With some 143 million consumers, Russia represents a highly promising market for European SMEs. In this article, Vladimir Kisselev, market expert on Russia and the Commonwealth of Independent States (CIS) for the Salvéo Group, which specialises in international support, gives three reasons why to go, and three mistakes to avoid.
Three reasons why to develop your business in Russia
For Vladimir Kisselev, who has been working for the Salvéo Group for more than 20 years, there are at least three main reasons why European SMEs should invest in Russia:
- A solvent market with a similar culture. The Russian market continues to benefit from high purchasing power in the medium to long term, even if the 2015 crisis has had an impact on its economy, leading to a loss of purchasing power for some. Moreover, Russia’s culture is similar to that of Europe. You can, for example, receive payment in advance for an overseas supplier, which is far from being the case in Asia or Africa.
- A vast and diversified market. Contrary to popular misconceptions, Russia is not limited merely to Moscow and Saint Petersburg. The country stretches across 11 time zones and includes plenty of cities with more than 1 million inhabitants. Some are even bigger than Moscow in terms of retail space per inhabitant (such as Perm, Krasnoyarsk, Yekaterinburg). Each region has its own specificity, for example, agriculture in the south, industry and steel in the Ural region, or automotive in the cities of Kaluga, Nizhny Novgorod and Samara.
- High demand for technology. Russia has a high demand for new technologies in a number of business sectors, chief among them aeronautics, space, medical and NICTs. Other promising sectors for Europeans SMEs include construction, DIY, luxury, infrastructures and transport. Note that, given EU sanctions resulting from the Ukraine crisis, Russia is increasingly turning towards Asian countries. Basically, whatever the sector, the ability to provide added value is the crux of the matter.
Three mistakes to avoid
European SMEs looking to do business in Russia must not think that they are dealing with just another European country that is already a “conquered land”. The reality is quite the contrary. Here are the three main mistakes to avoid that are frequently observed:
- Being overly opportunist. You must avoid getting overly enthusiastic after establishing an initial contact, either at a trade fair or via your website. All too often, European businesses enter into partnership agreements with unsuitable players. By proceeding methodically, you should be able to target more interesting partners and make an objective choice. Be careful!
- Underestimating regulatory complexities. Russia is not an EU member state. Its adheres to different standards and customs procedures with which you must be familiar. New standards adopted in the framework of the Eurasian Union and the Customs Union often impose new constraints, such as the applicant’s mandatory local presence. Ensuring a customs-cleared delivery is far from straightforward. The best way to proceed is to consult a Russian market specialist.
- Adopting an intrusive form of behaviour. For your first appointment with a potential Russian partner, there are a number of questions that you should avoid, such as asking what their company’s revenue is, or how many employees they have. It is better to commission a study of good repute rather than asking questions that will be perceived as intrusive. Questions of a political nature must also be avoided.
Founded in 1991 in Lyon, the Salvéo Group specialises in supporting and representing businesses and governments internationally. Headed by Hervé Druart and Johann Sponar, the group is now present in more than 20 countries (France, Russia, Ukraine, Kazakhstan, Central Europe, India, China, Japan, Australia, Iraq, Iran, United Arab Emirates, Algeria, Morocco, Turkey, Ivory Coast, Canada, USA, Mexico, Brazil, etc.). In 2013, the company became a subsidiary of the Adit group, the European leader for strategic intelligence. With 300 permanent employees based in France and in its subsidiaries and affiliate offices, the group has an annual revenue of 32 million euros.