20 April 2011
4.8 Practical recommendations
Partner with local retailers with extensive distribution networks
In order to succeed in the gigantic Russian consumer market, new-to-the-market companies must pay attention to the changes in consumer preferences and product trends in Russia. Given the fact that it would be almost impossible for Hong Kong companies to fully appreciate the nuances of appetites and tastes exhibited in the 140-million-strong consumer base across Russia, it would be practical and advisable for them to look for reliable local partners when making a debut in the market. In this context, the aforementioned nationwide retailers can be prospective and potential partners for Hong Kong exporters. Thanks to the fragmented market structure, Hong Kong companies can have a reasonably high chance of securing good deals, while taking advantage of their Russian counterparts’ extensive distribution network with outlets throughout the country. Another advantage of this kind of partnership stems from the fact that these nationwide retailers usually have their own freight forwarders, customs agents and brokers for customs clearance, which is of vital importance to the survival and success of new-to-market Hong Kong suppliers in Russia where bureaucracy and corruption can be an overwhelming burden.
Win business by increasing flexibility and providing value-added services
Hong Kong exporters should be more flexible in accommodating the needs of Russian importers and traders. For example, Hong Kong exporters should be more accommodating to small orders with short lead times from small- and medium-sized Russian traders. This has been proven to be particularly important when approaching potential ODM and OBM buyers who might want to test the market and product quality before placing large orders. Meanwhile, Hong Kong traders may also consider extending credit or giving longer credit terms to their Russian buyers who have a favourable track record and sound credit background. Moreover, since import tariffs for finished goods are much higher than parts and components, Hong Kong companies may consider exporting on an SKD or CKD basis rather than finished goods to Russia in order to tap into the trends of manufacturing localisation.
Differentiate your products with decent branding
Given Russians’ low awareness of Hong Kong products and inability to differentiate Hong Kong products from indigenous mainland supplies, non-branded Hong Kong products are no longer saleable in the market in the absence of big discounts or price concessions. To avoid fierce competition and differentiate themselves from low-price suppliers, Hong Kong companies should leverage on their design and branding capabilities to penetrate the Russian market by associating the “made by Hong Kong” label with branded products with favourable price-quality ratios. By cultivating brands, Hong Kong companies can also be decoupled from the less advantageous image of the “made in China” label as consumers are generally less concerned about the country of origin, when buying from a reputable brand. Apart from design and quality, Hong Kong exporters may also differentiate their products by packaging, quality guarantees and product warranties.
Make it face-to-face
In view of the challenging business environment in Russia and high travelling costs, Hong Kong companies can make contact with Russian buyers at trade fairs and exhibitions in Hong Kong. In fact, there are growing numbers of Russian buyers coming to Hong Kong trade fairs and exhibitions for sourcing and networking. Hong Kong companies should adopt a more proactive approach to meet Russian distributors and traders here in Hong Kong. This is particularly important as many Russian distributors and traders are still at the early stages of trading with Hong Kong companies, and therefore prefer dealing directly with company owners to avoid hassles. To build a better buyer-seller relationship, it may also be necessary for Hong Kong companies to visit their clients in Russia regularly. In this regard, it is advisable to hire a professional interpreter to avoid misunderstandings and confusions during business negotiations, although most Russian businesspeople speak fluent English.