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The director of Palink, the company that operates the Iki store chain, says the failed two-year merger with Rimi has slowed development, but 2021 could be a watershed year for the chain.
In an interview with BNS, Nijolė Kvietkauskaitė, the head of Lithuania’s second largest food retail chain, admitted that due to the coronavirus pandemic, the company did not meet the 5% target set for 2020 growth.
“The beginning of the year will be difficult, we are prepared for that. We have more hope for the second half of the year and then we look forward to a festive party, ”said the headline of“ Iki ”.
According to her, next year the company will invest more than 30 million in development and renovation. will use artificial intelligence technologies to manage the processes.
N. Kvietkauskaitė predicts that in 2021 there will be stores without vendors in Lithuania.
– Christmas has just passed, the most profitable period for traders. Were the Christmas quarantine conditions for the Iki network different from last year’s?
– It was really different, because overall, shopper behavior has changed during this pandemic year: shoppers started preparing for Christmas much earlier. Already in early December, we had significantly higher sales than we used to have. Until now, Lithuanians have been impromptu shoppers: they are not used to planning shopping vacations in recent days. So the biggest problem was how to guarantee the maximum amount of products in a short time. This year, around Christmas, residents started shopping much earlier. We even came up with a term for this: “buyers borrowed turnover.” If we look from the beginning of the strict quarantine, it is according to the controls of December 7. traffic dropped 30 percent. and the shopping cart increased 37% compared to the same period last year.
– Why did the operators of the retail chains, including Iki, not agree, as requested by the Minister of Economy A. Armonaitė, to reduce the range before Christmas so that only the most essential goods remain in it?
– It seems to me that the complexity of the retail sector has been underestimated in this case. Yes, customer safety is a priority. However, we also need to understand the retailers who are the first to “absorb” the restrictions that have been lowered from above. For example, the requirement to reduce the parking area. All the dissatisfaction, frustration, psychological frustration spilled over the heads of our employees. Not even staff hired by psychologists helped.
In this case, we had two arguments: hard and soft. The “good thing” is that the quarantine has already reduced the flow of buyers. With the tightening of the quarantine, the flow of buyers was reduced by 50 percent. more than what had fallen before. The “soft” argument is concern for the welfare of your front-line employees. Customer flow has already slowed down, so we really didn’t want to further frustrate our employees with customer dissatisfaction. The Iki network does not sell pumps or televisions, only everyday household items. If the government had made such a decision, we would have followed through, but there was a call for volunteerism, so we chose to protect our employees from another negative wave of customers.
– And what would you say to representatives of small businesses who say that the current restrictions are unfair and unfair?
– Trade in industrial goods has not been suspended. All prerequisites are created to create e-commerce, selling by delivering purchases directly to your home. You know, sometimes I lack creativity because normally companies are the ones that “get out of their skin” to survive. I would very much like to accept all my colleagues, both small and large, accept this unfavorable and non-standard situation for the whole business and seek ingenious solutions.
– Pandemic, teleworking has increased considerably e. Commerce. How relevant will it be to your retail chain?
– There is and will be relevant. Last year, on the basis of a partnership, we began to cooperate with the startup “Last mile”, so today residents of five major cities can buy through this platform. However, this year we have also seen a great need for such services. We predict that this way of shopping, even if the pandemic goes away, will continue to decline, even if it decreases slightly.
At the moment we already have e. a trading strategy that I would not like to reveal yet. However, if we say today that we are Lithuania’s second largest retail chain in physical stores, we definitely do not plan to cede this market share to anyone in e-commerce. The only question is how, with which partners and how we will do it. We expect to make decisions on this in 2021. in the first quarter.
– In general, how did Iki feel about the effects of the quarantine?
– I will not hide – the effect is. The main reason is the changing needs of the population. The priority in this case was safety. People began saving, which resulted in a significant, almost 2 percent, compared to the same period in 2019, retains participation in stock sales. And we have to assess that we have one of the highest share sales quotas compared to the market average.
