interview
February 28, 2022

METRO AG makes $20 billion a year online. Amounting to 10% of its total revenue in Russia

In a recent interview, Evgeny Mishchenko, Head of the e-commerce division of METRO Cash & Carry, Russia, discussed some key aspects of the business:

  • Where does its growth originate?
  • What is B2B2C?
  • What are the logistics, from buckwheat to oysters?
  • What are the roles of SberMarket and Yandex.Food?
  • What is pandemic blind hiring?
  • Has there been customer migration from online to offline, and vice versa?
  • What are some insights into customer behavior?
  • What is METRO AG’s business infrastructure in Russia?
  • What have been some changes in the marketing organizational structure since the takeoff of e-commerce?
Evgeny Mishchenko

What does the infrastructure of METRO AG Cash & Carry look like in Russia?

Metro

There are 93 stores, located throughout the country, except for the far eastern region. Historically, these stores have been wholesale centers. Meaning that they are primarily intended for restaurant owners, chefs, traders, and convenience store owners, etc., who can buy food in bulk there.

The first METRO in Russia was in Moscow on Leningradskoe Highway
The first METRO in Russia was in Moscow on Leningradskoe Highway

However, as time has gone by, so too has our business continued to grow. Today, we’re happy to see individual retail customers shopping in our wholesale centers. So, we’ve made it so that they can easily get a guest member card. Gone are the days when you had to submit a pile of legal documents, and then wait days for a response. Now you can simply download the mobile app or go to the website and get a member card within a few minutes. Or, you can also get your card at one of our store’s entrances at an Elecsnet ATM.

A guest member card as it appears in the Metro Wallet app
A guest member card as it appears in the Metro Wallet app

E-commerce has become another step in our transformation towards the consistent integration of current trends. Moreover, our e-commerce promotions include both B2B and B2C markets.

In B2B e-commerce, we assemble orders and deliver them to customers while using global promising systems to receive and process orders. Our managers work with B2B customers, helping them to solve many problems businesses face, from finding the right recipe to lowering the cost of food.

More than three years ago, we launched an e-commerce service for the B2C market, and now we are actively developing it.Unlike so many companies, our B2C e-commerce is essentially B2B2C, because in most cases METRO does not sell goods to the end customer.

We stick closely to the ideology that METRO is an excellent business partner. For example, many of our partners have been able to open delivery businesses utilizing METRO as their home base, just as many convenience stores and shops buy their goods from METRO.

We are partnered with many businesses, one of them being SberMarket, formerly called Instamart. At first, SberMarket positioned itself as a professional shopper-assistant, and its employees assembled goods according to a customer’s order and charged for delivery. Now it is a huge ecosystem that works like clockwork. Both orders from SberMarket’s customers and its own orders from METRO’s website and app are transferred to SberMarket’s hub, which then are processed and delivered respectively.

METRO’s online showcase in SberMarket
METRO’s online showcase in SberMarket

Through this type of connection, we share specific responsibilities with our partners, each carrying out their role to perfection. While our partners process and deliver orders to the end customer, adhering to quality requirements and ensuring fast delivery, we organize the purchase of a large range of goods, monitor their quality, stock them on the shelf, and set the best price. We are able to pack larger orders from business customers in boxes and on pallets, and ship them by truck. However, when it comes to smaller orders that may require selecting individual produce and then delivering them to several different addresses, we won’t be able to do that ourselves just yet. But our partners can.

At the end of last year we launched Yandex.Eats (also known as Yandex.Eda), which delivers orders from our stores in just 90 minutes.

METRO’s online showcase in Yandex.Eats
METRO’s online showcase in Yandex.Eats

We initially realized that interconnecting all kinds of IT systems within different e-commerce marketplaces requires a significant number of resources that we are just not prepared to allocate. However, if a partner is ready to take over the integration process, we will always be happy to give a partner the right to showcase METRO, which in turn will allow them to receive additional orders. This occurs after discussing how exactly we will be represented in the showcase to guarantee our brand’s safety. In other words, ensuring that their assembly and delivery service meet our high standards.

This cooperation is mutually beneficial. METRO manages profit turnover, while our partner receives orders from customers who are confident in METRO’s quality and product range. If we add in turnovers from B2B and B2C partners, we then find ourselves in the top three e-commerce market leaders.

What is METRO’s share of e-commerce revenue?
B2B2C amounts to about 10% of our profit turnover; a substantial amount. We plan for our share of e-commerce to increase even more over the next five years, along with market growth.

