Unlocked and loaded

Unlocked and loaded

A transparent market oiled by petrodollars and awash with investors looking for UK partners – no it’s not the UAE or Qatar, it is in fact Russia.
“Don’t be scared,” says Dr Jeff Sanders over the muffled phone line into his Haltwhistle-bound car. The UKTI trade adviser, who has made a career out of talking North East firms by the hand into unchartered markets, is giving advice on how to crack what is perhaps one of the most mysterious markets for export virgins – Russia.

But, for Sanders, even SMEs who are yet to make their first overseas foray should not be intimidated by the old red giant. And, it should certainly no longer be associated with the idea of the ‘riddle wrapped up in an enigma,’ placed in the British subconscious by Churchill many moons ago.

“Things have changed so much in Russia. It used to be a very difficult market to get into and was full of corruption, but over the last five years that corruption has gone and the Russian economy itself is increasing rapidly.”

It’s fitting that Sanders – an extremely well-travelled trade expert – is out on the road when BQ catches up with him. His journeys of discovery in Russia, however, are perhaps rather more exciting than his drive home in Hadrian’s Wall country.

“I remember going to Siberia a couple of years ago and even I was expecting people to be living in wooden huts, but when I got there one in three cars was a Mercedes.

“There was a manufacturing company there which we visited. In the UK companies like this would only have one kind of a certain machine because they are worth about £500,000.

“But this company had 30 or 40 of them lined up in rows. They said they wanted to buy more but they just couldn’t find the supplier to buy them from. ‘We’re willing to pay upfront and in cash,’ they were saying.”

Technically Russia is the North East’s fastest growing export market. However, the latest export figures which show a 177% rise in exports from the region to Russia, valuing exports at £591m, are somewhat skewed by Nissan’s Wearside plant. “They really love Nissan cars in Russia,” says Sanders.

But even without the North East outpost of the Japanese powerhouse, the region still has strong trading ties with Russia and an increasing number of SMEs are realising the huge opportunities on the other side of the Baltic.

“There are a stack of exports going from the North East into the oil and gas sector in Siberia and that’s just going to grow and get bigger.

“I’ve got a company at the minute that is preparing to go to Russia next month and already they think they’ve got a distributor out there before they’ve even left the UK.”

As well as the appetite to work with the UK’s oil and gas service sector, there is also the insatiable demand for British fashions and artefacts in Siberia and the wider Russian nation.

“The oil and gas industry makes parts of Siberia incredibly wealthy. I went to a shop which specialises in selling British furniture and upholstery and they couldn’t get enough of the stuff.

“They were buying it from the UK and shipping it five days by lorry and selling small armchairs for about £2,000 – they were going out the door like hotcakes.

“The Russians are very gothic in their style so the traditional Victorian British style fits very well with them.”

If Sanders is correct, and the notion of a corrupt Russia is as outdated as the Iron Curtain, the vast country may have some way to go to win the global PR battle.

Bill Browder from Hermitage Capital, which was once Russia’s largest portfolio investor, told the BBC recently that Russia is a “terrible, terrible place to do business”.

While David Cameron was on a charm offensive in Moscow last year, Mr Browder voiced his concerns, which largely related to the case of a lawyer who was imprisoned in Russia without trial in 2008 and later died despite being a healthy 37-year-old when arrested.

But Sanders sees no reason why SMEs from the UK should fear the potentially lucrative Russian market.

“There’s corruption about everywhere but it’s no more than other country. I don’t know of any other company that’s had particular trouble. There’s a policeman on every street corner controlling everyone so there’s a good sign. Yes if you go into the middle of Moscow, there are times when you do pay through the nose if you’re a foreigner, but if you get away from Moscow it’s Russian prices with Russian deals.”

Like China, Brazil and the Gulf, in Russia, a trusted local partner can hold the key to unlocking your target market. “Don’t jump into relationships with the first people you meet. Take some time to assess what you’ve done,” Sanders warns.

Once face to face with potential partners or clients, there are the obvious do’s and don’ts which come with most new markets, says Sanders. Don’t use first names, use titles where possible and of course, dress immaculately. One major difference of note – which, if followed on these shores, would perhaps make British boardrooms a more pleasant place – is in the way negotiations take place.

