The right concept means big money in Russian retail today. The Nizhny Novogorod-based Myasnov Company didn’t want to be like the rest and created a new format in the retail grocery trade.

Nizhny Novogorod is Russia’s number four city—after Moscow, St. Petersburg, and Ekaterinburg—in terms of retail chains. Today, Nizhny Novogorod’s retail grocery market, according to the words of one local chain retailer, is a “business of total, mad competition.” The industry is experiencing a dramatic rise in the number of retailers, but there are almost no improvements in brand name establishment or management techniques. The hope that these would finally come was intimately connected to the arrival of foreign or Moscow chains on the Nizhny scene.
The Nizhny Novogorod-based Myasnov, however, demonstrated that Moscow companies aren’t the only ones with big ideas. The company began to offer consumers a completely new retail format, a chain of small (50-60 m2) stores specializing in meat products.

The first nine Myasnov stores opened in October and early November of 2003. Within a year, the company plans to open fifty stores, or in other words open four stores each month. “To keep to this schedule, we had to create a chain from the very beginning,” explains General Director Vladlen Altshuler. “A store is purely a front, and its business is trade. The central office manages the company’s finances, business processes, the selection of goods, and prices. It is also responsible for merchandising, company style, brand architecture, and personnel development.”
However, the main factor determining a retail chain’s success, Altshuler believes, is precise positioning and differentiation.
The new chain needed to demonstrate to consumers immediately why it was different from other, similar offerings. It emphasized its unique character. Until Myasnov appeared, there was no retail chain of this kind on the Russian market that so defied all categories. “There are no other stores like it on the Russian market,” states Altshuler. “I haven’t even seen anything like it in the West.”
Specialized stores that defy categorization already exist in other sectors besides groceries. They offer a limited number of types of goods, but their offerings are better in terms of price, selection, and service, which attract customers. Among grocery retailers, in particular in such a complicated sector as meat products, nothing of the sort existed before Myasnov.

Myasnov’s target group consists of consumers earning $100-200 per household member a month, as well as better-off consumers in search of a good deal. Keeping in mind what their customers can afford, the company selects both the products it offers and sets its prices.
At first glance, the product categories offered at Myasnov appear to be a tribute to Russian national tastes. Many Russians still follow the old adage that “sausage is the tastiest fish.” However, the company’s strategic products go beyond sausage. The company focuses on fresh refrigerated meat and convenience foods. This emphasis has created a different image of Myasnov as a store offering delicious and nutritious products. “We want to break down the stereotype that you can only get real, quality meat at the market,” Altshuler explains. “Our selection is better than any market vendor’s. Quality is guaranteed by the main supplier who monitors every stage of the production process, starting with the quality of the herd. All this service, and we’re close to home.”
The stores’ prices are also lower than those at local supermarkets.
Myasnov attracts particularly price-conscious consumers not by lowering quality and therefore prices, but through a system of cumulative bonuses. “That way,” notes Deputy Director Svetlana Karaeva, “even less well-off customers can have a chance to try some of the more expensive gourmet products.” Myasnov estimates that at least 80% of those making purchases become loyal customers.

Selling meat is tough. Products spoil quickly, and off-color hot dogs and aging meat mean direct losses. Monitoring internal costs at every stage of a product’s journey is the main factor influencing Myasnov’s profitability. For this reason, the company is constantly optimizing every process from making orders to making sales.
For instance, special containers allow a truck to be unloaded in a matter of carefully calculated minutes instead of hours. Time is of the essence, as refrigerated meat products are brought to stores every morning. Even once evening comes, the products are still fresh thanks to special ventilated display cases kept at particular temperatures.
The company spares no expense on display equipment or on cash registers. Registers are one element in an informational system that allows the company to monitor its inventory in real time. Every store is equipped with high-speed Japanese pos-terminals, which transmit information about each and every sale to the main office. This allows the company to manage its product supply and ensure that there are no leftover or out-of-date products in stores.
One way to lower internal costs according to the folks at Myasnov is to achieve a certain managerial harmony. This is more than a nice turn of phrase. “The category management that we introduced from day one allows us to avoid a large number of the conflicts that usually emerge where various divisions intersect in a traditional management scheme,” explains Karaeva. “When each division has its own goals, then everyone makes decisions based on their own conceptions. As a result the supply division is unhappy with the sales people, who can’t sell products properly, and the sales staff is unhappy with what the supply division buys and with prices, and they insist that no one could sell the junk. Internal costs grow. Category management reduces internal conflicts and therefore losses by focusing each stage of purchasing and selling in a single center of responsibility. Product category managers are responsible for the entire journey of their products from supplier to consumer. They are responsible for the right selection, the right purchases, prices, and supply volume. Furthermore, they also are responsible for researching the market, advertising, and improving customer loyalty. Thus, we approach every product category like a separate business. Our category managers deal with production and participate in creating the product offerings that they then promote. In essence, it’s brand management, the way we understand it and the way we try to implement it.”

Retailers have taken note of Myasnov’s appearance on the market. They are divided in their reactions. Skeptics think that it’s risky business to open up a bunch of butcher shops as supermarkets pop up around the city. Supermarkets’ huge range of products corresponds to a great extent to the lifestyles of modern working urbanites who have little time and prefer to do all their shopping in one place.
The optimists, of which there are many, see specialization as a new, cutting edge trend. General Director of Media Navigator Marketing Agency Alexei Mokrov believes that the time of specialty stores has come and that even big shopping centers are being forced to focus on particular targeted market segments today.
As markets become more saturated, new specialized grocery stores have begun to emerge, believes Vadim Nosov, Director of the Nizhny Novogorod non-commercial organization Soyuz Magazinov. These stores have a new level of quality. “The supermarket,” Nosov notes, “creates a customer base. With the right positioning a specialty store can attract a portion of that customer base—the pickiest or busiest customers—and make more efficient use of it.” The specialized areas with the highest demand according to Soyuz Magazinov are reminiscent of the Soviet era: bakeries, dairy stores, fruit stands, and delis offering convenience foods. These types of stores always enjoyed wide-spread popularity, but lost their individuality in the 1990s when they moved away from their specialties and became like everyone else.
It makes particular sense in Nizhny Novogorod to know the customers who will form the basis for a specialty store concept. The capital of the Privolzhsky Federal District is far from the district’s wealthiest city and has fewer well-off citizens and a smaller retail market than the cities of Samara, Kazan, or Ufa. The retail chains opening stores in Nizhny, however, are oriented not on the size of customers’ wallets, but on their purchasing habits. It turns out that many shoppers in Nizhny Novogorod respond eagerly to new ideas in retail trade.

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