We calculate B2B separately, because it is in a different category. So, the indicated share doesn’t include B2B sales through our online channels.

Here is a question in order for our audience to better understand the speed of development. You launched your e-commerce service three years ago. How did it come to pass that today your share has grown to 10%?
The share reached 10%, of course, in 2020, when everyone had no choice but to shop online. It all started with 2, and then rose to 3, then 5% and it was quite stable. But the pandemic gave the market a huge boost. Without the pandemic, it would have probably taken 3 years for the e-grocery market to reach today’s volumes. The pandemic has saved us a lot of time and allowed us to skip over several stages that the market normally would require.

How did this share spike come about during the pandemic?
Due to the pandemic, people have gained crucial experience in shopping online and aren’t afraid to place online orders now. The pandemic has removed many buyers’ mental stumbling blocks. At first, when there was a large influx of new customers, they ordered mainly items they weren’t afraid to order such as pasta, cereals, drinks, canned food, and household chemicals. Then they began to order food such as fresh fish, fruits and vegetables. People realized that when shopping at METRO online, the selection would be amazing, these really great products would be delivered to them, and at the right time. Along with our partners, we tested and changed the work process of assemblers and couriers several times. We were concerned with transporting our products so that they would maintain a proper quality. Today people buy even the more expensive fresh goods and regularly use our services without a second thought.

We also observed that, at the beginning of the pandemic, there was a significantly high demand for buckwheat for about 2-3 weeks. To some extent, it even became a joke in e-grocery and retail circles. People were literally stockpiling buckwheat. But then, people began to want more variety. So, orders began to include chicken and other types of meat, fruits and vegetables, and other goods with a short shelf life that customers typically buy every 2-3 days.

In three years, taking into account the pandemic, we have come a long way, which in normal circumstances would have taken us about six or seven years.

What does your marketing organizational structure look like now and how is it changing due to the growth of e-commerce?

marketing

The CRM and market research department, including the direct marketing team
We have many customer groups, therefore the structure of the Marketing Directorate includes departments responsible for marketing to individual customer groups, as well as the CRM and a market research department, which includes a target marketing team.

As I said, there is a separate business audience consisting of the HoReCa segment. This is further divided into subgroups such as Japanese restaurants, traditional Russian restaurants, seafood cuisine, fish products and others. You need to communicate with them in different ways, as they are interested in different types of goods and they have different values when choosing where to buy.

There is also an audience of traders, but I don’t mean stock traders. They differ at least insofar as they are just traders, i.e. store owners, and there is our «Fasol» franchise in Tatarstan. In this case, we recommend different products for different types of stores.

There is also a B2C audience that can be segmented, spanning an immense set of characteristics. In this example, both RFM segmentation and segmentation according to customer behavior are used. This is achieved through a composition of receipts, purchase location, categories of purchased goods and their price level.

Auditorium

Traditionally, METRO has had a much higher share of quality shoppers — customers who buy premium goods — than the market average. We also see that in our online channels, customers are really willing to buy more expensive products. In other words, premium products that don’t sell as well in other stores sell in ours. Some examples of premium products are frozen crabs, scallops, oysters, meat from Uruguay, different types of imported meat and cheese, and much more for which METRO is really famous. The same can also be said about more expensive alcoholic products, such as Dom Perignon champagne.

Of course, we also have customers in the budget shopper segment, who buy in bulk from METRO and stock up in order to save on purchases. Yet at the same time, they can still be sure of their products’ quality

Initially, the marketing tools we used did not allow us to segment customers too significantly, especially in e-commerce. Personalization was mainly at the level of generating discount coupons for our mall stores, and only in the most popular categories. Coupons had automatically been sent via email. It worked — and still works — but there was very little flexibility as far as putting more useful information into the letter. So today, we’ve launched a local service that allows us to create singular customer profiles — regardless of the channel through which they buy — as well as carry out dynamic segmentation and flexible communication.

Our CRM department works separately from our e-commerce division. They’re responsible for everything to do with customer relationship management, while we’re responsible for the business customer. Our approach is that our requests don’t follow the logic of simply, «we need you to send us this, that, and the other thing,» but instead, we are deeply immersed in each other’s processes. Not to mention it allows us to test and see which types of results we are able to get. This approach applies not only to emails, but also to chains through different channels. It also applies to personalization on our website, which we have not yet gotten too deeply involved in, but we have installed pop-up triggers.

