Expand your business, 300 million consumers are waiting for your products, services
Make info about your products or services available for Russian speaking consumer audience of around 300 million people.
The 4th World's Most Widely Spoken Language
Today 290 million people (consumers) speak Russian. Russian is the 4th World's Most Widely Spoken Language (http://www2.ignatius.edu/faculty/turner/languages.htm) and the most geographically widespread language of Eurasia.
As regards modern times, Russian is the 4th language in the frequency of use in the world today, which enables one to say that Russian is an international and a go-between language for ethnic communities.
Russian is the first language of approximately 150 million people and has long served as a lingua franca for millions more in other countries. Russian is spoken in: Bulgaria, Canada, China, Czech Republic, Finland, Germany, Greece, India, Israel, Mongolia, Poland, Romania, Russia, Slovakia, Uruguay, United States, etc..
If we add the secondary speaker populations to the primary speaker populations, we get the following list:
(number of speakers in parentheses)
1.Mandarin Chinese (1.12 billion)
2.English (480 million)
3.Spanish (320 million)
4.Russian (285 million)
[George Weber's article "Top Languages: The World's 10 Most Influential Languages" in Language Today]
Vast Consumer Market
Russia is the fastest growing retail sales market in the world, with the potential to again double in size. Russia is ranked 2nd most attractive retail market in Global Retail Development Index. Hence, Russia has emerged as a big retail opportunity.
As most Eastern European countries slide on the Index, Russia holds its second place position. The country's economic attractiveness is clear: its retail market increased 19 percent and its GDP of $740 billion grew nearly 6 percent. As a result, the steady stream of new foreign retailers continues. Retailers continue to be attracted by not only the size of the Russian market, which is home to 143 million people and an estimated $280 billion in annual consumer spending, but also by its potential growth.
Russia's size of population creates enormous demand potential for all kinds of goods and services. Insufficient domestic supplies means the gap is largely met by imports.
The emergence of the consumer market in Russia has brought with it foreign investment, either directly in manufacturing and distribution, or through product sales. The region is increasingly becoming a focus of attention from many of the world's leading players.
Russia's re-entry into the world economic system has opened up an enormous and largely unexploited market for western goods and services. Russia possesses a well-educated work force and vast natural resources; given these conditions, business opportunities in the region can only increase over time. A large number of US companies have already established business relationships with Russia, and western European firms are even more actively investing in the region.
What's attracting international companies is the surprising strength of the Russian consumer, not just in Moscow but also, increasingly, in other cities catching up with the capital's breakneck economic development. Russia's gross domestic product grew by 6.4% last year and has averaged 7% growth over the past five years. Dollar income per capita has risen by nearly 29% per annum over the same period, faster even than in China.
Rising disposable income and a growing middle class have caused an explosion in all types of consumption. Last year, sales of new foreign cars reached 600,000, a 57% increase and a sixfold rise since 2001. Mobile-phone ownership has mushroomed from 3 million in 2000 to 80 million today. No less than a fifth of all households own a computer, four times the figure in 2001. "The most striking thing is the overall growth of consumer potential. It's shown by literally all measures," says Alexander Demidov, managing director of GfK Rus market research in Moscow.
At latest count, Russia was home to an estimated 88,000 millionaires, according to a study carried out by Merrill Lynch & Co. (MER ) and Capgemini. And it's not only the millionaires who are buying cars at the Rolf dealership chain, Russia's largest foreign-car importer and distributor, says President Matt Donnelly. He estimates that 8 million Russians earn at least $2,000 a month, and 3.5 million earn double that. "It doesn't sound like a lot, but they have masses to spend," he adds.
That's because some 70% of Russians' income is disposable, vs. around 40% for a typical Western consumer. "We have 13% flat income tax, subsidized housing and utilities, and 10% savings. The rest of it is pretty much out there being spent," says Natalia Zagvozdina, a consumer-goods analyst at Moscow investment bank Renaissance Capital.
