Export sales and business support in Russia
Our Export to Russia and our Business Development pages discuss how we can provide you with extra resources to get moving in Russia either by way of market entry or to rejuvenate an existing route to market that is not delivering the full potential.
A key point is that we supply interim management resources.
You can use us to cover the peak effort of recruiting a channel partner, revitalising marketing effort or a new product launch without committing yourself to additional permanent overheads by setting up your own office or employing staff.
We cover a third route to expanding in Russia and the CIS on our Mergers, acquisitions and disposals page.
Choosing distribution channel partners
This section clarifies the terms we use to describe distribution channel partners and discusses the differences in importance that often apply in Russia. The size of Russia and the relatively young market economy mean that distribution channels are not the same as in a compact, highly centralized country such as the UK or France.
You may get a better understanding of our recommendations if you also read our Where? page.
Russia is not an member of the EU or an associate. Russia has it's own set of laws and regulations. Obtaining the necessary registrations and certificates can be a considerable task. Some of the certificates are only awarded once to a single importer. This was originally a measure to protect brand owners from piracy.
Russia is also a very large country both in population terms and physical size. As a result, there are very few businesses where a single wholesaler or distributor covers the whole country.
Importers add value by maintaining your options to use more than one distributor by avoiding the costs of multiple import registrations or being locked in by an important registration. They also add value by allowing you to choose multiple channel partners with strengths in different parts of the country or in different industries.
In markets addressing the public sector, importers may not only deal with the importing formalities, but also hold stock and fulfil orders while the sales are made by independent agents specialising in close relations with the 83 provincial governments or the 40,000 county councils. In such cases, the importer can deliver a complete route to market.
Importers and distributors generally wait for orders to arrive. They rarely undertake sales and marketing activities from their own budget. In many businesses, they may require you to finance stock holding. Their main function is order fulfilment. Agents work for you. They don't take possession of the goods. The use of agents is not well developed in Russia. Russia is a growing economy, so unemployment amongst skilled people is low. There is no tradition of redundant middle managers setting up their own businesses. Self-employment as a whole is underdeveloped, because of the communist tradition. Agents are most typically found working in public sector sales, where prior knowledge of a forthcoming tender may assist in the preparation of documents, particularly as Russian tenders are often open for short periods only. Such an agent will specialise in understanding the requirements of the Ministry in a provincial government or all the requirements a county council rather than a particular product set. The agent will have a contact list of the importers of a diverse range of goods and services in order to respond to a particular tender.
In the private sector, there is often a need to pull sales through the importers, wholesalers and distributors. Generally, it is very difficult to find a commission paid agent to do this. Engaging your own product manager is usually a better solution.
We use wholesalers to describe distribution channel operations that buy in quantity and break down and mix the deliveries to sell to the next level in the system.
Wholesalers are very important in many trades in Russia. When the Soviet Union collapsed, most Russian businesses were privatised by selling them to the staff. As a result, there is a very high proportion of small owner run businesses at the business to consumer part of the supply chain. Chain stores are very rare. They do exist but are small compared to the size of the Russian economy. Access to the Russian market in most retail businesses is through the wholesalers. These wholesalers can be large. 500 outlets is not uncommon in the clothing trade.
Wholesalers are not necessarily importers. Russia is large. Cities are far apart. There is a lot of added value simply in holding stock near to the point of demand. The wholesalers are not often multisite businesses for the same reasons as the retailers.
There are more than 20 agglomerations (the Russian for Conurbation) with more than 1 million people. All of these have a community of wholesalers.
We use the word distributors for handlers who may not stock a large range of items but may also add value through training, installation, servicing and maintenance. Typically this is business to business.
The discussion about wholesalers also applies to distributors.
Servicing and maintenance providers