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Eastern promises: How Belarus’ largest food retailer built its eCommerce business

Online supermarket deliveries are as familiar as online banking in the UK, but in Belarus it’s still a novelty. However, the country (sometimes labelled 'Europe's last dictatorship' due to its long-serving president) has found a growing appetite for the service. 

Andrei Matsiavin, the head of business strategy at the country’s biggest online grocery service, E-dostavka, says the proposition in Belarus is different from Western Europe. 

E-dostavka began in 2014 and is venture created by the founding shareholders of Eurotorg, Belarus’ largest food retailer. However, it is run independently as an online only provider, with its own management team and IT infrastructure. Prior to E-dostavka online shopping didn't really exist at scale – only a few small, niche providers offered it.

Noticeably, customers are more price sensitive than in Europe, and have more spare time, he says.

The average online shopping basket at E-dostavka is $28 (£20), compared with $158 (£115) for Ocado, he says. That is as much down to a difference in spending behaviour, as cost of food.

“We're focused on providing competitive prices, which is important because customers will always check them against products in-store." Free delivery is also key, with the threshold just $12 (£8.7).

Unlike the UK, Belarus has a much lower penetration of modern retail, with only 45% of the market comprising chains with modern layouts, centralised management and logistics in place. The majority of consumers still shop in local markets or independent shops – which are less geared up to eCommerce. In contrast, the penetration of modern retail in the UK is 89%.

Yet the country is increasingly hungry for online groceries. In 2017 E-dostavka delivered more than 3 million orders, with sales of $86 million (£62 million). The company has remained profitable since the last quarter of 2016, with earnings before interest, taxes, depreciation and amortisation $2.6 million (£1.9 million) for 2017, he says.  “It is a supply-driven market, rather than demand-driven." 

However, Matsiavin admits the major challenge is ensuring the operational model fulfils customer demands while remaining profitable. 

Keeping IT simple

Technology has to be closely aligned with operations, as a small miscalculation could rapidly lead to big losses. 

"We have developed in-house software that helps staff, who pack grocery orders, take the optimal route inside the warehouses when putting orders together. This ensures orders are filled quickly without any time wasted,” he says.

“We’ve also developed a tech solution for the delivery van drivers, which ensures the drivers take the optimal route between customers to achieve the fastest delivery time.” It also calculates the minimum orders needed per van for each delivery to be profitable.

Since launch, the company has introduced hundreds of iterative changes. "Generally, we try to optimise every single cost item by making a small change and rolling it out on a limited basis to test it. If it helps cut costs or increase operational efficiency, the change is then rolled out across the business and integrated into our IT system.”

Unlike its Western equivalents, he says the company started small and grew incrementally, meaning it didn’t begin with a huge IT outlay.

“All of our processes are incorporated into our in-house IT system, which guarantees our operations have speed and flexibility. We didn’t purchase any material tech solutions off-the-shelf, but rather used a team of ten IT professionals to develop tailor-made software for E-dostavka. 

"We are lucky that Belarus, sometimes dubbed the Silicon Valley of Eastern Europe, has a deep pool of highly skilled programmers and other tech professionals, making it easier for us to source talent.”

Moving on

Similarly to when Ocado began its services expansion, E-dostavka’s immediate plans involve branching out into the non-food market in Belarus, and selling its services to the Russian market – which he says is the “obvious choice” given both countries speak the same language and are part of the same customs union. 

E-dostavka is already in discussions with a Russian retailer, and is looking to expand into other countries in the region. "We’re not excluding western European retailers that are interested in our story, but that is not high on the agenda yet.”

As eCommerce is still increasing exponentially in the region, with double-digit growth each year, Matsiavin is confident the company will continue to grow via its current model. 

"It will take time for people to fully understand the value of buying food online and eCommerce," he says. "Obviously, the increase of smartphone and tablets will help [boost growth further].”

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