Order fulfillment, which includes the processes involved in storing goods and delivering them to customers after an order is placed, plays a critical role in the success of a retail business. With consumers’ increasing desire to receive goods “here and now,” the speed and precision of delivery, as well as the availability of appliances in stores, are becoming key factors in the competition for customers.
Thanks to our advanced logistics platform and expansive retail network, investments in which have exceeded RUB 150 billion, we already offer unsurpassed delivery and pickup services throughout most of Russia. As of December 2020, 60% of the country’s population was covered by stock availability within 24 hours.
Our infrastructure for the storage, distribution and delivery of goods throughout the entire territory of Russia includes more than 1 million square meters of fulfillment area. The most important element of this infrastructure is the M.Video and Eldorado store networks, which account for 540 thousand square meters of warehouse space and about 46% of the Group’s inventory. The density of the retail network greatly increases the availability of goods and the speed of delivery in regions outside Moscow and St. Petersburg. Taking into account the expansive size of Russia, the Group considers the fact that it has stores located in every region of the country to be its most important competitive advantage over marketplaces and other online players.
Further development of logistics and fulfillment is a key element of our strategy aimed at doubling business volumes by 2025. We have set for ourselves the goal of increasing the share of goods available for delivery or pickup within 15 minutes to more than 50% of GMV.
To achieve this goal, the Group will focus on the following areas:
The Group continues to develop a mixed logistics model using both outsourcing and in-house resources. Our unified logistics infrastructure supports both brands—M.Video and Eldorado—in every region where the Group operates, which increases the flexibility of our business model and enables us to take advantage of the full effect of economies of scale.
In 2020, the Group’s logistics function successfully passed a COVID-19 stress test. Our multisite logistics network and high level of business digitalization made it possible to quickly switch to a remote procurement and distribution management process and to move our network of stores to flexible operations (see “ 2020 Performance Highlights ,”). In addition, the Group quickly restructured delivery processes and entered into a number of important partnerships to launch express delivery using taxi operators. As a result, we were able to drive sales growth in the face of heightened health and safety requirements and a tripling of home delivery orders.
The storage and distribution system includes retail stores, large central distribution centers in Moscow and Russian regions (an assortment of 10–21 thousand items) and smaller multiplatform warehouse centers (with an assortment of up to 10 thousand items).
In 2020, despite pandemic-related restrictions, the Group successfully implemented a large-scale project to transform its distribution system. The assortment in distribution warehouses in regions outside Moscow and St. Petersburg was expanded 2x–3x to 10–14 thousand items, which greatly improved the availability of the Group’s products outside Russia’s largest cities. At the same time, we continued to open multiplatforms (small distribution centers) in less accessible cities, particularly in the north of Russia.
Every year, more than 50 thousand vehicles transport goods from more than 300 suppliers to the Group’s nine central distribution warehouses. From there, appliances and electronics are transported to regional warehouses and to M.Video and Eldorado stores throughout Russia.
In 2020, the Group began using the SAP Yard Logistics system, which enables us to arrange and monitor the movement of transport from suppliers to all distribution warehouses, and also to automate work planning at all sites. Next year, the system will also cover shipments leaving warehouses.
In 2020, our endless shelf project underwent considerable development: now orders are executed without storing goods at Group warehouses—they are shipped directly from suppliers’ warehouses instead. In connection with the further development of the project and the launch of marketplace sales, we are planning to open a specialized warehouse in 2021 to handle such goods.
The focus of the Group’s transport logistics is the constant improvement of delivery times for the entire range of household appliances and electronics.
All long-haul shipments are carried out by Group counterparties. The choice of transport service providers, including for long-haul transport and home delivery of goods to customers, is based on tender procedures. For those products that customers cannot get within the available assortment in a particular city, the Group speeds up delivery by shipping consolidated cargo from central warehouses, while also using cross-docking technologies.
Since 2020, the Group has been using daily cross-docking shipments between all its distribution warehouses to move its exclusive assortment along with customer orders to remote communities located a long distance from cities with a population of over 1 million. For expedited delivery of goods to remote regions, the Group also uses air transportation.Group transportation
|TYPE OF TRANSPORT||NUMBER OF TRIPS|
OF CUSTOMERS PICK UP ONLINE ORDERS THEMSELVES
DELIVERIES TO CUSTOMERS
OF DELIVERIES MADE ON TIME
PARTNER PICKUP POINTS
OF ONLINE ORDERS AVAILABLE WITHIN 24 HOURS AFTER CHECKOUT
OF CARGO TRANSPORTED OVER THE YEAR
We are also partnering with the major Russian food and FMCG retailing chain Pyaterochka (X5 Retail Group), as well as Russian Post, whose service networks provide us with pickup points for our customers. This allows our customers to pick up their purchases on the go. Our network of partner pickup points and parcel lockers across Russia include more than 55,000 locations.
Home delivery is provided by Group partners. In 2020, M.Video–Eldorado increased its total deliveries to 5.4 million, up from 3.2 million in 2019. Moreover, more than 98% of deliveries were on time. During the year, the Group launched an express delivery service for digital equipment and household appliances weighing up to 20 kilograms through its partner services Yandex Taxi and Gett Delivery. In 2020, a total of some 400 thousand deliveries were made by taxi.
In Moscow and a number of large cities in Russia with a population of over 1 million people, standard home delivery is possible the same day. In other cities where the Group has stores, more than 90% of goods ordered from the assortment available in the city are, as a rule, delivered the next day. In some cases, we can schedule delivery the next day or later if the customer wishes to purchase a product with specific features.
One of the key projects in this area is the launch of our own proprietary app for couriers that is integrated with our websites and our customer apps. The app will inform customers about the status of their order in real time and adjust the delivery process based on the customer’s schedule.
As part of the expansion of our last-mile tools, we intend to develop new delivery methods, including environmentally friendly delivery services on foot or by bike. In this regard, we also plan to launch a new tool: a platform that will automatically select the optimal vehicle for each order based on the specifications of the items and the terms of the order. This technology will reduce errors in the delivery of goods and increase our last-mile precision.
The Group also plans to expand its pool of pickup service providers and also to continue to improve the quality of these services, as well as introduce a digital process for the generation of receipts.
Continuous improvements in efficiency and the digitalization of our inventory and transportation management systems are prerequisites for increasing the availability of goods for customers and successfully expanding our online business.
M.Video—Eldorado has been investing for many years in state-of-the-art IT systems to support logistics; the introduction of most of these systems has helped the Group become an industry pioneer and a major source of unique expertise in the market.
The Group has a process of end-to-end inventory planning from supplier to store. The Group has developed its own planning system that uses mathematical models to predict the optimal level of inventory at each stage in the supply chain. Machine learning technologies are used to predict the volume of inventory for each store based on sales dynamics, seasonality, traffic, promotions and the likely volume of goods to be reserved for pickup.
In 2020, the Group became the first company in Russia to start commercial use of the SAP Yard Logistics warehouse management solution. Modified specifically for M.Video–Eldorado, the solution is helping set up a unified, centralized system for managing and monitoring all product flows, increasing the capacity of warehouses and the quality of logistics services.
The Group has introduced a system for managing customer data and product features that makes it possible to customize recommendations for accessories for the main products on our websites and through our mobile apps, to create and edit SEO collections to simplify product searches, and to create and highlight data indicating differences in the technical features of goods (for example, color, memory size, etc.) in order to view them more quickly. In 2020, thanks to updates to this system, the Group processed an additional 14 thousand new product cards for its endless shelf project.
The Group is introducing electronic document interchange (EDI) for most of its settlements with contractors and service providers to speed up the processing and sending of documents, and also to ensure closer monitoring of information exchange at all stages of the supply chain. Information exchange in accordance with EDI standards was implemented with more than 100 key suppliers, which greatly facilitated procurement procedures.
An SAP SRM–based electronic tender platform makes the process of purchasing noncommercial services as transparent as possible. In 2019, the Group’s Supply, Distribution and Logistics Department held several tenders and entered into about 250 new long-term agreements with counterparties in order to improve the efficiency of its existing warehouse capacities and reduce transportation costs. The Group also continued to develop cooperation with selected partners in 2020.