Russia is among world’s countries with the strongest economies. According to Export.gov, this country takes 12th place in world’s rate of the gross domestic product. Russia’s purchasing power parity accounts for the 6th place, which means there are many potential customers who have money to buy new products. Since it has a vast population (144,096,812, according to GlobalEDGE), and a quite high rank in Ease of Doing Business (40 from 190), the Russian market is attractive for foreign investors. In addition, the America’s business ventures are familiar with working in Russia, as the United States is among Russia’s most important foreign investors.
Nevertheless, modern Russia struggles with financial problems, which may complicate doing business there. Since the 1990s, Russia has been strongly relying on oil export, and the current decrease of oil prices had a negative impact on its economy. In addition, due to Russia’s annexation of the Crimea and conflict in eastern Ukraine, the United States and European countries have imposed economic sanctions on Russia. As a result, states Export.gov, the Russian economy struggles with recession, and it is harder to export there. Despite sanctions, U.S. government still offers several financial support programs for exporters, for example, the Small Business Administration.
Since I own a company that produces niche perfumes, I am interested in expanding my business. According to Export.gov, the local market of makeup and perfumery goods has not suffered from economic recession as bad as others. In Eastern Europe, Russia accounts for 50 percent of the region’s beauty retail market. Moreover, Export.gov cites experts who predict a substantial rise of cosmetics sector in 2018. Traditions and social norms require Russians to take care of their appearance, and they are not likely to cut their expenses on skin care, makeup, and perfumery. In addition, they prefer to purchase expensive high-end products and always look for innovations on the market.
In terms of perfumery, the Russian market is very attractive for a foreign investor. The local population is likely to buy luxurious exclusive perfumes and avoids cheaper middle-market and mass-market brands. Russians’ interest in high-end exclusive products explains the rise of sales of niche perfumery, states Export.gov. Novaya Zarya is the only noticeable local perfumery brand, and the market’s leaders are foreign companies. Therefore, it is very likely that an American brand of niche perfumery will successfully export to Russia.
Because of cultural and legal differences, doing business in Russia is challenging. Export.gov argues it requires a lot of time and resources to export there. The key is finding reliable business partners who will represent the investor and distribute their products. Legal consultations, communications with other foreign investors and business partners are obligatory for successfully exporting to Russia.
According to Export.gov, the vast majority of American exporters prefer to rely on local distributors who are mediators between an investor and clients. Normally, Russian distributors provide selling, delivery, and logistics; however, due to legal restrictions, they are not likely to promote their clients. Distributors cooperate with local retailers, and this is important for my company because it is typical for Russians to buy perfumery in beauty chain shops. Two major retailers of luxury perfumery are local companies Rive Gauche and Ile de Beaute that are present throughout the whole country. Cooperating with them will ensure that the vast majority of consumers has access to my products.
Overall, despite difficulties, it is possible to establish a successful export to Russia. The local market has a high demand for certain products, and consumers continue purchasing them despite economic recession. Since experts predict the future rise of beauty sector in Russia, it is reasonable to look for opportunities to cooperate with local distributors and retailers.
- “Russia Country Commercial Guide.” Export.gov. N.p., n.d. Web. 27 Apr. 2017.
- “Russia: Introduction.” GlobalEDGE. N.p., n.d. Web. 27 Apr. 2017.