“Don’t speak down to people, in the way that people tend to here. For example, don’t say anything that suggests your company is above the Russian party. Don’t say things like, ‘we’d like to appoint you as our distributors’. Instead, say something along the lines of ‘we’re here to look for new opportunities where we can work with you’.”

With 70% of European, American and Asian companies with footholds in Russia telling a recent Ernst & Young poll that they believe the country will become a more attractive place for their investment in the next three years, now maybe the time to follow Sanders on your own Russian adventure.

CASE STUDY: Standing on the shoulders of giants

Recalling the day that Russia’s biggest university stumbled upon a design agency in Newcastle, the firm’s co-founder admits he would have worked on the subsequent contract “for nowt” such was the kudos it ultimately gave his team.

That isn’t to say that One Best Way was not worthy of such a weighty client.

The business is manned by a team of absolute experts in their field, including managing director Mike Owen, a veteran of the marketing and design game with an impressive list of former clients.

But it was “freaky”, reflects Owen, that Moscow’s State University of Management would head to Tyneside to in search of a team to rebrand its marketing course.

And given a behind-the-scenes look at Russia’s take on marketing, the agency discovered an under-developed discipline which is ripe with opportunities for British creatives.

While marketing as an academic subject is a mere teenager in Russia, in the UK, it has just about reached its retirement age and is still going strong.

“As a discipline, here in the increasingly competitive UK market, there is a real need for marketing and design and branding plays a massive part of it. But in Russia, because the markets aren’t yet cluttered, there hasn’t been as much need for it and there aren’t so many people competing against each other,” says Owen.

“As the markets are opening up more and more, this is changing at a massively rapid pace.”

One Best Way was tasked with breathing new life into the branding for RIMA – a programme which teaches professionals in commercial or marketing roles about the value of branding and marketing.

The agency found an existing logo with “amateurish” hallmarks, such as colour gradients and other inconsistencies which meant it would look clunky when used large, on posters, and all but disappear when shrunk for use on business cards.

“They couldn’t find a design agency in Russia that could actually design. True design is about delivery of the message which comes from the brand, but once we started talking to them about that their heads just spun and they said they didn’t get it.

“It’s a fact that when the university spoke to the Russian deign companies out there, they would simply ask things like which colour do you want and which font etc but we talk about message and target audience.

“The key word is sophistication because here in the UK marketing has been around for 60 or 70 years, while it’s been in Russia for 10 to 14 years. They had an existing logo which stood for nothing. It looked very amateurish. A good logo works across all mediums and a great design agency will think about what it looks like on a business card and on a 100 ft sign.”

Ultimately the agency helped the university to look at more than just colours and fonts and showed the Russians the importance of focusing on the message behind the brand.

“You start off with good design and then you get consistent and beyond that is then the marketing and branding. They were so far behind that they didn’t have the design right.

“We had to learn some of the Russian alphabet and had to be careful not to change the meaning by using certain fonts. The other important thing was to set guidelines in terms of what colours to use so there was consistency.”

Today One Best Way – which some readers may remember as the company behind the televised ‘naked office’ experiment in 2009 – has an ongoing relationship with the university.

But the RIMA work has not been without its logistical problems. “Initially they couldn’t pay us because we didn’t have a formal contract which they understood to be what they are used to dealing with.

“We had to get in touch with our chamber of commerce who had to get in touch with their chamber of commerce because our documentation was built on a completely different set of rules than the documentation of businesses in Russia.

“We had a company number but we didn’t have a company stamp. We didn’t know what that was but it cost us £300 and you had to get one. There was lots of zigging and zagging but the nice thing was that they were lovely and were ready to pay us.”

While Owen and his team invoiced the university the same amount as it would have its British customers, it did gain an insight into some of the prices touted by their Russian counterparts.

“They showed us a website designed by a Russian company. At our normal day rate, we would have charged between £5,000 and £10,000. The Russian company charged approximately £150,000.

“You’re probably thinking why we don’t move to Moscow with prices like that.”