During quarantines, people chose networks that are positioned as discounts. Because Iki has positioned itself as a network of fresh and quality food, we have suffered because people’s priorities are different. Although the year is not over and there are no final reports yet, I can say with certainty that we will not reach the 5% target for 2020. growth. At best, we will stay at the 2019 level. There are also unforeseen direct costs associated with the pandemic. So far, they have already allocated 3.5 million to the Iki network. euros. (including all protective equipment, disinfection, purchase of additional equipment, etc.)
– You carry out various market research and analysis. What were the moods of Lithuanian buyers this year? What are the forecasts for 2021?
– Buyers’ expectations have been particularly positive for the past three years and have been improving every year, including into the early 2020s. For example, in the first quarter before the quarantine, our sales increased 7 percent. The future was supposed to be bright, but the pandemic turned everything upside down: buyers’ confidence in the future was gone. However, in 2021. we plan better, especially due to the vaccine factor. We are more hopeful for the second half of the year and then we look forward to a “festive party.” The beginning of the year will be difficult, we are prepared, but we still expect 3% per year. higher sales than in 2020.
– To what extent will the pandemic, the deterioration in the mood of the population affect the development plans of the network for 2021?
– It definitely won’t affect. Unless it is due to opportunities (renting or buying additional space in the store), we will try to invest even more than we expected. And next year we plan the active development of the network: we would like to open up to 10 new stores.
I will openly admit that after the failed merger with Rimi, our network lost for at least two years. Initially, the Competition Council’s decision had a prolonged shock: expansion and renovation work in preparation for the merger was simply frozen. And in the highly competitive Lithuanian retail trade, to carry out the usual development (5-8 stores per year) it is necessary to act very consistently and proactively. Those works were simply suspended pending the merger, as the expansion became obsolete. Rimi had Plan B then, sadly we didn’t. Therefore, it took time to get the partners back and fill the real estate portfolio. Now we say that we are ready for a new outbreak.
2021 is a year of big investments. First of all, physical development. We will allocate about 10 million for the construction of new stores. euros. Then a major update to the job shops. We will allocate around another 20 million for this. euros. The third direction is all digital and technological innovation. Iki has been known as a technology pioneer, which is why we want to regain these positions next year.
We have many projects based on artificial intelligence (DI) and machine learning (MM). 2021 We have a huge resource planning and efficiency project ahead of us that will allow us to have as many people in stores as and when needed, so that shoppers can get out of stores as quickly as possible, which is their priority, according to our research. available. As a result of more efficient management, the “saved” employees will be directed to new stores. By the way, we plan to have as many employees next year as we have this year (5902), but they can be distributed to new stores.
The same DI and MM will begin to shape the range of our stores next year. We will invest at least 5 million LTL in these technology-related projects next year. euros. We are also planning other innovative novelties that I would like to have in my pocket so as not to make life easier for competitors. But in general, I would like Lithuania to be advanced, not just the digital market. start up telecommunications market, but also in the retail sector.
– In 2008, Iki was the pioneer of modern self-service in Lithuanian supermarkets with bititės. Why has its development slowed down in recent years?
– This is the same price for a failed merger with Rimi. Why invest in what you may no longer need in the future. We just didn’t know how many of our stores would remain after the merger. The technologies used by both networks also differ. In this case, Iki is the company most affected by the non-merger.
We did not suffer financially, but in terms of business management, we were preserved for two years. My favorite saying is: “In retail, you’re either fast or you’re dead.” And when they artificially slow you down for two years, suddenly you get up and speed up with development, with technological solutions, rebuilds are a titanic job. However, I am happy that this year we invested around 1.5 million in self-service. and next year we will double our investment in this area.
– What are the main trends in the Lithuanian retail market in 2021?
– The changes that took place during quarantine 2020 will not change as quickly, so e. trade and digitization will advance. In general, next year there may be stores without sellers in Lithuania, such as Amazon Go. I think hypothetically it could also be an Iki store, because we have to look at global trends where business is moving. The pandemic has shown that buyers want to shop safely, that is, with as few contacts as possible. Therefore, one way or another, we will go on to buy with the least number of contacts possible, and it will be as fast as possible: shopping without problems. These two trends will prevail next year.
– Is your strategic objective to remain in second place or to become the first retail chain in Lithuania?
– I would like to be the first choice in the minds of buyers.
– Thank you for the interview.
Author Remigijus Bielinskas
