Detsky Mir expects to continue to increase sales over the next 2 years by developing its omnichannel business model, with the share of online sales growing from 30% in 2021 to 45% by 2024 in the Children’s category. The Company’s goal is to consolidate its leadership in the children’s goods market.
One of the Company’s top priorities is to grow the Detsky Mir marketplace (launched in October 2020) into a leading marketplace for the whole family, offering the best product assortment and prices. Our advantage in the development of the marketplace is the existing logistics and retail infrastructure, a large amount of organic free traffic, as well as low marketing and operational costs. All of the above creates an opportunity to implement the marketplace project more effective than competitors.
Detsky Mir also plans to digitize most of its existing stores: (1) bring all service zones into a single customer service center for online customers, (2) introduce separate warehousing space to store online orders, (3) adapt all the technological processes around order fulfillment and storage, including for prepaid and marketplace goods.
The upgraded stores will have advertising and point of sales materials that link with Detsky Mir’s website and digital services, as well as interactive terminals to provide shoppers access to the full product assortment of Detsky Mir’s marketplace, thus contributing to sales growth.
Detsky Mir also plans to procced to expand its network of partner pickup points. The amount of partner pick points increased from 6,500 in 2020 to 37,000 in 2021. The Company will continue to build out its logistics network to support the fast and cheap delivery of online orders. In 2021, the Company launched 2 regional distribution centers: in Kazan and Novosibirsk. Later, in early 2022, the third federal distribution center in Ekaterinburg was launched. New distribution center with an area of 63 thousand square meters, designed to process 2.4 million SKUs, will ensure the uninterrupted supply of goods to the stores of the network and the delivery of at least 80% of online orders the next day in the Ural Federal District. Until 2024, the Company plans to launch another federal distribution center.
An important priority of the company is the search and development of new business verticals. The first project in the framework of developing new business verticals and entering new markets was the development of a chain of pet products under the Zoozavr brand. The company plans to actively develop a chain of goods for pets based on the omnichannel business model similar to Detsky Mir.
Another business vertical for the Group is the launch of digital services and family-oriented games. As part of the development of digital products, Detsky Mir became the publisher of a children’s mobile game for the first time. The first such project was the mobile game “Risovashka”, launched in April 2022. The Company plans to further launch digital services, as well as create an ecosystem and a single platform for buyers and suppliers of goods and services.
The company expects it to continue improving its operational efficiency to maintain its double-digit adjusted EBITDA margin (excluding the impact of IFRS 16 Leases) in the medium term.
At the same time, Detsky Mir expects its financial year-end net debt/adjusted EBITDA ratio to stay below 2x throughout the entire forecast period.