Innovation Inspiration: Understanding Russia

30 Apr 2010|Added Value

Last time out, we took a closer look at the massive opportunity that is India. This time, we zoom in on Russia, the largest country in the world. Already higher in 2008 than India, the World Bank estimated in 2009 that Russia’s GDP would have caught up developed economies by 2026.

Let’s take a closer look…

Economic growth over the past decade has fuelled Russian consumerism, and by 2012 the country is expected to surpass the UK and Germany in terms of retail market size. Grocery retail alone is predicted to reach $55.66 billion in 2013.
Read more: Magazine 69, Russia retail expansion

The middle class is Russia’s most important engine of wealth creation, estimated at 20-25% of the population.
Importantly, milions of Russians are richer than they appear statistically due to several factors: property ownership (60%); the grey market (40-45%) ; tax avoidance ; low personal debt ; and publically subsidized utilities, transport and healthcare.
Read more: From Russia, with insight, Ernst & Young 2009

So, how to make the most of the waking bear? First of all, don’t make the mistake of thinking Russia’s just like the West. Its geographical position and cultural diversity make for significant differences: the West prizes the individual, while Russia values the common good ; the West prides itself on pluralism, while Russia believes in consensus ; and our obsession with competitiveness plays less well in a culture built on togetherness.
Read more: Culture of the CIS countries, by Tatiana Sonnikova

What else? Think twice about just diving into Moscow first. There is a growing number of cities with high potential, including St Petersburg, Rostov and Krasnodar, and evidence suggests that going to the provinces first lays the foundations for market leadership. In any case, local adaptation is critical: the differences in the five classic regions are perhaps greater than between European countries.

And what about the Russian love affair with Luxury? Cars, property, mobile phones, fashion, holidays and even pets – they’re all important ways to express status: and most likely, they’re international brands. The exception? Food and alcohol products where local taste and quality can prevail.
Read more: Which luxury perceptions affect most consumer purchase behavior ? A cross cultural exploratory study in France, UK, and Russia

As well as working locally out of Moscow, Added Value has partnered with multinational companies throughout the world on how to approach Russia. And if you’d like to discuss how we can help, we’d be delighted to hear from you.

Best Wishes,

Jonathan Hall

CEO, Added Value France

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