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DEAR COLLEAGUES, 

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Must Have Things for Market Entry in Russia

From our experience in a number of projects with different International Companies there are several things which are to be considered by International Company before entering Russian market.

It is hard to predict success of exact product or International Company before you get response from the market but there are several must-have things and it is easy to predict failure if International Company does not have these things. 

If International Company is not willing to adjust products for Russian market, do necessary marking and certification or alternatively to find partner or distributor who make it Company will most likely fail on Russian market.

Please find a scope of must-have things for International Company to be able 
to enter Russian market using distributors network:


- International Company should be manufacturer otherwise it might be bypassed in future. 

- Goods are to be prepared to be sold through distributors network.

- Manufacturer should have strength and success history on other markets (Company makes good products at a reasonable price, price calculation should be made on DDP point in Russia terms).

- Manufacturer should be ready to adjust products to Russian market (TR CU certification, marking of items in Russian language, etc, or alternatively to cover the cost for certification to distributor).

- Manufacturer should be ready to provide free samples for testing to potential distributors.

Regards, Yury

How Saint-Petersburg Business Gate Can Assist Your Business In Entering Russian Market (One of the Options)

One of the options we can offer our Customers is Introduction Project.

Project time: estimated 60 days.

In details project will look like below:

1) Through our partners in inbound logistics we check import statistics for main Customs offices in Moscow and Saint-Petersburg using HS code and figure out main importers of specified products.

2) Then we check listed importers through open sources and shortlist to 10-20 Companies sorting out technical Companies used for import. 

3) Then we contact shortlisted Companies including:

a) Preparation for telephone call which is normally checking company profile in internet plus company website contacts page to get better understanding of person in charge (if applicable, some websites does not have this info).

b) Preparation of brief introduction message to win attention. To our experience if you just call and offer you get 98% of negative answer on phone. The reason is that in recent years there have been increase in telemarketing and cold calls and employees consider them as a spam. So you need in 1-2 sentences draw attention and get required contacts of person in charge. 

c) Call and follow-up.

Telephone call is to be followed by e-mail with clear offer specifying main offer details as MOQ, delivery time, price, quality certificate, tech specs. The offer should be written in simple words without complications, but must be clear and without any kind of mistakes including spelling mistakes. It should be easy for potential Customer to test your products so postage of 2-3 free samples is must have option. 

d)Then after a period of time 2 days to a week second approach is made via telephone or e-mail or both to get feedback.

Feedback might be either positive or negative. In this case positive feedback will be willingness to test your product, negative answer will be - not interested.

So basically project is introduction of your product including price to 10-20 Distributors / Customers  by means of calling followed by e-mailing, getting feedback from them and making summary back to you.

As a result of the project you will get summary of feedback from Distributors / Customers which you will then follow-up your side.

Looking forward to your inquiries.

HINTS ON ESTABLISHING DISTRIBUTORS NETWORK IN RUSSIA

Creating Distributors Network is one of possible ways to enter the market with minimum costs.

In this case you do not need many employees or resources as sales to End Users are handled by Distributors.

Another benefit is that you do not need to interact with local tax people, Customs or other authorities as this will be done by Distributor.

Also with distributors network you can cover bigger territory than just using your own sales office.

Among negative factors is less control on communication with End Users, so you can not be sure for 100% that your product is positioned correctly and sold for correct application.

This should be considered especially for technically complicated products where engineering advices are so important from the Seller to choose right product for right application.

HINTS:

1. To create effective distributors network it is better to have 2-3 distributors covering the area.

If you create only 1 distributor selected Company-distributor might start to be too demanding, because they will understand that your sales targets are relying only on them.

If you create too many distributors it will most likely be not interesting for distributors as cross competition on the products will be too high meaning contribution margin by distributor should be set to minimum.

2. Please prepare winning arguments for distributors and ensure these arguments are applicable for exact market.

It might be extended warranty, free samples, increased quality, reduced price, variety of choice or combination of above.

3. Please make training to distributors and ensure they understand your product correctly.

4. Please ensure good Customer care and timely reply on questions of distributor.

5. It is always better to have a specialist with local market knowledge coordinating distributors network.

Regards, Yury

HINTS ON DOING EXHIBITIONS IN RUSSIA

One of promotion methods is exhibiting on thematic exhibitions.
Main exhibitions are usually held on annual basis or every second year.

When you are already operating on the market exhibition is a good chance to demonstrate new items, meet existing Customers and search for new Customers, but we will mainly talk  of exhibiting before entering the market.

Exhibiting before entering market can have following advantages and disadvantages.

Advantages: 

1) Inviting potential Customers and existing sales leads to stand and possibility to conduct big number of meetings in 3-4 days in one place with possibility to show samples of goods you produce.

2) Getting general input and information about the market visiting stands of Competitors and conferences which are normally a part of business programme of main exhibitions.

3) Growing brand awareness in specified region.

Disadvantages:

1) You might be visited by not relevant businesses or not decision makers unless you have sent invitations to key persons of potential Customers in advance.

2) Without preliminary market research you might find out that your competitors have better offer on the market or that your product is not ready for local market.

3) Costs for exhibiting are relatively high and there is possibility that future profit and opportunities will not cover costs.

HINTS:

- Before taking decision to exhibit in Russia please do marketing research first to get general understanding of the market.

- Some of the tasks can be first time performed by attending exhibition as a visitor which can save your budget.

- Usually exhibition have long-term effect and not always bring short-term results or immediate orders.

If you have decided to go ahead and have exhibition stand below action plan can be used to proceed.

a) Choose stand location and define stand area and setup.

HINTS:

- It is better when your stand is situated alongside main walkways or crosses of main walkways.

