Russia’s consumer retail landscape is changing post-recession. A stabilised rouble and favourable global commodity prices have boosted retail sales (3% increase in June 2018), growth in real wages (2.5% average increase) and fall in unemployment (about 5% decrease).
A niche consumer market is forming in Russia following a shift towards value-seeking consumer behaviour. Domestically produced goods are gaining market share due to imports becoming more expensive. Consumer spending is increasing but its consumers are becoming more savvy and sensitive to price and quality, following the rouble devaluation in 2014.
Singapore companies in the consumer sector - be it food, fashion or consumer electronics, can find substantial opportunities in the huge Russian market of 142 million people. Russians favour European-quality products with high perceived value, at low prices. Aligning your products and pricing strategy to fit this mindset will enable you to do well in Russian markets.
It also pays to know the taste and preferences of local consumers. If you are in food services, understand that Southeast Asian food is generally not part of Russian gastronomy. Therefore, more marketing is needed to drive sales in Russia. There is also a perception of Southeast Asian foods as low in price. You can offer unique and higher perceived value products at attractive price points to capture the market.
In addition, e-commerce is changing Russian consumer behaviour and creating new business opportunities. Russian e-commerce has been growing at a rate of about 20% annually for the past five years, and is expected to be worth US$35 billion (S$47 billion) by 2019.
Your company can consider using online platforms to market and service Russian consumers, who are taking to the digital sphere to fulfill their shopping needs - from checking prices to buying. There are also opportunities for Singapore companies specialising in e-commerce enablers such as warehousing services, fulfillment services and CRM systems.
Russia has strong science and technology capabilities and an established research and innovation culture. Due to economic sanctions which prohibited the transfer of technology to Russian firms, Russia is resolved to find its own made-in-Russia solutions in defence technology and high-tech civilian products. It has plans to eventually export its technology products too.
Russia funded the Skolkovo Foundation to establish the Skolkovo Innovation Centre in the suburbs of Moscow in 2010. Billed as the “Russian Silicon Valley”, the 400-hectare science city “built from scratch” houses 21,000 permanent residents and an equal number of commuting employees today.
Research and enterprise development in Skolkovo Innovation Centre focuses on five areas: energy efficiency and conservation, information technologies, developing equipment and pharmaceuticals in biomedical technologies, nuclear technology, and space technology. The centre expects to be self-funded by 2025, and estimates that it will contribute 213 billion roubles (S$4.2 billion) to the Russian economy by 2020.
Singapore startups can collaborate with Russian partners to co-create innovative tech solutions and products, especially in consumer business technologies, e-commerce, digital services. Singapore can also serve as a base for Russian technology firms and startups to venture to Asia, with Singapore as their regional base.
Today, infocomm technology is transforming daily living in Russia, similar to trends in other parts of the world. For example, Russian e-commerce has been growing at a rate of about 20% annually for the past five years, and is expected to be worth US$35 billion (S$47 billion) by 2019.
To establish your business in the Russian market, consider using an e-commerce platform to build up your brand and service the increasing tech savvy and value-seeking Russian consumer. There is also opportunity for e-commerce enablers including warehousing services, fulfilment services, and CRM systems, which Singapore specialists can provide. Find out how your business can meet the growing consumer demand in Russia.
Russian produce is highly sought after, especially wheat, following productivity investments and favourable weather that enabled Russia to increase its volume of wheat exports. A large portion of these exports come into Asia.
In June 2018, Russia became the top supplier of wheat to Vietnam, the seventh-biggest market in Asia. According to UkrAgroConsult, wheat exports from Russia jumped 13-fold in the 10 months through April, compared to the previous season.
In May 2018, it was also reported that Russian wheat exports to Indonesia had increased by 41% in the period from July 2017 to March 2018.
Bigger harvests and relatively cheap production costs have helped Russia to seize export-market share from major suppliers such as the US, European Union and Australia in recent years.
Singapore companies such as Olam International have capitalised on this and invested in the Moscow region’s dairy and crop farming.
Besides direct investment, Singapore companies can leverage Russia’s trade with Asia for business opportunities. For example, the Russian Far East is an important source of timber, seafood, soybean, grains, oil and natural gas. You can look for opportunities to source for and process raw materials from the region for trade to Southeast Asia.
Alternatively, partner Russian companies to export their products into Southeast Asia. More than 500 Russian companies are now based in Singapore, using it as a base for their Asian operations. Increasingly more are venturing into Asia. Your in-depth knowledge and networks in the region will do well to help Russian products reach regional businesses and consumers.
Interested in international trade? Find out how you can set up your trading business.