In 2020, people’s lives changed as a result of the spread of the novel coronavirus infection COVID-19, which, in turn, had an impact on retail. The pandemic accelerated a number of consumer trends, the most important of which was the digitalization of the shopping process:
The key to creating a seamless shopping experience has been the development of IT systems and logistics, which have made it possible to qualitatively improve speed and delivery and installation services, making the shopping experience as convenient and secure as possible. These trends are fully in line with the Group’s long-term vision, which was developed long before the pandemic. Therefore, our hybrid sales model — the smartphone became the focal point of our sales model in an organic way — our extensive network of stores and our logistics infrastructure are a solid foundation for the development of a seamless and highly personalized customer experience online and offline.
As the boundaries between online and offline retail are blurring, competition for customers requires an increasingly complex approach. With the goal of creating a better shopping experience, the Group has identified three key stages in the customer journey:
Providing the best service at each of these stages requires the ability to identify the customer at any point of contact with the seller and to have an in-depth understanding of the shopper’s needs at every stage of the journey.
To solve these problems, the Group is developing its own proprietary technological platform, OneRetail, which brings together the sales consultant’s mobile app with that of the customer along with the websites of the Company’s retail networks. The solution makes it possible to identify customers at the stage when they are searching for items and making a selection regardless of whether the contact occurs online or at a store. OneRetail’s architecture relies on back-end systems that enable us to leverage customer profile data and correlate it with a full range of internal data, from logistics and assortment information to promotions and personalized offers. Based on data analytics, customers receive personal offers, recommendations and other information in their app or during authorization through the consultant app at a store, which can prompt a potential customer to make a new purchase, and our advanced logistics solutions and the range of additional services available within the hybrid model help maximize the number of customer journeys that end in a purchase. OneRetail shoppers, by which we mean customers who have logged in and made at least one purchase during the year through the web platform or the mobile platform, which includes the customer app and the consultant app, have a higher average ticket thanks to the convenient purchase process and personalization.
The share of OneRetail transactions in the Group’s total transactions reached 42%, and we plan to increase it to 85% in the medium term.
In 2020, as part of further development of OneRetail, we introduced a single shopping cart—the ability for the consultant app and the customer app to interact. The OneRetail shopping cart has been implemented 100%— a customer’s shopping cart can be created in the consultant app, and the customer can continue the purchase process for the items in the cart either on the website or in the customer app at any time. The process of completing orders based on our best price guarantee was simplified, and a free-delivery option was added. Also, personal recommendations based on data science were introduced; a service was launched that sends sales receipts to the customer’s phone number, as was a personal collections service for the seller (simplifies operations involving the catalogue and the forwarding of a OneRetail shopping cart without reservations).
The service, which is available through our mobile apps, is in high demand among customers, and the mobile platform’s performance has generally exceeded our expectations. In 18 months since its launch in 2019, 100% of M.Video stores, or about 50% of all Group stores, have already been connected to the platform.
Currently, the M.Video–Eldorado mobile platform is the most powerful element in our toolkit, and we will continue to work to ensure that as many of our customers as possible switch to using it. Our efforts will focus on the following strategic initiatives, which will further enhance the customer experience that we offer:
Creating a single shopping cart
One of the strategic directions for the further development of the customer experience is the creation of a single shopping cart. OneRetail technologies make it possible to combine all points of purchase: the website, the customer app and the consultant app. At the center of this process is the single shopping cart. This solution is a cart that the customer can fill and change using any interface of their choice—at a store or online—at any time when searching for and selecting items. The creation of the single shopping cart is an extremely important step in terms of maintaining a high level of satisfaction among the Group’s customers.
Improving ordering options
Decisions on how to pay for purchases are an important part of the customer experience. With respect to shopping carts, our aim is to improve customers’ ability to pay at any touchpoint so that every cart results in a completed order regardless of the customer’s location and payment preferences.
To this end, we are constantly expanding the payment and credit processing options available to our customers. As one example, we plan to set preapproved credit limits for every identified customer so that they can purchase goods on credit or in installments as quickly and easily as with any regular purchase. This also applies to virtual credit cards and instant credit accounts.
