
Perm krai 4,829 4,767 31.48 0.50 -1.00
Kirov oblast 2,630 2,560 31.23 1.22 -0.90
Nizhny Novgorod oblast 5,085 5,087 31.93 0.30 -0.26
Orenburg oblast 3,663 3,507 31.55 0.23 -1.47
Penza oblast 2,459 2,429 31.24 0.12 -0.50
Samara oblast 4,080 4,229 22.16 0.09 0.08
Saratov oblast 5,360 5,352 38.00 0.23 -0.13
Ulyanovsk oblast 3,607 3,529 31.33 0.20 -0.66
Kurgan oblast 2,172 2,088 33.59 0.32 -1.27
Sverdlovsk oblast 4,274 4,493 19.67 0.04 0.79
Tyumen oblast 6,801 6,807 32.06 0.06 -0.66
Khanty-Mansi Autonomous Okrug 2,396 2,321 28.46 0.12 -0.94
Yamalo-Nenets Autonomous Okrug 771 821 23.82 0.00 -1.29
Source: Retail and catering. https://rosstat.gov.ru/statistics/roznichnayatorgovlya. (In Russ.)
Having systematised the data obtained from food retailers, we determined that the chosen format of a retail outlet in rural areas is expected to be effective if the following parameters are considered:
- limited retail space in rural areas - up to 200 m2;
- the possibility of customising the product variety according to personalised offers (up to 3000 SKUs) with a predominance of private labels;
- implementing the pricing policy of hard discounters;
- best promotional offers compared to local competitors;
- scaling a food retailer in the target market through franchising.
The aforementioned parameters taken into account stimulate the rapid adoption of the optimal format in rural areas, which is able to compete with liquor stores and
marketplace pick-up points. Thus, the process of creating the optimal food retail format for rural areas centers around regular assessment of consumer preferences and the product variety in the customer's basket, as well as the total sum and frequency of purchases.
Discussion
The economic development of the optimal format for food retail chains for rural areas is inextricably linked to consumer acceptance and the efficiency of operational processes. The need to identify such a format results from economic instability and increased competition in cities, since the modern food retail market is saturated. As a result, the fight for customers in rural areas could become a potential expansion area for retailers.
The analysis of store formats in the Russian retail market allowed comparing their growth rates and share in the structure of retailing. We believe that most modern food retailers operating in a multi-format mode promote the existing formats (supermarkets, hypermarkets, convenience stores, etc.) and create new ones aimed at urban areas. For food retailers not to lose their position in the market, it is also necessary to actively penetrate into rural territories.
There are several directions for developing grocery retailer formats in rural areas. Among them is optimisation of current stores according to the following criteria: price, product variety, area, and services. For example, one regional retailer converted its existing supermarkets into a food and liquor discounter. To advance priority categories, equipment in stores of different formats needs to be standardised. We have formulated the optimal parameters of the conceptual model of the food retail format for rural areas (Figure 4).
Another example is the 'fresh foods' format, which only needs a small area and low investment; this allows one to quickly enter the most promising areas. Thus, the 'fresh foods' format is a variation of the 'convenience store' format.
The second direction for development involves 'smoothing out' formats through a unique service: cafeteria, bar, etc. Culinary islands, children's areas and creative workshops will make the stay of clients in retail stores of new formats more comfortable and will increase the total time spent there. As a result, there emerge such formats as 'minimarket + bar' or 'supermarket + restaurant'.
The third direction is the construction of a completely new unique format, e.g., a 'holiday store' with a relevant product range and additional services. The key priority when changing formats is to enhance the level of efficiency.
It is worth highlighting that there is the need to change the organisational structure of the stores adopting the format. This implies changes in motivation and the remuneration system, revision of the staffing table and transition to a new management system providing for several stores of the same format per one director.
Fig. 4. Conceptual model of the optimal food retail format for rural areas
The second tool involves developing a franchise for reproducing unique formats. To that end, different product ranges should be clearly assigned to different types (formats) of stores within a regional food retailer (product variety formatting). When framing a pricing policy, it is necessary to evenly distribute the quota for the product, splitting it into price segments. Therefore, this issue requires additional research. We plan to conduct further studies to assess the economic efficiency and the payback of production and logistics costs based on small food retailer formats in rural areas.
Conclusion
Studies have already proved the influence of the perceived image of the retail format on the competitive situation [Dominguez, 2007]. Currently, the optimal format of a food retail store should be focused on effective contact with the consumer. Our previous studies have established that federal retailers, in order to improve interaction with consumers, cluster retail store formats by key parameters, which are among the main criteria for a client choosing a store to make a purchase [Kovalev, Novikova, Antineskul, 2022].