Other departments
Our marketing team also has an advertising department, branding department, B2B and B2C departments. We have not prioritized B2C for quite some time, but now we see that these customers fit our company’s goals and mission. So now we give them the opportunity to purchase a large number of goods while saving on volume. In essence, the same wholesale mission that we have committed to is being carried out by our B2C clients.

E-commerce division
Our e-commerce division of marketing appeared just three years ago. It initially consisted of five people, and now there are more than 20 of us. It’s not necessarily a large team, and we tend to outsource a lot of services in an effort to be more efficient. That is, if we are short handed, we go to the market and choose a partner who is able to fulfill the necessary tasks at hand. Partnerships give us the opportunity to get results without having to increase our resources internally, while at the same time gaining external experience.

Our e-commerce division has grown immensely during the pandemic. Admittedly, it was a very interesting and confusing feeling to hire people without ever having seen them in person. Then, when it was finally time to return to the office, people didn’t recognize each other the same way as they used to. The first time they saw each other in-person they asked, «Oh, who are you?» Nevertheless, as practice has shown, hiring in such a way was the right thing to do, because swiftness was so important. By taking risks and scaling up, we were able to meet the demand that the pandemic had put upon us.

What is your role as the leader of the e-commerce division? What are some issues that can be a real headache?
My main headache is KPIs. These represent the sales quotas of today, tomorrow, a year later and beyond. These sales KPIs are further broken down by various indicators.

This functions as the conversion method on the site, along with average order value and traffic. Traffic is divided between old customers that we need to bring back and new customers. These new customers we’ll need to attract from somewhere first, and then guide them to their first purchase, because it’s not guaranteed that they will make a purchase during their first visit. We need new customers to warm up to us, i.e. inform them about METRO, our quality, range, and prices until they resolve that METRO is exclusively the place where they want to shop.

Naturally, sales are also influenced by the on-shelf availability indicator, which we monitor. It signals to our colleagues, responsible for our retail stores, to increase orders for those items that are popular online. In some retail stores, e-commerce shares have already exceeded some retail stores’ sales by 25%. So now, when e-commerce has a significant share of sales, it must be taken into account when planning inventory and purchasing merchandise for retail stores.

Online demand is now taken into account to ensure product availability on the shelves
Online demand is now taken into account to ensure product availability on the shelves

It especially needs to be taken into account if running a «short» promotion. For example, weekend promotions where the offers are so good that products are quickly bought out. It would be a shame if e-commerce customers were left without a product, or worse, if they ordered a product and we couldn’t deliver it to them. We will offer a replacement, but, of course, it wouldn’t be the same good deal as with the initial product.

Such indicators, among others, can be further detailed and itemized and distributed among each team member’s KPIs. The same traffic — what is that? We have paid placements, we have social media, we have CRM communication, all of which have to work differently with online and offline customers, and with those who haven’t yet made their first purchase but have signed up for our mailings.

Facebook promotion selection
Facebook promotion selection

Next, we regularly look at the plan/actual comparison to see if we are dipping below or even exceeding our expectations. Our plans are based on earlier expectations’ outcomes, reported statistically. We can then understand if we’ve improved in a particular area or not, so it’s very useful. If we fell short in one indicator but surpassed in another and ended up meeting the same sales plan expectations, that’s good, too. However, there is the question of how it is possible to adapt a plan to one over-fulfilled indicator and several other indicators that previously hadn’t fulfilled the plan.

You recently gave a talk "How to match online with offline and vice versa". How do you benefit from combining online and offline customer data?

The first and most obvious step is to make sure that the same customer, who uses both channels, does not receive two emails at the same time, both online and offline. If the customers’ data isn’t properly filtered, and even more so if emails are sent out from different systems, then the customers will be flooded with a huge amount of messages that appear as spam.

Then we face other tasks and goals, such as increasing the frequency of customer purchases. For example, if a customer makes a large amount of purchases offline every two weeks, we can reasonably conclude that it is probably difficult for the customer to get to the store. So, we can send the customer information proposing that they order products online between these offline purchases, and for a fairly small additional amount, we can deliver, maintaining the same quality our customers have come to expect.

The same goes for online customers. If a customer only orders online, we can make some offers to them to shop at our retail stores. It is important for us to ensure that as many customers as possible become omnichannel, because offline shopping is the best way to get acquainted with our wide assortment of goods, and our e-commerce catalog contains more than 40 thousand products to choose from. However, an online customer will most likely not see multiple product categories that they initially hadn’t planned on buying from. In contrast, when a customer is able to walk past the shelves, along the way they can visually familiarize themselves with a large number of products. Not to mention, they have the opportunity to explore them in further detail if they happen to be interested.

