Business in Rural Russian Part 2: The Opportunities

If you have been following my blog, you will have heard me say in one way or another that doing business in Russia is a mixed bag. I have talked about the business climate and the issues, but all the while insisting that there are many opportunities available in Russia outside of the main centers. So what kind of opportunities am I talking about? Well, pretty much everything. Naturally I can’t go into specifics. Sourcing new opportunities is part of my job. So it would be silly to divulge everything and give away information on ventures I plan to follow up on in the near future. I can’t even describe our current projects in any serious detail. I will however outline some of the areas where we are participating and where we expect to see growth.

So what can be done in rural Russia?

I think agriculture, cafés and restaurants, construction, entertainment, importing, manufacturing and production, real estate, services, and technology offer some of the highest number of obvious opportunities in the rural areas. Entering the market with your own product or service is relatively easy as many of the towns and cities offer a blank slate. Of course it depends on your product and sector, but for many, you can enjoy very low levels of competition. If we look at some of the sectors I outlined above you should see what I mean.

Cafés and Restaurants

The modern café and restaurant experience that many of you are used to doesn’t exist in the towns and smaller cities in Russia. In addition to this, many of the services, associated products, and partnerships do not exist either, providing a gap for new concepts and glaring opportunities to cater to existing establishments. You can also extend this to franchising. I know of many franchise restaurants that would work exceptionally well in Chistopol and other smaller towns. Generally, lower priced establishments will work better due to the salaries in these areas.

Importing

Anything to do with foreign goods and services can potentially work well. But the proper research needs to be done. We found that some things we thought would work well, worked very well, and some things we thought would work well, worked very badly. The regions all progress at different speeds and each area has slightly different perceptions and levels of acceptability.

If we take Chistopol for example, when we were selecting the latest items from Europe for our boutique store, we choose a number of very colorful, vibrant products (leg warmers, tights, t-shirts, etc). We found at first only some of the items sold well, with many left on the shelf. We soon realized that although people like the items, the colors and patterns were seen as being too bright and extroverted. The customers buying the products would standout quite significantly, and many did not want to take this risk. It came down to not fully knowing what was acceptable and what was not. We realized that we had to tailor our products accordingly to reflect the buying habits of the area.

Real Estate

I am specifically referring to the buy – renovate – sell sector, which has real potential here. I live in a modern studio apartment in Chistopol. It was bought for 15,000 GBP, renovated for 5,000 GBP, and is worth at least 30,000 GBP due to the unique design for the town. The whole process took 6 months and was renovated by a small, two-man team! It was incredible - they knew how to do everything from building the walls to installing the toilet! In Chistopol, for a small buy-in, you can experience real margins. There are more opportunities than I know what to do with in this sector, so I am happy to shout it from the rooftops. There is also the opportunity to provide associated services and materials to the sector.

Technology

There is a lot of potential in this area, but I would stress caution, as not everything you see abroad can work here. I would also consider technology that is perhaps seen as more rudimentary in developed countries, as it would be considered much more advanced here. The mobile sector is quite significant, and there are a lot of services operating well in this area. The internet is still gathering speed here. Part of it is the language issues. Russia uses Cyrillic characters, which differ a lot from English ones so it makes entering web pages and so on quite tricky at times.

Long and short, many projects, services, ideas, or ventures that you see abroad (or even in the larger cities) have a good chance of working in the smaller towns in Russia. In a number of cases you will need to scale and adapt but the opportunity is there and the competition is normally very low or non-existent. Take a look at what is happening in Moscow - chances are the same shop, process, system, or service can work well outside Moscow as well. I also have to stress that doing research is key; having a pulse on what is happening in and around Russia, from major Russian newspapers to local gossip will help in your execution.

I am sorry I could not go into more detail, but in Russia, like anywhere else, you have experience it for yourself.

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