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Russia: How to successfully enter the market

Russia has recovered from its deep economic crisis. Consumer purchasing power is increasing, the currency has stabilized and companies are again able to plan more reliably. So, is it the right time to enter the Russian market? Russia consultant Michael Kühn knows what Swiss and Liechtenstein SMEs need to consider.

Russia

The sheer size of the market is reason enough for Swiss SMEs to take a closer look at market entry in Russia. The prospects for success are particularly pronounced in the consumer goods or food processing/packaging industries – but not only there. However, companies that want to risk a venture in Russia need to consider a few basic aspects.

Logistics is key

Russia is a huge country and the logistical challenges may seem correspondingly large. But Michael Kühn says this is not the case: “Russia is a gigantic country, but the market is highly centralized. Virtually all Russian companies active in the import business have their headquarters either in Moscow or in Saint Petersburg. And if not their headquarters, the purchasing and sales organizations are certainly located there. This makes things relatively easy for Swiss companies.” S-GE’s statistics confirm this: 80% of all mediated companies have their headquarters in Moscow, 20% in Saint Petersburg.

Smooth customs clearance is the rule

Russia expert Michael Kühn leaves no doubt that exporting to Russia is more complicated than exporting to the EU. For example, Russia has its own certification systems; the CE certifications common in the West do not apply. For this reason, almost all products must undergo a certification or declaration process. This can be quite a hurdle in terms of time and money. But Michael Kühn is optimistic: “Once the necessary clarifications have been made and all documents have been compiled, goods usually make it across the border without any hitches. Western companies are not discriminated against, and customs clearance is electronic.”

Protracted and costly certifications

While declarations require an administrative effort of a few weeks and normally cost a few hundred to a maximum of one thousand francs, the situation is different for any necessary certifications or clinical tests. These can take a long time and cost thousands of Swiss francs, especially in the medtech and mechanical engineering sectors. The food industry also faces problems, because new import licenses for milk and meat products are currently not being issued. While existing import licenses are not affected (companies that already export food to Russia can continue to do so), all new applications are ending up on a waiting list. Nevertheless, Michael Kühn sees Swiss SMEs as having an advantage, because unlike the EU, Switzerland has imposed no sanctions on Russia. Swiss SMEs can, for example, export certain foodstuffs to Russia, while EU companies are not allowed to do so. However, there are measures in place to prevent Switzerland from circumventing the international sanctions and they must be strictly observed by Swiss companies. In addition, Swiss companies must be aware that in industries such as the MEM industries, export licenses from the Swiss authorities are often required. This process can also delay or even completely prevent an export. S-GE can help in clarification when an export license is required.

Finding the right freight forwarder and business partner

Despite electronic processes and rapid customs procedures, our Russia expert advises all export companies to work with a good and experienced freight forwarder in order to enter the market. “No matter how well prepared you are for crossing the border, if there is no reliable partner on the other side, the chances of success are slim,” says Michael Kühn. Cooperation with a Russian partner is imperative, but how difficult is it to find one? “It's not easy, but it is worth the effort.” However, attempting to find one from Switzerland alone is almost impossible, which is why S-GE offers targeted help to all interested Swiss companies. “We know which business partners to rely on, and support SMEs in their search for the right partner, as well as with the development of the appropriate sales strategy.” Find the right business partner in Russia

Overcoming cultural hurdles

“I see again and again that the hurdles are initially quite high. But once business relationships have been established and Swiss SMEs have a local presence, they see that many things are very similar to back home,” says Michael Kühn, summing up his experience with Russian business partners. There is a big difference when it comes to the separation of the world of business and private lives. While clear lines are drawn in Western Europe, he sees this border disappear in Russia: “Agendas and structured meetings are not the main focus in the beginning; Russian entrepreneurs want to build up a relationship of trust first. This sometimes includes private activities such as family parties or fishing trips.”

Business negotiations are always a matter for the boss

Swiss SMEs interested in export must also be aware of the ubiquitous bureaucracy and the fact that Russian CEOs always want to negotiate face to face with their meeting partners. “A country or divisional representative of a Swiss SME cannot really do very much in this regard. Even if they posses all the necessary decision-making powers, negotiations with Russian companies are always a matter for the boss,” our Russia expert explains.

For which industries is taking the step towards Russia particularly worthwhile?

Not all industries enjoy the same conditions for market entry in Russia. Currently, the situation is particularly interesting for the civil aerospace and aviation industry. Michael Kühn also sees good prospects for the consumer goods market: “S-GE was able to successfully support several exciting projects for Swiss food and cosmetic products and to find good Russian sales partners. The interest in high-priced products is certainly there, thanks to an increasingly affluent clientele in the big cities.” The still-valid regulations, according to which state Russian companies have to work with products "Made in Russia" in public tenders, often complicate exporting to Russia. But Michael Kühn knows the industries and niches in which the required Russian in-house production is not stipulated, or does not even exist. “For Swiss companies from the packaging sector, food processing and partly from the IT sector, the opportunities are now quite good.” Market analysis for Russia

Exporting to Russia?

Would you like to explore your business opportunities in Russia with no obligation? Contact Michael Kühn today to discuss your export project. At Switzerland Global Enterprise, we offer you initial free country consultations, prepare more detailed market and competition analyses according to your needs, support you in your search for the right business partner, and inform you about legal regulations.

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