In the context of the pandemic and ongoing restrictions, one of the Group’s important focal points in 2020 was the development of comprehensive customer service, which involved both the launch of new solutions and tools and the development of existing ones.
We continue to develop digital consultations for our customers through various channels, including chats with consultants, digital in-store consultations, video consultations, chatbot communication and others. We plan to double the number of transactions carried out using digital consultations from 8.7 million in 2020 to more than 16 million in the medium term.
A breakthrough solution that was launched last year and that has been enjoying a great response from our customers is video consultations with experts from our stores. Using the mobile app on their smartphone or our website, the customer, regardless of their own location, can get advice through a video consultation with the expert they need. An expert from M.Video identifies the customer in their own app, where they can see their search history, profile and available discounts. Based on the information in the customer’s profile, our artificial intelligence will suggest a suitable model, services and accessories, and the consultant will be able to explain in detail the advantages of a particular product, as well as offer related products and services. The experience from last year proved the high degree of efficacy of this tool: online customers who communicated with a consultant and received a personal offer were more likely to complete a purchase.
We strive to meet the needs of our customers not only when they are looking for something they need but also after they purchase it. Our service for the delivery and installation of large household appliances is one of our major competitive advantages; this service is provided both through our own resources (a team of more than 500 specialists) and with the help of partners—of which there were more than 150 in 2020. These services are in high demand among Group customers. Last year, we completed about 5 million deliveries of household appliances purchased at our retail network stores. Our installation service was used about 463 thousand times last year—in other words, installation was ordered for about 10% of deliveries. Installation takes place in strict accordance with European service standards. Revenue from installation services reached RUB 1 billion in 2020.
One of M.Video–Eldorado Group’s competitive advantages is its innovative consumer lending platform that enables customers to buy goods on credit both at Group stores and online, including through the mobile platform.
The ability to purchase consumer electronics by installments or on credit enjoys considerable demand among shoppers in Russia. In 2020, credit purchases accounted for 17% of the Group’s sales. We are convinced that we will be able to continue to improve these results by automating processes and expanding our partner network.
At the same time, the number of online loan applications increased by 19% over the year. The application and approval procedure takes only a few minutes, which was made possible due to both the constant improvement of the system itself and the increase in the number of banks processing an application at the same time.
Since 2020, the ability to pay for goods in installments has also been a standard option for our customers at all points of contact with them.
The Group is also developing tools for non-cash and contactless payments for purchases and aims to reduce cash payments to a minimum over the next few years. The share of contactless payments for home delivery reached 60% in 2020. Last year, the Group also continued working on the development of a pilot project to pay for retail purchases using dynamic QR codes through the Faster Payments System.
An important part of serving our customers is offering them the possibility of obtaining additional technical and digital services from consultants working in stores. After purchasing digital equipment, for example, our consultants can help with the selection and installation of protective films for device screens, and also with setting up and installing any necessary software and applications.
The household appliances and electronics that our customers buy are often capital purchases. In this regard, it is natural to provide insurance services for purchased goods. The Group offers a wide range of insurance programs for household goods, health, travel, etc. In 2020, about 700 thousand insurance plans were sold.
Very often, after buying new appliances, customers want to know if they can recycle their old ones. Not only have we developed a solution to this problem, but we did it in a very environmentally friendly way. M.Video–Eldorado Group launched the first program in Russia for the recycling of household appliances, thus giving them a second life. The program has already been rolled out in 17 regions across Russia; since its launch, more than 1,000 tons of electronics have been processed. The Group intends to continue rolling out the program, increasing its regional coverage to 100% by 2024.
Since we launched a fully functional mobile app that enables users to make purchases online, access the product catalogue, etc., we have seen an upward trend in customers’ use of and demand for the app. The M.Video app was downloaded over 7.1 million times last year. Mobile devices running on the Android operating system account for 66% of installations; iOS, 34%. The core of the app’s users are aged 18 to 46, are interested in technology and innovation, are active users of social media and instant messaging apps, and are used to using apps on a frequent basis. The M.Video app is one of the highest-rated apps in its category. In the Google Play store, the rating from customers is 4.7; in the App Store, it’s 4.5.
