HYBRID BUSINESS MODEL EXPANDS VALUE CREATION OPPORTUNITIES

The penetration of mobile Internet into all spheres of human activity, accelerated further due to the COVID-19 pandemic, is driving the evolution of our business model.

Household appliances and electronics remains a special category of products for which most consumers tend to use both online channels and brick-and-mortar stores. Only 12% of shoppers looking to buy CE products visit brick-and-mortar stores exclusively without checking websites or using apps.

Even amid the pandemic, the share of online shoppers who do not have any direct contact with stores, is 15%.

In order to satisfy the needs of customers, vendors and partners alike, we are developing a hybrid business model based on a combination of our leading online business, our extensive network of stores and our strong logistics infrastructure. Our websites, mobile apps and brick-and-mortar stores, brought together on the OneRetail platform (see p. 12), complement one another and greatly enrich the customer experience. As a result, the Group is creating important competitive advantages over exclusively online players and traditional retailers.

^{1 According to the study of consumer behavior in the market of Household Appliances and Elect ronics, conduct ed by IRC LLC in 16 cities with a population of more than 500 thousand people. Base: buyers who made a purchase on the CE market in the last six months, men and women, aged 18-55. Data was collect ed between March and November 2020.}

TWO LEADING BRANDS

All customer segments, resilience in the face of changing consumer behaviour, and the flexibility to expand our chain.

Our business relies on two leading retail brands—M.Video and Eldorado— both enjoying almost absolute prompted brand awareness among Russian shoppers.1

The dual brand strategy provides access to the widest possible customer base, the flexibility to react to changes in market trends and the strength of a developed retail network. For both brands, online infrastructure and retail network management are provided by a unified IT system and combined back office. In order to ensure the most effective implementation of this approach, we aim to maximize the digitalization of business processes at customer interaction points and in all key business functions, including logistics, marketing and assortment management.

Trendsetting

WIDE ASSORTMENT, INCL. EXCLUSIVE AND PREMIUM NEW PRODUCTS

HIGHLY PERSONALIZED EXPERIENCE FOR TECH-SAVVY CUSTOMERS

COMPLEMENTARY SERVICES

BRAND AWARENESS ¹

Attacking

ACCESSIBLE PRODUCTS SUPPORTED BY DEVELOPMENT OF PRIVATE LABEL AND SOLUTIONS FOR EVERYDAY USE

BEST PRICE GUARANTEE

PROXIMITY TO CUSTOMER

OPPORTUNITY TO EXPERIMENT WITH NON-CE ASSORTMENT

BRAND AWARENESS ¹

INTEGRATED RETAIL PLATFORM, UNIFIED LOGISTICS AND CORPORATE CENTER

Full market coverage, better shopping experience, efficient business scaling.¹

ONERETAIL: CREATING VALUE

We distinguish the three main stages of the OneRetail customer journey. The customer begins their shopping experience on the mobile app, website or at a store by searching for and choosing an item (the Discovery & Choice stage). Once a selection is made, they proceed to make their purchase (the Transaction stage) and then receive their goods by means of delivery or pickup (the Fulfillment stage).

At each of these stages, we strive to provide the best customer experience possible, satisfying the shopper’s needs by offering a wide selection of products, the best value and complete convenience for every transaction. This, in turn, increases customer loyalty and encourages them to return more frequently and to recommend the Group’s brands to other potential customers.

1. Discovery & Choice

• Access to a wide assortment of goods via the endless shelf online catalogue and the inventory of marketplace merchants;
• Powerful AI-based instruments for personalized service;
• Sales consultants available anywhere, at any time, online and offline.

2. Transaction

• The best price offer based on the client’s history with the Group’s brands and personal bonuses;
• A convenient purchase process and a wide range of payment methods, including contactless payment at stores;
• Available financing, including through online lending.

3. Fulfillment

• For 60% of the population, 85% of total online orders will be delivered within 24 hours;
• 34% of GMV is ready for pickup or dispatch 15 minutes after an order is placed;
• A range of delivery methods, including express delivery by taxi;
• Ample opportunities for customer pickup thanks to an extensive network of stores and partner pickup points.

The OneRetail platform creates value not only for customers but also for the Group’s vendors and merchants. In the face of increasing competition for shoppers’ attention, it is becoming progressively more important that vendors use the most effective means available to inform customers about their products and services. This factor is especially important when it comes to consumer electronics, as customers prefer not only to see the product but also to hold it in their hands and test it out before buying. That is precisely why the Group’s ability to demonstrate appliances and electronics both online and on store shelves, as well as the wide range of expert customer support tools available, are so important for suppliers and merchants. This makes working with the Group an increasingly interesting proposition for them.

Thus, the OneRetail platform connects buyers and suppliers in a single retail space, creating a mechanism in which the close involvement of vendors and partners helps increase customer loyalty and the size of the business:

The unique online and in-store customer experience increases customer loyalty and inflows of orders.

The growing base of loyal customers and wide range of opportunities to promote goods online and in stores makes vendors more interested in cooperation.

Vendor involvement ensures a wide assortment of 75 thousand SKUs, featuring a high proportion of exclusive items and excellent prices, which also helps increase customer numbers.

A HYBRID BUSINESS MODEL AND THE ONERETAIL PLATFORM ENSURE CUSTOMER LOYALTY AND ATTRACT SUPPLIERS

Consultant App

Conversion rate 2020 (%)

Customer App

Conversion rate 2020 (%)

Average check and units per transaction 2020 (RUB)

Checkout completion rate 2020 (%)