At least half of our online sales are carried out through the search bar. That is, a customer goes online to look specifically for «milk,» or comes from a search engine query related to milk, finds 40 products, and then chooses one from them. If a customer is at a retail store, they are able to see a lot of different products while they’re walking toward the milk aisle. Even if the customer doesn’t buy anything right at that moment, the next time they go shopping they may recall to themselves: «Oh, I’ve seen this before; it’s probably worth buying.»

The scenario of going to a retail store assumes that the customer will see a wide assortment of METRO goods
The scenario of going to a retail store assumes that the customer will see a wide assortment of METRO goods

On top of that, we have a wide assortment of alcoholic beverages that we unfortunately cannot legally offer online. Of course, we do have a self-pickup service. A customer reserves a product on our website, pulls up to the pickup point at their designated retail store, and pays for it there. But it’s still difficult to attract people to our wide assortment of items online. For example, if a customer decides they want to buy a bottle of white Spanish wine online, quickly finds and chooses it, then that customer won’t see all the other interesting offers that we place on the shelves in our retail stores. Case in point, our Wine Zone is very large, so much so that some of our customers are so amazed that they start visiting our METRO retail stores on a regular basis.

The Wine Zone is one of the main advantages of offline retail  over online
The Wine Zone is one of the main advantages of offline retail over online

Customers who start buying within both channels and do so regularly do not replace a purchase in one channel for a purchase in the other. Instead, they start buying incrementally. However, over time, it becomes easier for them to shop as they realize that they can order goods from an online store and get them the same day, or even within 2 hours. The advantage there is that customers don’t have to stockpile for 2-3 weeks on end or for a rainy day, nor do they have to drag a huge cart around the store. Instead, they can just start making additional purchases: on what they need for only a day or two. Due to this, the average order value, the frequency of purchases, and, naturally, LTV all increase.

Where a person buys, whether it’s online or offline, is a matter of habit. And as we know, habits are difficult to change. Besides alcohol, how else do you encourage online customers to go offline or vice versa?
Sometimes we carry out promotions online, and we inform everyone offline that the promotions are only available online, and vice versa. It may seem a little complicated to the customer, but it works. So why do we go about things this way? Because, as I said, we are interested in introducing the customer to all channels, and besides, there are products and categories that are more relevant to one channel or another, that is, if you count the insight into the receipt.

In retail stores, customers are reminded that it is possible to order delivery
In retail stores, customers are reminded that it is possible to order delivery

We also have personalized coupons that are sent to all customers who regularly buy from METRO, but the coupons are only valid offline. We do this deliberately and we want to continue keeping these coupons available for only offline purchases for now.

Also, we started to accrue cashback online, which likewise can only be spent offline. We’ll probably make it possible to spend it online later, but we’re thinking about it for now.

Moreover, we have a so-called BMPL — buy more pay less — a three-tiered price tag. If you buy one bottle of water, it costs 100 rubles, if you buy three bottles, each bottle costs 90 rubles, if you buy 12 bottles, each bottle costs 80 rubles. It is important that the benefits of a wholesale purchase are visible. However, tiered pricing isn’t available for online stores.

Retail store discounts are a way to attract online shoppers
Retail store discounts are a way to attract online shoppers

How does the average online versus offline order value differ in the B2C area?

Non-alcoholic receipts are comparable. They are considerably higher offline, but not by a large amount, rather just a hair short of twice as much. However, offline alcohol receipts can be two to three times higher.

What happened to METRO during the pandemic, particularly in the first months, when your wholesale customers’ locations and restaurants were closed?
Restaurants quickly refocused on delivery, and headed over to Yandex.Food and Delivery Club. Moreover, at some point some services reduced their commission so much that they generally refused a commission if the restaurant delivered an order itself.

For our part, we helped customers register with these services so that they could also launch delivery from restaurants. It basically means that METRO provided the correct legal conditions to connect with these services. We prepared special visual step-by-step instructions, which managers gave to customers to make it easier for them to adapt.

We also launched a loyalty program, «METRO Partner», which unites our audiences. B2C customers received a coupon for a discount in restaurants for their purchases. That is, we consolidated a pool of restaurants that had been verified in terms of safety precautions and rewarded them by bringing them live traffic. For example, if a restaurant gave a discount on a coupon to a guest from METRO, then the same amount was discounted on purchases in order to break even.

