Russia - Country Commercial Guide
Selling Factors and Techniques

Identifies common practices to be aware of when selling in this market, e.g., whether all sales material need to be in the local language.

Last published date: 2020-11-13

Overview

Adapting sales and marketing strategies to Russia’s business climate is a key factor that determines whether a product or service offering is well-received.  Customized market research is required to identify opportunities and potential Russian business partners.  The choice of a partner is key and should be done only after conducting sufficient due diligence to determine a partner’s reputation and reliability.  The U.S. Commercial Service can provide customized services, which may include market research, promotional events, partner and buyer identification, and due diligence services

Both before and after launching operations, travel to Russia is strongly recommended to establish and maintain relationships with business partners and to understand the realities of doing business in the market. While the recommendation of a visit remains for those considering the Russian market, the U.S. Commercial Service recognizes the realities of travel restrictions in a pandemic, and has successfully implemented a video conferenceing model based on the Webex platfrom to connect parties and establish a dialogue.  Marketing in Russia requires patience, and exporters should maintain a long-term perspective and not expect immediate results.  It can be helpful to network with companies and business organizations, such as the American Chamber of Commerce in Russia (with offices in Moscow and St. Petersburg) or the U.S.-Russia Business Council (headquartered in Washington D.C.), whose members have a track record of success in an array of industries.

Business planning should include advertising and marketing/promotion.  When recruiting personnel or identifying business partners, local talent should be considered, especially for government relations, which can be of critical importance for certain industries. Professional services of all kinds, such as law, accounting, and engineering are readily accessible.  “Absentee” management should be avoided, because it is important to communicate regularly with Russian business partners, customers, and clients to ensure a common understanding of expectations.  Partners can assist with required testing and certification, after-sales service, customs clearance, warehousing and preparation of Russian-language marketing and instruction materials.

Every foreign product intended for sale in Russia needs to have a description in Russian that includes information about its contents, manual/use explanation, manufacturer, importer, certificates, etc.  For more information please refer to the Russian Law “On Protection of Customers’ Rights”.

Business should always be conducted in compliance with all Russian laws and regulations (taxes, customs, labor, etc.), as well as applicable U.S. laws and standard business practices, including corporate governance and accounting practices.

Exporters should avoid selling on open account terms until they have developed a well-established track record with a given buyer.  Letters of credit and other secure financing vehicles are possible. Exporters should be prepared to adjust prices according to currency fluctuations.

Russian purchasers are generally sophisticated and highly educated.  Russian purchasers may be price sensitive, but are frequently willing to pay for quality, especially for recognizable and reliable imported brands.

Trade Promotion and Advertising

Television, radio, print, and billboard advertising are ubiquitous in the Russian market.  Most international advertising agencies are active in Russia along with their domestic counterparts. 

The Association of Communication Agencies (ACAR) estimated Russia’s advertising market at 469 billion rubles ($7.3 billion) in 2018, up 13% growth in 2017.  Accounting for the production of creative products, advertising goods, and payment for agency services, the total value of marketing communications is estimated at 810-830 billion rubles.

The following summary of 2017 Russian advertising market performance was derived from the Russian Association of Communication Agencies experts.  The numbers from 2011-2016 have been compiled by CS Russia from Russian Association of Communication Agencies reports.

Segments

2018 (Rubles, billions)

2017 (Rubles, billions)

2016 (Rubles, billions)

2015 (Rubles, billions)

2014
(Rubles, billions)

2013
(Rubles, billions)

2012
(Rubles, billions)

TV

187

170.9

150.8

136.7

159.2

156

143.2

Inc. Terrestrial Television

179.8

165.6

146.9

134.2

155.7

152.2

139.9

Cable

7.3

5.3

3.9

2.5

4.1

4

3.31

Internet

203

166.3

136

97

84.6

71.7

56.3

Incl. Media Advertising

n/a

n/a

n/a

18.7

19.1

20.1

17.9

Contextual Advertising

n/a

n/a

n/a

78.3

65.5

51.6

38.4

Press

18

20.5

19.0

23.3

33

37

41.2

Incl. Newspapers

n/av

8.7

5.4

6.5

8.1

8.7

9.5

Magazines

10.8

11.9

10.7

11.6

16.5

18.5

20.1

Advertising Periodicals

7.2

n/a

3,6

5.3

8.5

9.9

11.6

Outdoor Advertising

43.8

33,8

31,4

32

40.6

40.7

37.7

Radio

16,9

16,9

15,1

14.2

16.9

16.5

14.6

Total

468.7

417

n/a

307

340.1

327.8

297.8

 

Source: Association of Communication Agencies in Russia

Pricing

Russian consumers are attracted to bargains but are increasingly able and willing to pay a premium for quality merchandise. U.S. companies exporting to Russia should be prepared to offer competitive prices for their goods, since there are inexpensive Russian products on the market, and strong competition from Asian and European companies. With a few exceptions, goods and services sold in Russia are subject to the value-added tax (VAT) of 20%, which is assessed on the cost, insurance and freight (CIF) value of an imported shipment, plus applicable duty. In addition, with strong local and third-country competition in many industry sectors, it is advisable to invest in advertising and brand promotion.

