X5 Retail Group: startups from Europe have a positive attitude to the Russian market - GoTech Innovation X5 Retail Group: startups from Europe have a positive attitude to the Russian market - GoTech Innovation
04.09.2019

X5 Retail Group: startups from Europe have a positive attitude to the Russian market

Evgeny Babaev, Head of Innovation Search and Selection Projects, X5 Retail Group, talks about how European startups who submitted applications attracted the organizers of the contest, what are their prospects for implementation and what key mistakes they made while participating in the selection.

X5 Retail Group together with GoTech Innovation completed the first stage of startups selection in Estonia, Latvia and Lithuania for implementation in Pyaterochka, Perekrestok and Karusel stores. The company is looking for technological solutions for four key retail areas – consumer experience, store operations, supply chain and back office.

Evgeny Babaev, Head of Innovation Search and Selection Projects, X5 Retail Group, talks about how European startups who submitted applications attracted the organizers of the contest, what are their prospects for implementation and what key mistakes they made while participating in the selection.

– After analyzing the applications, what can you say on the positive side?

Despite the different level of projects, the finalists turned out to be strong. We chose the really best ones and did not select according to the residual principle.

I was pleased with the positive attitude of foreign startups to the Russian market. Those who have already worked in our country described their experience as positive, the rest mentioned that they were ready to adapt and did not see this as a problem.

– What conclusions have you made based on the analysis of applications?

First of all, to strengthen the emphasis on those areas of the company where there is a strong and concretized internal request for innovation. For example, now the X5 Department of Transport has such a request, and we have already focused our partner – GoTech Innovation – on closer attention to this industry.

It should also be noted that the Russian market has its own specifics, which should be considered. For example, we analyzed several mature projects working with reviews on Google maps. These companies have good implementation results among Western colleagues, but in Russia there is Yandex, which is a key player in the card market. And we still have to understand whether these solutions can be adapted, whether they will bring a similar effect.

In any case, we continue a dialogue on all projects that we are potentially interested in. Even if we understand that now the technology cannot be applied with us for some reason, we will certainly analyze it and leave it on our list in order to return to it later.

– What was the level of applying startups?

As usual – very different. I was glad that there were quite mature projects that had not previously been on our radars. They have already completed the testing phase, the solution has been tested, there are cases and references – it is very easy and productive to work with such startups.

It was no secret that there was a fear that startups from Europe were only interested in their own countries and scaling towards more “money intensive” markets. But it turned out that this is not so.

– What part of those who submitted applications, according to your forecast, will get to implementation?

It is too early to draw conclusions. With several projects, we have already begun negotiations on a possible pilot launch. And we will surely tell you what happens in the end.

– What are the differences between European and Russian startups?

European startups have an advantage – they are developing in an environment where access to the markets of neighboring countries is simplified. As a result, such projects are initially created more flexible, and implementation cases are not limited, for example, to one chain of stores.

At the same time, Europeans are more often oriented toward creating some kind of ecosystem, rather than solving a specific problem. This is good from the point of view of global development, but such a project is more difficult to adapt if the network is large and the main business processes in it are already built.

– Were there any concerns about possible difficulties in obtaining Russian visas and moving between Europe and Russia? And by the way, do European projects need to create companies with Russian jurisdiction to work with you?

Now we are at the very start of the negotiations, but none of the startups mentioned logistics problems or visa issues. Almost everyone has a ready-made plan: list of participants, number of visits and days that will be needed to install and configure the equipment, technology for remote monitoring of the solution. If a startup works online, then its representatives generally do not have to personally come to us, this is not a prerequisite. Only if the pilot requires this.

We are ready to work with foreign legal entities, there is no restriction. The process has already been set and we went through it, for example, with startups from Israel.

– What were the typical mistakes in startup applications?

For example, a presentation compiled for an event is not informative and has no speaker’s comments. We also had several cases when we received presentations tailored for an investor, with a payback period, calculated market indicators and the necessary amount of investment. But we are not a classic investor and do not invest in projects. We are looking for technologies that can be implemented in our stores, and we are ready to pay for pilot launches and scaling to all networks if successful.

– What attracted you to those shortlisted projects?

Everything is simple here: these projects are applicable to X5 business processes and can bring us tangible benefits. The second point: as a rule, these are companies that have successful implementation experience, albeit in some other market. There is a high probability that they will be able to repeat this experience with us.

– Was experience in Russia a plus?

Of course, this is a plus, but it is not a necessary criterion. We did not underline those who worked with Russia.

– Have you somehow adjusted your technological priorities based on the results of the last scouting?

There are corrections, but they are related to our internal needs. For example, we plan to pay more attention to startups in the field of logistics and transport, as there is an explicit request within the company to pilot such decisions. We have our own fleet of 4.5 thousand cars, and we are interested in solutions related to the prediction of driver fatigue, the collection and analysis of telematics, and the prediction of breakdowns. Everything is interesting that can reduce the accident rate, the cost of fuel and lubricants and car repairs. We can start a dialogue with such projects and start a pilot very quickly.

– You have announced the second stage of selection. What do you expect from it?

Of course, even more mature and interesting startups. The first launch was an experiment for us, and we consider it successful. Let’s see what projects the second wave will bring us.

Application period or the second stage of selection is open until September 17 on  http://x5start.vc/eng

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