The drop in the HoReCa segment was as expected as it had been significant. The drop in traders was probably less in percentage terms because customer demand for convenience stores also increased. At the time, customers couldn’t wander very far from their homes. They could go out for a walk with their dog, but otherwise they needed to be issued a QR code, which wasn’t the easiest thing. The growth of e-commerce, which was much higher than forecasted, made it possible to compensate for some of the lost turnover from the decline in demand from business clients.

Therefore, when one area decreases, as a rule, the other can increase. There were and are interconnections and overflows in everything. When customers couldn’t go to a restaurant, some of them, such as cooking enthusiasts, tried to make fancy restaurant meals at home. These customers came to us and started buying products for exactly that kind of cooking, trying to live up to the motto «cook like a chef».

METRO Chef is our own line of products for the preparation of restaurant dishes
METRO Chef is our own line of products for the preparation of restaurant dishes

Seeing this need, we launched, for example, live streams on Instagram. Every day, real chefs from restaurants prepared dishes right in their own kitchens from products that they bought from METRO, and, accordingly, they went through the recipe step by step, explaining what to do and how to do it. This was pretty popular during the pandemic.

Then we reformatted it a little; filming a lot of videos and cooking segments, rather than live streams, and published them on YouTube. We also made a section for recipe cooking on our website. There you can see the recipe or video, if the video is available, and we made it possible to add all the necessary ingredients to one’s cart in one simple click.

Online and offline customers react differently to discounts
It is surprising that online discount availability is more important than offline, but the size of the discount is less important. The main thing in the customer’s mentality is to have a discount. In this case 10 or 20% can work almost the same. Of course, the kind of product itself is important, too.

To find this out, we regularly hold promotions on the same product groups, tested under different conditions. At the same time, unfortunately, there is no way to do this to ensure statistical validity, because one city normally represents just one form of communication. We convey this one form of communication in retail stores, or over the radio, and our partners feature it on TV. That’s why we can’t conduct several tests simultaneously, for example, in Moscow. Moreover, if you carry out a campaign in Moscow and Irkutsk, most likely there will be a difference, because different cities have different types of customer behavior. That’s why we have one promotion one week and another one the next week or the week after with the same products. We observe how it works.

What was a revelation to you about customer behavior when you started encouraging them to become omnichannel?

The hardest part is when communication is severely limited geographically. For example, we tried to make a dedicated assortment of the product for e-commerce, and only launched it in a few retail stores in Moscow. We realized that we couldn’t fully sell this product because we couldn’t target any area around the store. First of all, targeting doesn’t work as well as I’d like it to. Secondly, it captures people who, for example, take public transportation outside of the target area, and we don’t know where they actually live. Most likely, these people won’t be able to order this product. Therefore, we realized that any placement must cover the entire city or region. That is, we can do tests for different retail locations, but we deliberately don’t do it, because it doesn’t give us an understandable result and makes our work significantly more complicated.

People start shopping online with only heavy goods, but then they get sucked in
Online customers are actively ordering, and this began with the fact that they ordered heavy things — a large amount of laundry detergent, water in packages of six bottles, especially when there was a promotion. By the way, a lot of free advertising pops up during promotions, such as nutritionists on their platforms saying something like: «Look how cool this water is, there’s a discount at METRO, you have to get it right away». As a result, we receive a huge number of customers. People simply start stockpiling it. It’s clear that the price is quite low, so we don’t make any money on it. However, on the other hand, customers come and get acquainted with other goods and start buying them.

People are no longer afraid to pay online
Customers have become more willing to link their bank card and pay online, even older audiences, too. Three years ago, people had a great fear of paying online and only young people would do it. Now that the initial fear has subsided, along with our partners, we have completely abandoned cash transactions at some point. There used to be a way to pay cash to the courier, now there isn’t one at all, but it works. The customer is willing to pay either online or by card upon delivery, but online payments are used more and more often, and after the customers pay, they just choose contactless delivery — leave everything at my door, call me, I’ll come out and get it. This change, I think, is associated with the pandemic, because people do not want to interact with unnecessary strangers. They don’t want to touch anything or even enter their PIN code into the terminal.

