Marketing Article Summary - Russian Market

1. Synopsis

Anonymous. (2007, April 24). Russians go on a shopping spree. American Marketing Association. Retrieved June 3, 2007 from http://www.marketingpower.com/content1033719.php

The demand for consumer goods is steadily rising in Russia. The increase in natural gas sales and rising oil prices has led to seven years of economic growth for the country. Russians are now spending 70 to 80 percent of their per capita income in the retail marketplace.

By Western standards, many Russians are still considered poor. About 20% of Russians live in poverty compared to 10% of Americans. However, Russia has government-subsidized utilities and a federal income tax rate of 13 percent. Compared with Western families, Russians actually have more discretionary income as a percentage of their salaries.

Some of the big growth areas are telecommunications, retail, restaurants, finance and construction. Cell phones are now found in almost every home in Russia, and many have more than one. Swedish retailer IKEA has opened eight stores in Moscow with one of them deemed the busiest in Europe in 2005. Other Western companies benefiting from the economic boom are Wrigley, who purchased a Russian chocolate company, Coca-Cola, who acquired a Russian juice maker, and Nestle, who invested in a coffee factory in southern Russia.

While the country has had oil revenues coming in for several years, Russians were initially worried about spending money because of the 1998 financial crisis. The ruble’s value was lost along with many of the citizens’ savings accounts. That fear seems to be subsiding though with consumption rate growth up 27 percent last year. Imports are rising at 30 percent each year as well.

This article ties in nicely with concepts presented in Chapter 7 - Reaching Global Markets. A marketer needs to understand and evaluate a country’s cultural, economic and political factors before deciding on a market-entry strategy and developing a marketing plan. All these factors have been changing dramatically for Russia in recent years.

As an example, the nation’s economic infrastructure has been an issue for foreign company investment. According to the textbook, there were no formal operating procedures for financial institutions under communism, and they are still limited. Purchasing real estate also involves a lot of red tape. However, the