The war against Ukraine unleashed by Russian President Vladimir Putin brought Russian business back to the 1990s. The massive exodus of foreign brands has opened up a wide window of new opportunities for small entrepreneurs at home, writes Bloomberg. The publication compares the current period with the beginning of the 90s, when the Soviet Union collapsed, stable trade relations were disrupted, and the population suffered from a shortage of a wide range of goods.
As an example, the agency cites the experience of 37-year-old Victoria Shelanova, a social media manager from Moscow: together with her sister Yulia, they organized the production and delivery of life jackets from China. The non-obvious choice in favor of importing vests was helped by her sister Yulia, an avid wakeboarder, who noticed that after the exodus of foreign companies from Russia, she could not find a worthy option. So they came up with the idea to look for a Chinese partner for Western brands and negotiate their own supplies to Russia. They contacted a potential partner in China via WeChat, the largest Chinese social network, after which they received 20 samples. Having chosen the one they liked the most, they ordered 100 pieces to sell them in Russia.
“We think that there will be a huge demand, but there is no competition yet,” Victoria is sure.
The agency notes that the Russian service "Avito" is full of ads with foreign goods. You can get 173,000 ads just by requesting Gucci. At the same time, entrepreneurs organize their supply chains, for example, the iPhone or other high-tech products through neighboring countries, mainly through the former members of the USSR. However, geography is not limited to neighbors: one of the businessmen, who asked for anonymity, said that he registered a company in Dubai and began importing gold to the United Arab Emirates (UAE). He estimated the profit from such a business at 40%, he spent this money on the purchase of automotive parts and other goods, the urgent need for which is now observed inside Russia.
The agency notes that such a level of support for small businesses has not been seen for a long time. On the website of the Ministry of Economic Development, for example, you can find information about providing soft loans to entrepreneurs who are engaged in parallel imports, and Russian President Vladimir Putin himself demanded that the authorities not touch such businessmen, because this is the only way to effectively deal with sanctions.
“There is only one way out of the conditions in which we are now – to provide maximum freedom to people who do business,” Putin said.
However, even this freedom does not always help. Finding an original gearbox for a BMW or Toyota in Russia is still almost impossible, and car maintenance has sometimes increased in price by several times. The situation is even more acute in the aviation industry, where Aeroflot had to “land” about a quarter of the fleet in order to use these ships for cannibalization, that is, dismantling for spare parts for the still flying part of the fleet.
The fate of foreign brands that have decided to leave Russia is also not obvious. Owners of popular franchises, for example, simply cope with the departure of multinational companies by changing familiar signs to ones that are as close as possible to them: Krunchy Dream instead of Krispy Kreme, Stars Coffee instead of Starbucks and Pizza H instead of Pizza Hut (at the same time, instead of the English "H", there is now Russian "N").
The companies that have announced they are leaving or reducing their presence in Russia are still undecided – for example, these include giants Danone, Unilever, Mondelez, condom manufacturer Durex Reckitt Benckiser Group and British American Tobacco. The owner of the luxury brands Gucci and Yves Saint Laurent, Kering SA, although it closed its stores in Russia, did not leave the country. The CEO of the company claims that this helped protect their trademarks in Russia. The agency notes that only 5% of foreign companies have completely left Russia, but half have reduced their presence in the country.
Some market segments are being completely replaced by Chinese alternatives. Such trends can be observed in the automotive market or in the consumer electronics market. The best-selling smartphone last year was Xiaomi, although for a long time the leading positions in the Russian market were occupied by Samsung smartphones. On the example of Yulia and Victoria, the agency hints that the boom of small business in Russia is starting to emerge again. The girls are planning to increase sales volumes and expand the assortment in conjunction with Chinese partners.
“We have already found one that makes wetsuits for Roxy, but we are looking for other companies,” Yulia says.
It is not possible to assess the real consequences of the collapse of imports to Russia for specific industries, since Rosstat has stopped publishing data on trade turnover. However, you can get an idea based on the statements of officials and indirect statistics from the Bank of Russia. According to the Central Bank, in 2022, the volume of imports in monetary terms fell by 23.5% ($89.3 billion) to $290.7 billion. The authorities expected that parallel imports in 2022 would amount to at least $20 billion.