There is a method when the full amount of the order is not pre-authorized, since it can change during assembly: goods that need to be weighed, or goods that weren’t available and had to be replaced or removed from the order. Therefore, customers simply preauthorize one ruble, and then write off the entire amount when the order is processed and delivered in this way without change. This ensures that the customer does not have to wait several days to get their money back when they’ve been charged twice: once for pre-authorization and then the final amount. This also has a big impact.

Customers have become more willing to link a bank card and pay online

Therefore, the transition to an online presence wasn’t so painful. I remember that sometime in 2015, it was a requirement to accept cash from customers as 60% wanted to pay only cash to the courier. The choice of courier services for the online store was complicated precisely due to the ability to accept cash for delivery. Now everyone accepts both cards and money, but there is much less cash, which is great for e-commerce.

People began to believe that quality fresh goods would be delivered to them
When there was a switch to fresh product categories, people tried it and believed that they would be assembled well. We regularly measure NPS, ask additional questions and get a lot of comments like: «You picked apples, cherries or bananas better than myself, because I don’t pay attention to some specks, but here everything comes in perfect condition». Although some still prefer to choose meat or fish on their own, because they themselves know how much fat, bones, etc. they need. You can always come to one of our retail stores and pick out everything yourself. Although we see that our customers actively order fresh food to their flats and even country houses.

METRO partners also deliver fresh fish with ice in special thermo-packages and thermo-boxes
METRO partners also deliver fresh fish with ice in special thermo-packages and thermo-boxes

A new mission came about — buying for our nearest and dearest
Previously, there were two obvious missions. The first one was express delivery, when you need it right here and now. I get up in the morning, open the refrigerator and see that the milk went bad, and I want to take my coffee with milk. So, I needed the milk to be delivered in 15 minutes. All express deliveries are actively developing this aspect. Companies like Yandex.Lavka, now occupy a significant market share. The second mission was stocking up. In other words, the replenishment of stock for a period of time. Such orders were facilitated by us and by other companies, but at that time the only delivery option available was mainly next day, and our partners and we were one of the few who delivered a wide range of products on the same day.

While it is difficult to calculate specifically, we see that a new mission has appeared. It’s buying for someone else. People began to realize that they could also order for their relatives. We often see that sometimes orders come from abroad with delivery somewhere in Russia. That is, people have relatives living in the regions, and so they, being in Moscow, on vacation, working in other countries, wherever, order groceries for their relatives. Perhaps some people can’t arrange a delivery for themselves or their relatives want to financially support them. It’s a cool, social and proper thing to do, as people have started to care more about each other.

People began to realize that they could also order for their relatives

You’ve been in charge of METRO’s e-commerce division for 2.5 years. Looking back at the decisions of these years with today’s experience, what would you do differently?

Infrastructure for partnering delivery services
We should have done more operational integration before. What is it? For our partnering delivery services we allocate sufficiently large areas in shopping malls, where refrigerators, shelving and POS are installed, so that the paths of floor workers and couriers do not cross with regular customers and they can quickly pack the processed order and finalize the assembly at the POS.

Special area for partners in the METRO shopping mall
Special area for partners in the METRO shopping mall

We also organized a separate scan and go system, when the assembler does not need to put the goods on the belt, and a system for the correct storage of products. This is extremely important, since we are an international company and there are strict requirements for the quality of HACCP goods, for compliance with the cold chain and for the rules of goods vicinity. For example, different categories cannot be stored in close proximity to each other, some products must be kept at a certain temperature. Frozen goods can’t be stored in temperatures higher than −0.4 °F, even −1.4 °F will not be ok. It is precisely the allocation of zones that allows this to be observed.

We started allocating zones of significant size by the end of 2019. Prior to this, integration consisted of lockers in the back-of-POS area; some services still have them. When a partner has five orders a day, of course, this system works. When there are at least 50 orders, you already need a suitable area and technical integration. This is something that could be accelerated, i.e. accelerated precisely by allocating space, because at some point in 2020, both we and our partners could not fulfill orders at the rate of growing customer demand. Roughly the whole market was the same, but this couldn’t justify the fact that we and our partners were unable to fulfill orders at the required speed.

App and website
It was worth speeding up the development of our own online showcases — the app and the website. If a partner attracted a customer through their online showcase, we wouldn’t know this customer. If a customer came to us through our app or website, we naturally give the partner the data for assembly and delivery, but we continue to interact with that customer, making it omnichannel. On top of that, in our online showcases, we can show offers that are valid in our retail stores, and partners are not interested in talking about offline because they operate exclusively with the online segment.

