Dmitry Tsypin, the chief executive in charge of business development of Four Paws retail chain, shared with Zooinform his thoughts about current situation, relevant problems, and forecasts.\u00a0\r\n\r\n\u2013 Four Paws is the largest retail chain in Russia. How many stores do you have now and how is the chain spread through the regions?\r\n\u2013 At the moment, we have 274 retail outlets in 69 cities in 15 regions. We also run three veterinary centers. But the stores are not evenly spread around the country. We have about 80 stores in Moscow. Another 120 are in the Moscow suburbs where we are present in practically every town, even the small ones. Our stores are located in almost all major regional centers of Russia as well: Tyumen, Yekaterinburg, Kazan, Volgograd, Nizhny Novgorod, Yaroslavl, Vladimir, Voronezh, and others.\r\n\r\n\r\n\r\n\u2013 Did you have to close any stores due to the lockdown and how does it affect the sales of the remaining ones?\r\n\u2013 We had to shut down only one store in Tyumen, because the store was in the mall which was closed due to the pandemic. We faced a spike of stockpiling demand in March, just like everyone else. The sales growth was significant versus the plan, thanks to an increase in the average receipt. But the imposed restrictions caused a strong downturn in April. I think we experienced the same effect as the rest of the retail: an outflow of customers in favor of specialty online stores and marketplaces. People were forced to quickly deep dive into online shopping, and many of them found it easier to buy everything in one place online. In May, the situation in retail stabilized slightly.\r\n\r\n\u2013 Lots of Four Paws stores are in shopping malls. What\u2019s the difference in current store operations depending on their location and format?\r\n\u2013 Indicators for convenience stores have been totally different compared to stores in shopping malls. The latter have a radical traffic decrease: by 80\u201390%, \u2013 especially in locations where the pet store is not next door to a grocery store or a supermarket within the mall.\r\n\r\nIn residential areas or in small towns the traffic decline was minor and these convenience stores are now doing better.\r\n\r\nIn the cities of the Moscow region, where the Four Paws chain is well represented, the situation is not bad. In summer, we traditionally respond to the demand of those who move to the countryside, and now most of the people are doing it. So, traffic in the Moscow Region convenience stores is unprecedently high. Hence, our stores there perform well.\r\n\r\nTalking about the stores in shopping malls \u2013 we are not going to close them down so far. We are closely monitoring the situation. Our decisions will depend, first, on when the restrictions will be lifted, and secondly, how the customers\u2019 behaviour will change after the quarantine. The authorities have already said that they will lift restrictions from the \u2018entertainment\u2019 components in the malls in the last turn, and even then people may still be scared to go in public.\r\n\r\n\u2013 Pet companies are taking anti-epidemic measures as though in unison. I'm sure you do, too.\r\n\u2013 Of course. We comply with all the prescribed regulations: we have applied distance markings, installed protection walls, purchased antiseptics, masks, and gloves for employees. We give our customers disposable masks and gloves for free. The store employees are much more busy now then before, since it is necessary to disinfect all surfaces every hour. There are still issues with ordering all of those necessary cleaning supplies. But we have been able to solve the problem by accumulating sufficient stock. It's the same with delivery trucks and couriers. We do only contactless delivery, i.e. delivery to the customers' doors. Our main task under the circumstances is to protect our employees and customers as much as possible. By the way it is much more important for us than any business objective. There have been no cases of infection in the team up until today. But we understand that they might happen, and we are ready.\r\n\r\n\u2013 Are there any new, unusual changes in certain categories sales? And we\u2019re not talking about seasonality.\r\n\u2013 We do not see any specific increase in demand for any category, but there is a decrease in some. Customers' expenses have reduced significantly, so the share of all non-food product categories has decreased. The situation is better for essential consumer goods which are food and litter.\r\n\r\n\u2013 You\u2019ve had a lot of positive changes to your online store. Is this part of an existing online development plan, or did you make quick decisions triggered by coronavirus situation?\r\n\u2013 We have always set a goal to increase our online sales at the expense of existing offline customers and the new ones. The situation has pushed us to move in this direction much faster. We quickly increased our logistics capacity, so even during the days of peak demand we were offering 3\u20134 days delivery. Which is fast in the meantime, as with many retailers, not only pet, deliveries took a week or more, and they often had to cancel orders all along. But we were not perfect either. Sometimes our customers encountered difficulties with placing an order, sometimes the website failed to process in peak times, and sometimes the logistics service was out of sync. But in general, you are right, Four Paws\u2019 e-com operates successfully, and many other online retailers do as well.\r\n\r\nWe introduced express delivery to cope with logistical overload of online stores. Now we deliver orders within three hours. I consider this a great success. When customers choose express delivery, they enter their address, and we offer them to choose from the assortment of the nearest convenience store. It\u2019s a completely automatic process: the website only shows goods available in the closest shop at the moment. And this service is free. Taking into account the coverage of our chain, the clients are guaranteed to satisfy their urgent needs. If the customer does not find anything, then regular delivery and open access to our entire range is an option, but with a longer delivery period. The vast majority of orders are delivered on the same day or the day after.\r\n\r\n\u2013 What did you have to implement in Four Paws e-store due to the growing number of orders?\r\n\u2013 First, we had to technically improve our online platform. This is a continuous process, but in the current situation, we had to reset our priorities and prefer those that improve customers\u2019 convenience and speed up order fulfillment. This required significant upgrades both on the frontend of the website and on the backend of our IT-systems.\r\n\r\nSecondly, we had to acquire more people. We started looking for specialists in online sales. Clearly everybody else was in a similar situation, so we had to face a certain staff shortage on the market. As for delivery, we hired a number of new delivery guys and engaged additional logistics companies.\r\n\r\n\u2013 Express delivery and banners promoting it throughout Moscow are very impressive. You are also doing a lot of online promotion. Isn\u2019t it a little too much when online demand is growing?\r\n\u2013 On the contrary, we need to increase our efforts and online presence right now. Competition, especially with marketplaces, has become more intense. They occupy a large share of the market. Our objective under such circumstances is to offer customers a wider range, better products, better service and expertise, including veterinary. We must convey these advantages to pet parents.\r\n\r\n\u2013 Why are you concerned about the competition from the marketplaces?\r\n\u2013 They are intensively developing new categories, including pet products, because demand for their primary categories, such as electronics and clothing, had partially decreased. Non-essential goods have taken a back seat in people's minds, while pet products are as essential as other FMCGs.\r\n\r\nMarketplaces are willing to pay for acquiring customers who are buying pet products. They are determined to broaden their pet product range and keep those customers. Sales of certain pet categories doubled and tripled at marketplaces. This is a big risk for us. Competition within our traditional market is predictable, and we know each other's capabilities, weaknesses, and strengths. It is important that competition with marketplaces and the rest of the industry is correct from a legal standpoint and from a standpoint of business ethics.\r\n\r\n\u2013 Meanwhile, we have arrived at the forecasts\u2026\r\n\u2013 We are seeing the same trends as everyone else does: the share of online shopping is growing and there are changes in consumer behavior.\r\n\r\n\u2013 Could you please tell us more about your plans? In these circumstances, will you continue to open new stores or wait for the storm to pass? Are you perhaps preparing online surprises?\r\n\u2013 We have paused the opening of new stores and in the future Four Paws will be more selective with new openings, primarily in shopping centers. We still need to do a lot to improve our customers\u2019 online experience, including customer services and our internal systems. We are doing a lot of work there. For example, we are improving a subscription service that had been launched before the introduction of restrictive measures. The times are uncertain, so we try to help people find the coveted stability at least in that part of life that we are responsible for.