Sales Service/Customer Support

Reliable after-sales service, training, and customer support can be a major competitive advantage for U.S. firms entering the Russian market, as Russian manufacturers are known for inadequate after-sales service.  Similarly, buyers of sophisticated equipment ranging from computers and process controls to medical and mining equipment are keenly interested in training, as their employees may have never previously used particular technology or brands.  U.S. firms willing and able to offer training and support for products, particularly at remote sites, could gain a significant advantage over competitors.  Conversely, companies unwilling to make this commitment may find themselves at a distinct disadvantage relative to European or Asian companies, whose proximity readily facilitates training and service.  After-sales service is also often an important component in leasing arrangements in Russia, and will play a larger role in the acquisition process as leasing continues to develop.  Companies that offer training in the United States or Russia are advised to start the visa process as early as possible - issuance of both Russian and U.S. visas can take up to several months depending on the type and time of the year (the summer period is particularly busy).  The American Chamber of Commerce in Russia and U.S.-Russia Business Council offer their members expedited visa appointment services.

Local Professional Services

While professional services are expensive, attempts to avoid such expenditures can be penny-wise and pound-foolish.  In Russia’s unsettled commercial environment, early and ongoing advice on tax and legal issues will ultimately mitigate administrative and compliance costs over the long-run.  Russian commercial regulations are contained in thousands of presidential, governmental and ministerial decrees.  These decrees and laws often overlap or conflict, and determining tax obligations is a complex task.  Moreover, Russian accounting practices differ from Western standards and the adoption of international accounting standards is still far from complete.

In Moscow and St. Petersburg, there are many offices of major Western accounting, legal and consulting firms blending the skills of Russian and foreign professionals (e.g. Deloitte, Baker McKenzie, EY, KPMG, PWC and others).  Competent smaller firms also operate under Russian or U.S./European management.  U.S. firms should avail themselves of locally based specialists familiar with issues confronting Western firms in Russia.  The U.S. Commercial Service in Russia maintains a roster of local attorneys and accounting firms in our list of Business Service Providers.  The American Chamber of Commerce in Russia www.amcham.ru is also an alternate source of contacts and information.

Principal Business Associations

Following is a non-exhaustive list of significant business associations active in the Russian market.  As with all such lists of associations in this report, this list is provided for informational purposes only, and does not constitute endorsement of particular policy positions that a given association might take.

American Chamber of Commerce in Russia 

U.S.-Russia Business Council

Russian Direct Selling Association

Russian Association of Internet Trade Companies

Russian Association for Electronic Communications

Russian Association of Communication Agencies/Russian Association of Advertising Agencies

Association of Russian Banks

Association of Advertisers

Russian Brand Owner Association

Association of Russian Retailers

Federation of Restaurateurs and Hoteliers

National Packaging Confederation (NCPack

Russian Software Association (Russoft)

Information & Computer Technologies Industry Association (APKIT)

International Medical Device Manufacturers Association (IMEDA)

Innovative Pharma

Association of International Pharmaceutical Manufacturers (AIPM)

Limitations on Selling U.S. Products and Services

In Russia, several important laws have been adopted in recent years in the field of personal data.  These efforts to improve the legal framework have resulted in significant complications for market players, as many aspects of the legislation on personal data collection, storage and use have become particularly demanding and implementation may be burdensome and costly for international market participants.  The 2014 law requiring that companies operating in Russia store their users’ or clients’ personal data on servers located physically in Russia is an example of how evolving regulatory practices can place a burden on U.S. firms.

Another restrictive law, Federal Law No. 188-FZ “Concerning the Introduction of Amendments to the Federal Law “Concerning Information, Information Technologies and Information Protection” and Article 14 of the Federal Law “Concerning the Contract System for Procurements of Goods, Work and Services to Meet State and Municipal Needs” signed on June 29, 2015, provides for the creation of a “unified register of Russian computer programs and databases” and a partial prohibition on the procurement of foreign software and databases for Russian government needs.  The law was enacted on January 1, 2016.  The signing of this law forms part of the import substitution policy laid down in the Russian Government’s crisis response plan.  Under the new rules, software will be recognized as Russian only if it has been entered in the Unified Register. The law defines basic criteria for including software products in this register. Russian right holders should possess exclusive rights on software, software should be freely handled and distributed in Russia, the amount of licensed and other contributions in favor of foreign right holders should be no more than 30% of revenue from software implementation. Data stored on foreign software should not contain national security information and Russian right holders should possess the exclusive right for the entire operating term.  Only software listed in the Unified Register may be purchased to meet federal and municipal needs.  The law states that in order for exceptions to be applied, the buyer will have to prepare a statement explaining why the restrictions cannot be observed.

In February 2015, Russia barred foreign medical device manufacturers from participating in government tenders for a specific list of medical devices (mostly low-technology goods) if at least two producers from EAEU member countries participated in the tender.  In December 2016, the Russian government expanded the list of covered goods to include 86 additional products (such as gauze and cotton dressings, glucometers, defibrillators, and certain types of tomography scanners).