You have many delivery partners: SberMarket, Yandex.Eats, igooods. The assemblers and couriers of the partners can make mistakes. Hence METRO’s reputation will suffer. How do you control the work of partners?
The partners have well organized customer support, call centers, trained assemblers and couriers. If any problems are identified, information is quickly transmitted to us so that we restock the shelves or conduct additional quality checks on certain goods. We even have chat rooms with major partners in retail stores, where assemblers report that something went wrong.

Moreover, all assemblers have an application in which they see the order and can scan the goods. We have such integration with partners: as soon as the application says «product not found» or «product of inadequate quality», a bot writes to us about it, and the director of the retail store sees it.

The assembler assembles orders with the app
The assembler assembles orders with the app

If the item hasn’t been found, our staff will check to see if it is in stock. If it is in stock, it can be taken off the racks from somewhere above so that the goods can be sold again. As part of the usual customer journey, if a customer comes to the store and does not find something, they move on. However, we can receive information about the stock from assemblers, and replenish the shelves.

Some fruits and vegetables have a ripening period, for example, tomatoes and avocados. From our point of view, such goods meet all quality standards. Business clients also prefer them because the products are supposed to be stored for several days in order to be used in the production of preparations for dishes. For a B2C customer, as a rule, slightly green and hard tomatoes are not ok, because they need to be immediately cut and put into a salad. Our partners tell us that tomatoes cannot be put into a customer’s order. Of course, we discuss each product separately with them, and find solutions that satisfy the customer’s need, or manage this need by making changes to the description of the products and photos.

Most partners have requirements for the remaining shelf life of goods, part of which has been agreed with us, and the other part of which has been set independently by them. As a rule, for products of the fresh and ultra-fresh categories, at least 50% of the «best before» period must remain so that the assemblers can put these products in the order. These requirements are observed by the assemblers of the partners, but the interference of the human factor can never be completely excluded, and if we were to assemble these orders ourselves, I cannot exclude that in exactly the same way the human factor could occur in a comparable number of cases. So, I don’t see that trading through partners is riskier than trading directly, because we negotiate the rules. All partners are also interested in the customer staying with them.

In every METRO store, the partner has enough staff to effectively control the implementation of the rules. Sometimes it can occur that an inexperienced assembler has not learned the requirements for a product, and if they’ve made a mistake once, made a mistake twice, someone from their more experienced colleagues is assigned to them in order to check several orders after they have packed them. If there are no problems, the assembler continues on their own. If there are problems, they make a decision about the assembler themselves: someone is transferred to the packers, who simply assemble the brought items.

METRO has its own quality service, which can check everything, including the work of partners, no worse than the Russian Federal State Agency for Health and Consumer Rights. As a rule, the quality service comes to the partner’s area, looks at which refrigerator certain goods are in, what the expiration date is, whether the rules of goods vicinity are observed and whether the shelves and drawers have actually been disinfected.

There are many rules to be observed. HACCP requirements are stricter than the official Russian Sanitary Regulations and Norms. We want to keep track of their implementation. It doesn’t matter which online showcase the customer places their order through, they are still buying from METRO. Therefore, we must ensure that we meet the expectations that the customer initially has.

There was a lot of talk about the cold chain, how to deliver ice cream or berries in 86 °F heat? We found ways, but they only work for a limited delivery time. That is, the partners also had to optimize the logistics so that the courier could reach each point faster. Each item is packed according to the required temperature, the fish is covered with ice, put in a cooler bag and then in a thermo-box.

METRO has its own quality service, which can check everything, including the work of partners, no worse than the Russian Federal State Agency for Health and Consumer Rights.

Inside the frozen food storage chamber before delivery
Inside the frozen food storage chamber before delivery

What are the next big challenges?

Communication challenges
We are moving towards more personalized messages to our customers. Step by step, we will do better, including with our Mindbox CDP system, we are looking at how we can improve integration, how to ensure the quality of data in the database, how to cleanse and unify customers’ data, what kind of customer contacts we already have, what history of actions is stored. How can we manage to kill two birds with one stone? Firstly, we don’t greatly inflate the base, the volume of events — the storage of which we have to pay for, and secondly, we have enough information to properly communicate with the customer. We can’t store orders for the last six months because some products are seasonal, and if a customer buys one thing in summer, they buy something different in winter. What the customer bought for the previous winter holidays is generally extremely important for us to know, because during these winter holidays, they will again order a large batch of food.

example of a history of customer actions in Mindbox
An example of a history of customer actions in Mindbox. The customer came to the METRO website via a search ad, subscribed to the web push notifications, looked at the products and left. The next morning the customer was sent a web push notification with a reminder of their abandoned search

We set up mailing lists and do a lot of testing. We have several agencies working on improving email newsletters, among other things. There is such healthy competition there: our internal team and the agency team are competing to see whose emails will have the best conversion rate and so on. However, our team is learning how to make it even better. In many tests, the in-house team certainly wins, but I would like to see the agencies be even more aggressive and get ahead, then we can gain some really useful experience.

