The Russian economy is gradually recovering from the coronavirus pandemic and lockdowns, with certain regions set to recover faster than others. Stronger and larger regions suffered worse during the peak of the COVID-19 pandemic because of their economies’ large service sectors and greater vulnerability during lockdown. As a result, federal districts such as Siberia, Urals, and Far East were more resilient; however, looking ahead into 2021, core federal districts such as Central and Northwest will revive strongly and offer more opportunities.
For Companies Selling to Consumers
Consumer spending struggled in all federal districts amid the COVID-19 lockdowns, despite unemployment remaining restrained at just 6%. Ultimately, historically higher wealth and purchasing power will allow for a more solid growth bounce-back in core districts, particularly the Central District. Looking ahead, with the major lockdowns over, businesses need to prioritize their target regions and distinguish between high- and low-growth regions. The overall size of the region measured in total ruble retail sales is a good proxy for resilience and growth in demand. Moscow, Moscow Region, St. Petersburg, and Krasnodar will remain obvious target markets for a stronger bounce-back.
For Companies Selling to Businesses
The COVID-19 outbreak derailed the expected improvement in B2B demand growth in 2020 after a mild pace of expansion in 2019. A sharp drop in demand has already had a noticeable effect on local companies’ profitability across all regions, even in ones that typically outperform. The introduction of government-subsidized loans has allowed local industries to take on more debt to mitigate some of the effects of the crisis, but this also indicates that B2B demand will remain intensely price sensitive and value oriented, with limited opportunities to upsell.
Actions for Business Professionals During 2021 Strategic Planning
- Increase contact with local partners, particularly by digital means, to ensure you have a good understanding of their financials and a tailored offering.
- Accelerate your digital strategies, both internal talent development and external relations, as the digital channel itself continues to accelerate.
- Improve your customer segmentation process in Russia to determine if your existing regional footprint may be inefficient or overly costly given the current economic environment.
- Ensure that your local distribution partners are efficiently targeting the regions that offer the biggest opportunities for your business given the current conditions.
- Ensure close relations with key accounts and distributors to assess their financial positions as well as their developing needs and levels of demand in this tenuous recovery.
Strategic planning season is ramping up and you need information about your markets, industry, and company in real-time to power your business decisions. FrontierView offers a solution that puts the right information at the right time, at your fingertips. Contact us to receive complimentary access for 2021 strategic planning season.