New investor of Russia’s largest children's goods retailer Detsky Mir speaks out on company strategy

After the takeover from ex-owner Pavel Grachev, new investor Alexey Zuev who acquired a stake in Detsky Mir in May revealed the company`s business strategy and future plans in his first interview published in Russian media outlet Izvestia.

Past and present

Prior to becoming a major stakeholder of Detsky Mir in 2023, Zuev owned another children's goods retailer named Korablik. Zuev sees Detsky Mir business model as completely different to Korablik. “You can’t compare the scale of the businesses. We recently opened our 1,000th store. The Company got through the pandemic, learned lessons, and gained experience from operating during a crisis”.

Zuev`s Detsky Mir story hasn’t just started from scratch – it had deep roots. Back in the 1990s, after the USSR collapsed, Zuev took the role as Chief Commercial Director at Detsky Mir and soon became a shareholder of the ex-Soviet retailer. “But at that time, I had my own vision for the business and expansion plans that were at odds with the ideas of the Company’s co-owners. And now, it’s as if I’ve been given another bite of the cherry”, Zuev said.

Regarding the timeline of the deal which was settled while the Company was on the way into a private business, Zuev says: “The retail market, including children’s goods, has been struggling. So, instead of being a public company, it would be better to focus on business sustainability, for example, by retaining our employees. Detsky Mir has over a thousand retail outlets across the country, so this is the time when social responsibility takes priority”.

In his opinion, he had an economic interest in buying a new asset in the turbulent times describing it as the opportunistic moment for buying a business. The Company is a market leader and continues to develop, Zuev explains. “Moreover, it has an excellent management team. I’m very impressed by the Company’s focus on ESG issues, as this meets current demands, particularly from the younger generation. In addition, ideas for dealing with the crisis have been put into practice for a while now — there are fewer intermediaries, the private label segment is expanding, and the unique product mix is increasing”.

ESG agenda and new projects

Ex-owner Pavel Grachev has introduced ESG principles to Detsky Mir’s business model. He launched and managed a spectrum of environmental programs, cultivating resource saving, energy efficiency and waste recycling.

Zuev plans to go on with those initiatives. “The Company encourages its customers to be responsible consumers. For example, when they return old shoes and clothes for recycling they get a 15% discount for these categories of goods”.

He also added that Detsky Mir intends to continue expanding online and offline sales and improving its pricing. The marketplace is demonstrating solid growth rates, its 1H 2023 results show that the marketplace online product range expanded to 1.5 million stock-keeping units (SKUs) and increased to 15% of total online sales. Since March, to support our suppliers, Detsky Mir cancelled the first-month service fee for new sellers on the marketplace and reduced the second-month service fee.

Recently Detsky Mir has created a separate segment in its business not directly connected with children’s goods. While discounter formats have become increasingly popular in Russia as well as worldwide the Company launched its own retail pilot project with more than a thousand items under $1 including food, household and personal care products, clothes and footwear, toys and cosmetics. “In fact, it’s not just about anti-crisis measures but also a reflection of popular demand. The quality of goods, services and infrastructure has improved compared to what was available before, which is changing people’s attitude to the format. Discounters are becoming popular due to the public’s demand for sustainable consumption. If you know you can buy a product with the same quality but much cheaper, then why would you pay more for top brands?”

Company management

When Zuev became a major stakeholder in May 2023, he decided not to change the Company’s top managers. “I’m very satisfied with the existing team. They are deeply involved in the process, know the market well, properly assess its prospects and make timely decisions. Therefore, I fully rely on their operational management skills”.

He prefers to go shopping in Detsky Mir. “I don’t use the app. I go to a store like in the old days. For me, visiting a store is a kind of tradition, and I also check how they’re working (I visit a different store every time). I have a loyalty card and keep track of sales and promotions”.

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