In December, the Eldorado brand launched a mobile app for Android and iOS that enables users to make purchases for delivery or to place orders inside stores, as well as to receive personal promo offers, up-to-date reviews of new products and to manage their bonus account. With the help of geolocation, customers can find the nearest store on a map as well as a complete list of retail outlets in the city, along with their addresses, opening hours and other information for convenient online ordering. The app is also useful at stores: shoppers can scan the barcode on a price tag and get detailed information about the product’s features and price without contacting a consultant.
The most popular sections are available on the home page: personal account, bonus balance, current promotions, products of the day, previously viewed items and popular items, order status, “EldoPlay” and “EldoTube” videos, as well as a product search function. When searching, the user’s search history and recommendations based on predictive analytics are active.
Members of the Eldoradosti loyalty program get quick access to the main features in the mobile app: checking their available points, spending bonus points, operation details, complete information about their balance and bonus types.
The brands’ web platforms, like the mobile apps, are an important element of the Group’s OneRetail technology stack, through which the Company aims to provide a seamless online and in-store customer journey with convenient smartphone access to all products and services. In Q4 2020, M.Video redesigned its website, which was the first step in updating its digital platforms. In the updated version of the site, the visual concept was completely changed, making the key pages on the customer journey more user-friendly. During the first stage, changes were made to the home page, the catalogue—including its structure—and product cards. To improve usability, the width of the site was increased, the number of banners on the slider of the home page was reduced, and a section with vertical banners was added that will soon be animated in the same way that the stories function works. The most popular promotions and products are listed beneath the advanced search box. In the header, the list of stores, contact information, delivery information and the M.Club loyalty program were made more prominent, as was the link to M.Mag, a hub with useful content about appliances and electronics. Significant changes were also made to our product cards: the change to a three-column desktop display enables users to get a better idea of what products actually look like.
Last April, the Group switched entirely to an online platform and revised the operation of its stores. During the period of major restrictions, the Group’s stores operated in different formats, depending on the restrictions in force in each specific region.
With the gradual easing of restrictions, beginning in June 2020, the Group announced the restart of retail in a new format in selected regions. First of all, there were changes to payment methods—now all in-store operations are available online and in a contactless form. It is now possible to pay for in-store purchases without going to a checkout counter—customers just need to use their smartphone to click on a link they get from the sales consultant. Loan processing and sales consultations are also possible without direct contact with staff. Contactless payment terminals are available in all Group stores. Additional contactless payment terminals have been installed in the shopping area at the 250 largest M.Video and Eldorado stores.
The next important innovation was to enable M.Video customers—and also Eldorado customers following the launch of the Eldorado app—to use the mobile app to scan QR codes on price tags in stores to instantly receive complete product information. In addition, a number of services were launched to expand opportunities for customers to receive purchases without visiting stores:
When paying on the website or through the app, customers received a 5% discount on their order. The Company extended the period for the return or exchange of functioning products—all purchases at M.Video and Eldorado, including online orders, could be returned or exchanged within 60 days (instead of the standard 14 days stipulated by law); non-functioning products could be returned or exchanged within 30 days of purchase, thus encouraging people to stay at home during the public health emergency without worrying about their purchases.
The Company also automatically extended those orders that had already been issued for pickup from stores and paid for but that were not received for some reason. This initiative was aimed at enabling people to plan a convenient time to pick up their purchase and to do so without contact.
M.Video and Eldorado employees undergo daily temperature checks both before the start of their shift and during the day; they wear masks and gloves at work. Markings have been added to the sales area of stores; antiseptics and personal protective equipment are available for shoppers. Cleaning and disinfection of all surfaces in stores is carried out every three hours, and the air is disinfected. Store employees and management also receive regular training on compliance with measures aimed at preventing the spread of infection. Stores also provide regular audio and video information on available safeguards.