- If your stand area is less than 20 m2 it is better to book near smaller stands, than your stand will look bigger in comparison.

- Please ensure sufficient light to highlight the stand.

- Make your stand higher to ensure stand dominates the area and can be seen from different angles.

- It is better to built locker room on the stand to avoid pilferage and place fridge, coffee machine and spare samples or give aways.


b) Make a tender for building a stand and appoint stand builder. 

Even if majority exhibition organisers offer ready solutions you might need to hire an independent Company to build your stand. From experience sometimes if you go for standard solution offered by organisers you get ordinary looking stand with old furniture, problems with electricity, etc.
Professional stand builder will make design and ensure all your expectations are met including graphics, furniture, fridge, coffee machine, snacks, etc. Goodlooking stand can be built even on small area as below example (design is by Expostroy LLC)

c) Ensure that samples and marketing aids are sent on-time and you have proper partner to clear goods in Russia and bring them to the stand.

Russian certification might be needed for goods being imported, so please take care about it in advance. As an example TR CU certificate was required to import catalogues to the stand.

d) Make visitors of your stand feel comfortable.

- Coffee or tea with chocolate or sweets will make conversation longer if needed.

- Give aways are always appreciated by visitors.


HINTS:

- Make sure you have written down visitors contacts and topic of discussion as otherwise it will be hard to remember the subject of discussion.

- Please take into consideration that last day of exhibition is usually no good for business contacts after lunch and many exhibitors are  starting to pack the stand.

- Follow up sales leads continuously after exhibition. From our experience it is normal practice when
everybody is following up new contacts in 1 or 2 weeks after exhibition but after 2 months majority of contacts and sales leads are being forgotten. It is always better to make several approaches.

Note: (To drink or not to drink - that is the question.)

Some visitors prefer alcohol to be present on the stand but we do not recommend to attract visitors with alcohol. Even if alcohol to some extent might be used during meetings with already established partners / customers, with new Customers regular business discussion with tea or coffee is more recommended.

Best Regards, Yury

BUYING PROPERTY FROM BANCRUPCY AUCTIONS IN RUSSIA

BANCRUPCY AUCTIONS IN RUSSIA 

How it works?

When Company is going bancrupt in Russia its property is being sold on auction. Auctions details are being published in "Kommersant" newspaper on weekly basis every Saturday. Goods which are being sold on auctions include all type of property, equipment, machinery, cars, etc.  We are mainly buying on third stage of auction known as a public offer. Difference from first two auction sessions is that Price during public offer (3rd auction) is going down over a period of time before asset is being bought or minimum price is reached. 

Bancrupcy auctions are held on web-based electronic trade portals. Now it is more than 150 different electronic platforms where bancrupcy auctions are held, but principles of operation are the same for all of them. Buyer should register in advance and get authorisation by providing necessary legal documents. Also a prepayment to specified account is being made before your bid is being submitted. After changes in legislation on bancrupcy auctions in 2014 winner is defined as a Company which offered maximum price during corresponding active period of auction provided it has all necessary documentation in place.

Are foreign Companies able to buy from bancrupcy auctions in Russia?

Yes, foreign Companies are able to buy from bancrupcy auctions but all required documents should be translated and verified into Russian. Also some type of land is only available for rent to foreigfn companies (for example land near state border, farm land, sea ports land, etc). Taxation for foreign Companies differs from taxation to Russian Companies as well.

What are main benefits of buying from bancrupcy auctions in Russia?

Main benefit of buying from bancrupcy auctions is that you can buy property, production facilities, warehouses and other assets in Russia with considerable disount from market price. Usually it is 20-30% discount, but in some auctions it reaches 70% discount. 

What are main concerns when buying from bancrupcy auctions in Russia?

Main concern is that you are buying from bancrupt company. It means you need to check assets very carefully, because it is really hard to get your money back in case you bought something and did not like it. In fact money goes not to bancrupt company but to its creditors who are not likely to give money back after they get it.

What does Saint-Petersburg Business Gate offer our Customers?

We offer agent services for buying from bancrupcy auctions in Russia including monitoring of required property or other assets, requesting documents for assets being considered, preparation of documents for auction, handling auction procedure on electronic platform.

ADVANTAGES OF USING SALES REPRESENTATIVE IN RUSSIA

What advantages international business can recieve by using Sales Representative in Russia?

1. Sales
Main advantage of using Sales Representative in Russia is that you gain access to really big market. Russia is a huge area which is more than one-eight of the Earth's inhabited area.

2. Minimization of your business risks on the market
Using Sales Representative in Russia you do not need to register branch office or representative office in Russia. This means you do not need to interact with numerous Russian Authorities which will definately save your time and nerves.

3. Flexibility 
When using Sales Representative you can quickly change your presence on the market depending on the situation and market condition.

4. Cost Effectiveness
When using Sales Representative you pay monthly fee plus percentage from sales turnover. You do not need to pay for office costs, salary to your employees, payments to social funds, etc.

5. Overcoming market peculiarities
Russian business model still have some peculiarities, using Sales Representative gives you knowledge of tricks and traps which cannot be seen from first sight.

These are advantages of using Sales Representative in Russia, but there are disadvantages as well:

Main disadvantage is that Sales Representative Company is not your Company but your Representative Company. If Sales Representative is not professional or does not have necessary experience in international trade it may have negative influence to your sales figures.

Another possible disadvantage is misunderstanding between Parties which may occur especially on first stages of collaboration.

HINTS: 

1. Discuss your proposal to Customers in Russia in details. Ensure your Sales Representative understands your Company sales policy the same way that you do. (Sales pricing, Discounts, Terms of Payments. Minimum Order, Incoterms, etc.)

2. Use professional Sales Representative. This will save your time and money.

Regards, SPB BUSINESS GATE