Most food retailers use sales area that is profitable and most convenient for consumers; rural areas, however, are insufficiently studied in terms of the optimal store format. Customers are interested in the opportunity to be a part of a social group with the appropriate product variety and additional services [Novikova, Oshchep-kova, 2021].
According to recent research, the next step in studying retail store formats is establishing the interaction with local authorities interested in developing the infrastructure of the territories. In foreign practice, the relationship between retail trade and municipalities is already being evaluated, aimed at pinpointing promising retail outlet locations that would help attract customers.
The article did not evaluate specialty grocers that take quite a large share in the retail structure. They have not been analysed due to the difficulties in collecting statistics on micro-retailers represented by a small number of outlets and the presence of this assessment in many other studies. Limiting ourselves to the findings of the current study, we believe that modern food retail formats need to be altered to the changing consumer behaviour with a focus on increasing the economic efficiency of operating activities adapted to the changing infrastructure of the territories. In this regard, next research can be aimed at exploring the distinctive characteristics of the target audience, its needs, and specific regional administrative factors.
Appendix. Number of leading discounters in urban and rural areas of the Volga and Ural Federal Districts, 2024
Dobrotsen Svetofor Chizhik Nakhodka Pobeda! Total
RF constituent entities city village/ town city village/ town city village/ town city village/ town city village/ town city village/ town
Chelyabinsk oblast 46 2 54 8 90 5 13 2 0 0 203 17
Kurgan oblast 0 0 13 2 5 0 0 0 0 0 18 2
Tyumen oblast 19 3 14 0 15 1 0 0 0 0 48 4
Sverdlovsk oblast 47 5 56 8 83 9 0 0 0 0 186 22
Khanty-Mansi Autonomous Okrug 13 1 22 1 0 0 0 0 0 0 35 2
Yamalo-Nenets Autonomous Okrug 3 0 6 0 0 0 0 0 0 0 9 0
Ural Federal District 128 11 165 19 193 15 13 2 0 0 499 47
Share of a discounter among competitors in the Ural Federal District, % 23.4 2.0 30.2 3.5 35.3 2,7 2.4 0.4 0.0 0.0 91.4 8.6
Perm krai 26 3 33 2 84 5 8 2 2 0 153 12
Mari El Republic 1 0 4 0 9 0 0 0 14 0 28 0
Republic of Tatarstan 3 0 26 4 41 1 92 17 46 0 208 22
Chuvash Republic 1 0 10 1 11 0 0 0 28 0 50 1
Orenburg oblast 16 2 20 5 3 1 20 6 10 0 69 14
Republic of Bashkortostan 17 8 42 5 57 13 60 35 18 0 194 61
Udmurt Republic 5 0 12 1 23 2 20 11 5 0 65 14
Kirov oblast 6 0 20 0 1 0 2 0 0 0 29 0
Nizhny Novgorod oblast 10 1 31 2 73 8 0 0 2 0 116 11
Saratov oblast 6 2 27 0 61 0 0 0 42 0 136 2
Samara oblast 4 2 21 2 34 5 12 3 84 0 155 12
Republic of Mordovia 1 0 5 2 4 0 0 0 17 0 27 2
Ulyanovsk oblast 0 0 8 1 14 1 15 1 56 0 93 3
Volga Federal District 96 18 259 25 415 36 229 75 324 0 1,323 154
Share of a discounter among competitors in the Volga Federal District, % 6.5 1.2 17.5 1.7 28.1 2.4 15.5 5.1 21.9 0.0 89.6 10.4
Source: Own calculations based on data from retailers Svetofor. https://svetofor-nsk.ru/shops/urfo/chelyabinsk.html; Chizhik. https://chizhikmagazin.ru/shops/; Nakhodka. https://nahodka-magazin.ru/magaziny/; Pobedal hIIps://mai ahhi 111 () 6 e; i, a. p < 11 /mai ahh\u,i/; Dobrotsen. https://zig3mp323.ukit.me/adriesa_maghazinov. (In Russ.)
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Information about the authors
Victor Ye. Kovalev, Dr. Sc. (Econ.), Associate Prof., Prof. of Global Economy and Foreign Economic Activities Dept. Ural State University of Economics, Ekaterinburg, Russia. E-mail: kovalev@usue.ru
Ekaterina A. Antineskul, Cand. Sc. (Econ.), Associate Prof., Associate Prof. of Management, Marketing and Commerce Dept. Perm State University, Perm, Russia. E-mail: antineskul-e-a@yandex.ru
© Kovalev V. E., Antineskul E. A., 2024