We identify the target audience of our M.Video stores as customers seeking medium to premium price products and complementary services who are willing to pay a premium for a superior customer experience and place a high value on technology and customer service. M.Video stores are located mainly in larger cities in prime locations with high consumer traffic, such as in large shopping centers, often as an anchor store of the center.
Eldorado stores’ target audience is characterized as customers seeking mass-market and medium price segment products whose preferences tend to favor cost savings and optimize price value. Eldorado store customers also value simplicity in shopping and the proximity of stores to the customer. Eldorado stores are mainly located in cities with populations of more than 50,000.
The Eldorado 250 format comprises compact stores with floor space of 250–500 square meters and offering an extensive range of appliances and electronic goods via an online catalogue. The stores are located primarily in small and medium-sized towns. The new format will help Eldorado enter more than 100 new towns over the next three years and strengthen the brand’s position in existing locales. Integration of the online platform and stores, rapid delivery and after-sales service will help the brand to boost its online sales. Indeed, online sales have tripled in towns where we offer this store format, due mainly to the convenient option of collecting online orders. Meanwhile, unlike most order-collection points, these stores will offer the most popular items for customer collection within 15 minutes.
To help simplify the operating model, our next pilot project will be Eldorado- Express stores. These will comprise an average floor space of 50 square meters, and will focus on click & collect orders. They will offer a narrower range of so-called fast-own goods, which is one of the key aspects of Eldorado’s CVP. Format testing will begin in 2021.
We plan to continue expanding our logistics platform by opening stores in various formats, including small-format stores in small cities. In 2021–2023, we plan to open more than 150 stores annually, about half of which will be in our new format, Eldorado 250. Thus, we plan to open more than 500 new stores in total over the next three years and add more than 100 new cities to our coverage area.
Our goal is to develop an extensive base of loyal and engaged customers. A cohort analysis of our customers shows that we are able to keep approximately 30% of our clients active even after a lapse of five years. This helps us constantly increase the share of sales generated by our loyal customer base: as of the end of 2020, this indicator was 68%, which was 23 percentage points higher than five years ago. These dynamics are reflected in the Group’s results.
One of the program’s main conditions is that bonus rubles will remain valid indefinitely upon the performance of any action in the user’s bonus account every six months.
Updated in 2019, the M.Club loyalty program operates digitally, as customers use virtual cards linked to their personal mobile phone number. In the context of the strict lockdown restrictions in force and the increased demand for online orders, the fact that the card is digital has had a positive effect on the use of the card. The bonus card can also be added to any of the digital wallets available in various ecosystems (e.g., Apple Wallet, Google Pay, etc.).
In 2020, M.Video launched a new channel for communication with customers— mobile push notifications, thanks to which our users were the first to learn about ongoing promotions and offers.
The Eldorado bonus program works on a similar basis. Program participants receive from 3% to 30% of the cost of each purchased product or service in the form of bonus points in their personal accounts. Bonus points can be used to pay for up to 50% of the cost of a subsequent purchase in stores or on the eldorado.ru website. The bonus card is also available in virtual form and can be linked to the customer’s digital wallet. Upon registration in the Eldoradosti loyalty program, the customer receives a gift of bonus points.
Last year, both Eldorado and M.Video took a particularly sensitive approach to initiatives for their customers in order to make interaction with them even simpler and more convenient. Both brands extended the lifespan of bonus points for all customers during the lockdown period.
The M.Video and Eldorado brands are constantly working to improve customer loyalty, which is also something they measure. The main indicator of customer loyalty that the Group uses is net promoter score (NPS), which measures shoppers’ willingness to recommend a retailer or a particular store as a preferred place to buy consumer electronics.
According to the marketing research conducted by LLC “M&P ANALYTICS” in 20201, M.Video and Eldorado brands enjoy a high level of customer loyalty. Compared to 2019, the Net Promoter Score (NPS) for M.Video customers continued its upward trend and reached 86% (+2 p.p.). The NPS for Eldorado customers showed a more dynamic growth over the past year and reached 73% (+6 p.p.). This success is based on the following factors: