Russian hard discounter fights Aldi and Lidl

Mere store in Germany.
A Russian grocery discounter is trying to fight Aldi and Lidl in their home market. Can it work?
By Reidar Molthe

6 February 2019 14:51

Russian hard discounter fights Aldi and Lidl

Hard discounting is founded in Germany, by Aldi and Lidl in a poor and degraded country after World war II. The Russian discounter, Mere, now tries in the lion's cave. Can it work?

The retailer from Krasnoyarsk in Siberia wants to rent "more than 100" stores with sales areas of 800m² to 1,200m² and 30 to 40 parking spaces.

Expansion is planned in both Northern and Eastern Germany, including Berlin and the federal states of Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt, Thuringia, and Brandenburg, writes www.germanretail-blogg.com.

Poor must save, rich ones like to save

This looks very much like carrying coals to Newcastle. Germany is the international home of discounting. You can find discount stores all over. LZ Retailytics, a retail consultancy, counts nearly 16,100 of them.

Working on the basis that "poor people must save, rich ones like to save", powerful giants such as Aldi and Lidl have carried their no-frills, low-price message with invariable success to nearly 50 countries world-wide over the last 60 years.

The two German giants go from victory to victory, not least in the UK these days. And now Russian grocery discounter are now trying to fight Aldi and Lidl in their home market. Can it work? Maybe, if German consumers find Aldi and Lidl too chic these days.

Design free

A warehouse looking shop, glaring neon lights, the food in cardboard transport boxes. No signs, no frills. The 100% design-free shop of the Russian discounter Mere, owned by Torgservis, opened last week in Leipzig, writes Michael Kläsgen, Sueddeutsche Zeitung, incidentally, in a former Aldi store.

TS-Markt, the German subsidiary of Torgservis, has already been involved in a lawsuit before it was even able to open the Leipzig store. The Siberian discounter wanted to call its cheap stores in Germany «Centwelt". That should be a clear statement: Food for cents.

Centi was, however, the wholesaler of household and garden tools, which also includes the retailer Centiniwelt. Centi complained and the result is that TS market had to change the name and logo and postpone the opening from December to the end of January. The name of the store is now Mere, as the discount chain of Torgservis in Romania.

Get your costs in order

But to portray Torgservis as some vandal from the East is to do it less than justice. The company has certainly learned the first lesson in retailing: Get your costs in order.

Torgservis is said to have reduced average store opening costs to only 1m roubles (around €13,130). Rents are said to be half those of leading Russian multiples Magnit and X5.

Torgservis is also regarded as a highly competent logistics operator.

Franchise

Very unusually for a hard discounter, Torgservis is believed to operate a franchise model where each outlet is a unique legal identity. This has helped to fuel the rapid expansion of the store base.

Torgservis was founded in 2009 by Valentina Shnayder, who still owns more than 60 per cent of the company.

Sources: Lebensmittelzeitung. www.germanretail-blogg.com, www.retailytics.com, Süeddeutsche Zeitung, Torgservis, TS-Markt, Lidl, Aldi.

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