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26 Sep 2018 Updated 26 Mar 2021

Russia

Winning over the Russian consumer

This is the second post of a two-part series on Russia. For the first post, click here.

Russia is an important market for global companies and offers many prospects for Singapore businesses that are looking to internationalise or enter an emerging market, and opportunities abound in sectors like food, education, and retail. However, the Russian retail and consumer landscape is undergoing tremendous change as consumers adjust to the country’s new economic reality.

With Russian consumers becoming more price-sensitive and discerning, companies need to approach the market differently than they have in the past. Brands and businesses that are able to tailor their strategies to the particular context of the Russian economy are well-positioned to thrive in the large and growing market.

For example, Food Empire Holdings, which produces MacCoffee and MacChocolate beverages, has continued to maintain its dominant market position despite changing consumer preferences and a recession and by aligning its product and pricing strategies with market demand.

RSBF Blog Post 02

The Russian consumer market today

According to Svetlana Bobrova, Consumer Practice Leader at ACNielsen Russia, a shift in consumer behaviour can be observed since the Russian financial crisis that began in 2014. While Russians are ready to spend on goods and services that will improve their quality of life, they are more pragmatic and value conscious than before, and are now more selective and discerning in their purchases.

At the same time, growing urbanisation is creating a demand for more services and is boosting retail growth. By 2025, 75% of the country’s population will be living in urban areas, and 83% will be living in cities with over 1 million people, representing a large opportunity for Singapore brands. Similarly, the number of single-parent households in Russia is growing, and 69% of women are expected to be working by 2025. This means that customisation, personalisation, products that save time for the consumer will be in demand.

Additionally, the spread of digitalisation and better infrastructure is driving e-commerce sales – Internet penetration is currently at 73% and expected to reach 86% by 2020. As such, there is an opportunity for e-commerce enablers, including warehousing services, fulfilment services, and CRM systems, which Singapore specialists can provide.

Advice for brands and companies entering Russia

  • Engage customers and offer a better customer experience

    Campaigns and direct engagement with customers are important. Learn to work with social media, including YouTube and short video formats, as they are among the main advertising channels in the retail experience. Additionally, the average Russian online consumer does a lot of searchers before making a purchase, so price comparison, price discovery and product discovery are important parts of the process.

    As such, brands must deliver a better and more exciting consumer experience to win over the Russian consumer, CEO and co-founder of artificial intelligence based visual search and image recognition solutions provider ViSenze.

  • Keep quality high, and cater to different customer segments

    According to Anna Kuzmina, CCO of Yandex.Money, Russian consumers, particularly mature consumers, are not as sensitive to brands than in the past, and do not differentiate between local and foreign companies and instead look for value for money and quality when making purchases. Furthermore, while consumers have certain expectations with regards to quality, they will not compromise taste and quality, so brands that are able to connect with certain demographics stand to benefit from their loyalty and willingness to pay a premium for quality.

    Brands can consider differentiating pricing and promotions across regions and to have different strategies to cater to different customer segments, said Leonid Strakhov, CEO of Russians sporting goods retailer Sportmaster, who shared that the company did not experience any dip in sales during the Russian recession because it maintained its focus on providing value for money.

This is the second post of a two-part series on Russia. For the first post, click here.