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Magnit is one of the two largest grocery retail chains in Russia: thousands of convenience stores, supermarkets and pharmacies across the country. The company started out as a wholesale trader of household chemicals in Krasnodar and grew into a federal chain with its own production and logistics. Its shares trade on the Moscow Exchange under the ticker MGNT.
Grocery retail lives on turnover, not on markup: the shopper comes in several times a week, the ticket is small, and the gap between the purchase price and the shelf price is measured in single-digit percentages. Profit is therefore determined by two things — footfall and the cost of serving it.
Hence two lines of work. The first is network density: the closer a store is to home, the more often people drop in, and the cheaper it is to deliver goods to it from the distribution centre. The second is private labels and in-house production: a product sold under the retailer's own label earns a higher margin than someone else's brand on the same shelf.
Digital channels are a separate matter: delivery and partnerships with aggregators. They are growing fast, but they cost more than ordinary retailing, because behind every order there is a picker and a courier.
The core format: small stores within walking distance, which generate most of the revenue.
Stores with a wide product range and a higher average ticket.
Stores selling household chemicals, cosmetics and medicines — a business line with a higher markup.
Food production facilities and a network of distribution centres, which lower the cost of the goods on the shelf.
Strengths and weaknesses describe the business itself. Opportunities and threats describe what may happen around it.
It is a retail chain: convenience stores, supermarkets, cosmetics and household chemicals stores, and pharmacies. The company also owns food production facilities and distribution centres that serve its stores.
Because the competition is on price, and the shopper compares it every day. The gap between the purchase price and the shelf price stays in single-digit percentages, and profit is built up through enormous turnover, not through markup.
It is a product that is made to the chain's order and sold under its own brand. It is cheaper for the shopper and more profitable for the chain, because the price does not include a third-party manufacturer's spending on advertising and promotion.