No one should underestimate the consuming potential of Russia's wider public, either. Multinational food and drinks companies, the biggest consumer-goods investors in Russia, have already discovered that mass-market opportunity. "As soon as people step out of poverty, they become potential Nestlé customers," says Bernard Meunier, country manager for the Swiss food giant, which has pumped $500 million into Russia to date. Nestlé's most recent foray, a $120 million instant-coffee factory that opened in Krasnodar, in southern Russia, last November, was its first international greenfield investment for two decades. Why there? With an average of 250 cups per person per year, Russia consumes more instant coffee than any other country.
Analysts calculate that there's still plenty of potential for growth in fields such as tourism and financial services as well as consumer durables like automobiles, furniture, and electronics. Appliances giant Whirlpool Corp. is planning to make washing machines in Russia, in partnership with Turkey's Vestel Group. American Express Co. (AXP ) launched its first ruble credit cards in December, working in partnership with Russian Standard Bank. "This is a market for the future, and we think it's got real opportunity," says American Express Executive Vice-President Gary L. Crittenden.
There are still openings for relative latecomers to the market, too. "The results are far better than even our most optimistic forecasts," says Leszek Krecielewski, country manager for Ada (Mich.) direct-sales giant Amway Corp., which began selling cosmetics and detergents in Russia last March. Sales reached $110 million in nine months, above forecasts of $100 million for the first year, and were a big chunk of Amway's $600 million in European sales. The company projects Russian sales will rise to $200 million this year.
Will the consumer boom last? Russia's economy remains closely tied to global oil prices and could face an upset if prices plunge. Then again, persistently high oil prices mean economists are raising their forecasts of Russians' future income and consumption. Goldman, Sachs & Co. (GS ) predicts Russia will be the world's eighth-largest economy by 2025, with per capita income of $45,000.
Experts say Russians are natural born consumers who want to simply spend every dollar that they have.
The consumer market is one of the most attractive sectors of the Russian economy for investors. This can be seen in the results of a marketing study called "The Top 100 Emerging Companies of the Russian Consumer Market," which was conducted by an independent research company called Interactive Research Group (IRG) with the support of Deloitte & Touche, Societe Generale and Altium Capital.
"Consumer demand in Russia is on the rise as real incomes increase, most significantly in Moscow and St. Petersburg. This is evident not only in the quantity, but also the quality of goods and services demanded by Russians," said Evgeniy Gavrilenkov, Chief Economist of Troika Dialog investment bank, "It is increasingly common for consumers to pay premiums for well known brand names and product quality guarantees.”
MARIA VAKATOVA: I think that Russians in general are born innovators and splurgers. They like to spend the money and they are greedy for life in general, and they like to feel life to its full completeness. And if there is something new on the market, if something new appears this good or this service definitely finds its consumer.
EMMA GRIFFITHS: Some examples - DVD players, stereos and kitchen appliances are, in shopping parlance, walking out the door. Moscow is one of the world's biggest markets for mobile phones. And this year Russians have spent nearly $30-billion on cars. Those on the average income of just $400 a month are spending, too. They buy clothes and household items and treats for the pantry.
Some money is saved - stuffed under the mattress. But Maria Vakatova says the spending urge is strong in the Russian soul.
MARIA VAKATOVA: The first impulse of a Russian person when he gets his salary is to spend money and to buy something. And the first impulse of a westerner - how to save money. According to the same research, which is done in London, young people aged 21 years old, they already have their deposit accounts and their pension accounts. They start thinking what awaits them in the future when they become old when they're 21. And for a Russian person it's a little bit odd, I think.
EMMA GRIFFITHS: That may have something to do with the country's turbulent history. Russians still don't trust their banks, and political stability is a newfound phenomenon. For them it's a case of shop now, because tomorrow may be too late.
Retail trade benefits significantly from the growing income of Russians, as well as from Russia's political stability and economic recovery of the past few years.
Over the next four to five years, Russian retail trade is expected to grow intensively, stimulated by macroeconomic factors (GDP growth and increases in consumer income and spending), structural changes in the market, and steady increases in retail company efficiencies. Chain retailers with modern store formats stand to increase their respective market shares significantly.
This transitional period of dynamic growth in Russia's retail sector provides foreign companies with a unique opportunity to tap into a rapidly evolving market.
Expand your business, make your marketing materials available for Russian speaking consumer audience of 300 million people.
By Vadzim Yaskevich, Phd
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