Export Knowhow

How to build a successful partnership with Russian distributors

Working with distributors is an effective way for Swiss and Lichtenstein companies to enter the Russian market. It gives the company an opportunity to relatively quickly generate sales through the network of the local partner. However, despite its numerous advantages, this approach also has its limitations. In this article we will point out some aspects specific to the Russian market, as well as the pitfalls to avoid.

Russia

Advantages of a distribution model in Russia

The collaboration with a distributor facilitates the market approach for a Swiss exporter and allows to organize sales conforming to the model «1 market = 1 partner». With almost no fixed costs, this approach simplifies marketing, sales and import activities, facilitates the procedure of bringing goods to the market and liberates the Swiss exporter from regulatory issues that usually are undertaken by the distributor.

The majority of Swiss consumer goods, food products, ingredients, as well as equipment and machinery are represented in Russia by different distribution companies.

Keys to success

The choice of the right partner is crucial and is a key element for future success. A due diligence check of the potential partner should be a mandatory step before signing any agreement.

An exclusive partnership helps to structure the market and to build a coherent sub-distribution network. Taking into account the geographic dimensions of Russia, it is recommended to discuss carefully a distributor’s coverage before granting exclusivity.

Swiss exporters should bear in mind that the difference in business culture between Switzerland and Russia can be considerable. In our experience, any success story of a Swiss brand on the Russian market is based on a regular communication between both sides: Skype calls, sales meetings, trainings and regular visits to Russia should be an essential part of the market development in order to control commercial activities and avoid miscommunication.

If the contact with the final consumer is an important part of your sales strategy, you will probably be obliged to heavily invest in the training of your distributor’s sales team. In this case, you may want to consider out staffing a salesperson located in Russia or even creating a local representation office in order to retain the market knowledge and to keep relationships with the final customer.

Legal aspect

The Swiss Business Hub Russia recommends to include the following clauses in the distribution agreement with a Russian partner as a way to secure control over their commercial activities:

  • Detailed product description with its peculiarities
  • Exclusivity or non-exclusivity of the contract
  • Geographical area of agreement
  • Sales volumes and penalties from the manufacturer in case of non-performance of the sales targets
  • Price forming structure on the local market (note that Swiss and Russian accounting systems differ)
  • Consumer protection regulations
  • Procedure for selecting sub-dealers by the distributor (signed off by the Swiss exporter or not)
  • Intellectual Property rights
  • Conditions of contract revising

In addition, a service agreement on marketing costs share or a license agreement covering transfer of intellectual rights can be concluded.

It is recommended to determine the Russian law as applicable and act under Russian jurisdiction. In case of non-payment by the Russian side, the compensation will be received quicker and will involve less expenses than under Swiss legislation.

Support for Swiss exporters from the Swiss Business Hub Russia

The Swiss Business Hub Russia assists Swiss and Liechtenstein companies in distributor search in Russia. Based on a detailed discussion with the Swiss exporter, Swiss Business Hub Russia establishes a verified long list of Russian importers, according to the «ideal business partner profile», provided by the Swiss company.  The second step includes an in-depth research and pre-evaluation of a business partner based on a specific profile and requirements. The results are approx. 3 – 5 potential business partners who fulfill the criteria and have a serious interest in further discussions about a potential cooperation. The final choice will be made by the Swiss exporter after in-person business meetings.

Are you looking for a distribution partner in Russia?  Get in contact with Michael Kühn, Senior Consultant Russia

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