A/B testing of the subject line of the promotional mailing list
A/B testing of the subject line of the promotional mailing list

The customer must receive exactly the right number of messages that will be enough for them to make a purchase and not forget about us. Due to the fact that the competition has grown greatly, many services have appeared, or those who have been on the market for a long time have started selling products, including in express format. Informational pressure on customers has become much greater. On the one hand, we must not pass the customer on, on the other hand, we must stay with them. In other words, our task is to achieve a balance.

Technical challenges
The backlog of the website and app for several years to come. We are introducing additional functions to make it more convenient and interesting for the customer with new releases every week.

We have recently introduced a new promo-engine, accelerated the updating of prices, product inventory, and are constantly developing other functionalities, which concern not only e-commerce, but also retail stores and B2B customers.

Operational integration with partners
In terms of assembling orders for delivery, there are even more tasks. If you go to some of our stores, you can see that there are more people in green or other branded clothes of our partners than ordinary customers. On the one hand, this is good, but I don’t want ordinary customers to feel discomfort. I want them to be able to walk up to any shelf and not encounter online order assemblers. This is especially critical for traditional peak periods.

To prevent this from happening, every assembler must start to work more efficiently. In the time it takes them to assemble two orders, they must assemble at least three. Filled carts should get to the area where the orders are packed faster. Drivers should be able to pick up these orders faster, and now they have to go in one by one because sometimes they just crash into each other at the door. There will definitely be some operational improvements like this.

SberMarket truck waiting to load goods for delivery
SberMarket truck waiting to load goods for delivery

Express delivery
We also want to test express delivery. We would like to do this in two ways.

The first way is on-demand delivery within 90 minutes. By the end of the year, we plan to make it possible to select a really short slot in our online showcases once we finalize the necessary operational processes with SberMarket. There is a demand for such delivery, this has already been proven by our cooperation with Yandex.Eats. They always offer delivery within 90 minutes from the moment of ordering, but there are a limited number of slots at one time. Once the ability to take orders with delivery for the closest time runs out, they can just turn a store off for a number of addresses.

The second way is to launch a super-express delivery in 20 minutes as a test, but with a more limited assortment. Together with SberMarket, we are building a store-in-store in the e-commerce zone of one of our retail stores. The delivery will take 15-40 minutes depending on the radius from the store.

The assortment will be larger than that of other express deliveries, and the delivery area around the store will be determined together with the partner: we will not deliver orders to where it takes more than 40 minutes, but only to where we can deliver in 20 minutes. Moreover, there will be on-foot and bicycle couriers, ones on mopeds and traveling by car, depending on which way from the retail store the destination is.

At one store, we will test the model to discover to what extent we can work together with the dark store, so that customers can receive goods quickly, assemblers do not interfere with each other in a very limited area, and the goods are always on the shelves. If it turns out to be successful, and I really believe it will, then we’ll scale it up.

We love these kinds of tests. In the spring of 2020, one store launched the self-pickup service. We had been providing it since November 2019, when we didn’t yet know about the pandemic, but we were providing it as seriously as a big German company should do. That is, we allocated a large room, renovated it beautifully with a waiting area, with couches, with a separate entrance and with parking at one of the retail stores. When the pandemic hit, we said that self-delivery was needed everywhere and the most important thing was the speed of launching the service.

A special in-store pickup area
A special in-store pickup area
A special in-store pickup area

We created self-pickup from other retail stores as quickly and easily as possible. First, we put out tables that were available with a sign reading «For self-pickup go here →». Now, of course, we have decorated everything, but nevertheless, the concept of «Enter through the exit, come to the counter, collect everything» remains in place. If something can be done easier, but with the same effect, of course, we will do it. Initially we are trying to test the model and make sure that it works.

If something can be done easier, but with the same effect, of course, we will do it.

P. S. Photos of Evgeny Mishchenko were taken outside office hours.