Investing or expanding in Russia sounds like an amazing and terrible idea at the same time. International sanctions, political instability, giant territory, corruption issues – it is a difficult case. But the companies, which enter the Eastern European market, profit from the booming consumer market and the status of a trusted European brand.
As the statistics (AHK Russia/2018) show, German companies are making a lot of money on the Russian market. In 2018 the top nine groups combined (with Volkswagen, Metro Cash&Carry, Globus, Uniper, and Henkel onboard) reached a turnover of €12bln. The total amount of German companies on the Russian market has declined a lot since 2013, but still counts 3971 firms (AHK Russia/2020). Let’s find out why the Russian market seems to be attractive for the European companies and what can be done to minimize the risks of the new market entry.
First of all, Russia is increasingly becoming a consumer society. The main purchase factors are the brand, quality, and longevity of the product, as they come right before the price. The brand „made in Germany“ (but also „made in EU“) means a lot to the Russian consumers. They trust it even more than domestic products and are ready to pay for the quality. Russian e-commerce is booming and is the fourth largest in Europe. 73.7% of the population lives in urban areas with a good logistics infrastructure. And with the two biggest cities (Moscow and Saint Petersburg) being just 700 km apart you can serve a big part of the market without the need of covering the whole territory. Last, but not least: with nearly 150 million consumers Russia has the same amount of the population as Germany and France combined. All this, combined with qualified, but comparatively cheap labor force make Russia an interesting case with massive potential.
But how can you lower the risks and find the right strategy? Let us take a closer look:
„Russify“ your product.
It is always important to localize your brand. However, the Russian people are proud of their culture, language, and history and don’t like to be judged by foreigners. Political correctness is the key to business communication and marketing here. Don’t underestimate the differences in the mentality, as a successful slogan or design from your homeland can be interpreted wrong. Avoid this by working with local designers, copywriters, and marketing specialists, who can adjust your brand to the local market. A lot of European companies (Nivea, Adidas, and MediaMarkt) adapted their marketing design exclusively for Russia.
Get ready to change your infrastructure and legal documents.
Great things take time. Okay, bureaucracy is not a great thing, but it takes a lot of time, especially in Russia. Like any national market, Russia has its own regulations. Take a closer look at the Russian legal system, a lot of permits are regional and depend on the field you are working in. Do you need to collect personal data? Then you have to follow the law, which requires companies to store the personal data of Russian citizens on Russian soil. Look for local consultants and lawyers, they often know the rules better, than their international colleagues.
Facebook who? Use social media, but the right ones.
The Russian social media market is booming. The biggest companies are communicating with customers through Twitter and are buying integrations on TikTok. Due to the official blocking of LinkedIn in Russia (an issue with local data storage), Instagram became a business and marketing platform. But if you take a closer look, you will find out, that Russian consumers are not using western media only. The market leaders are not Facebook and Google, as you could expect. The main social media platform is VK and the most used search engine is Yandex. Both are local and widely used by Russians.
Don’t be afraid to use the methods you already know.
Even if Russia seems to be an unknown land with a lot of difficulties, you do know about sales and marketing already. A lot of businesses forget to transfer their own success stories into the new market strategy. In general. Russian consumers are the same as others. Don’t overcomplicate the strategy. Find a problem, screen the market, offer a solution.
Luckily, you are not the first one, who wants to enter the Russian market. There are a lot of great service providers and advisors, who can help you with all the points from above. They will help you to understand Russia better and minimize the risks.