Trade and brand revolution: How the Russian market will look soon?

Trade and brand revolution: How the Russian market will look soon?

Recent international tensions, which resulted in sanctions against Russia, have led to a dramatic transformation of the Russian economy that is now underway. At the moment, it is impossible to say whether it would be successful, or not. But one thing is quite clear: Russia’s economy is changing deeply and it might affect the country for decades.

If you visit Moscow now, you may wonder that it doesn’t look like the capital of a state at war. All shops and clubs are open, and people in the street are not disappointed: for most of them everything is as usual. But what strikes the eyes is that many well-known global brands have disappeared namely McDonalds, Starbucks, Zara, Nike and many others. Western countries claim they never asked their business to leave Russia, and it was the companies’ independent decision. Nevertheless, they left the Russian market and this has led to changes.

A great brand substitution is going on in the Russian market. Some Western businesses decided not to leave completely, but sell their assets to Russian entrepreneurs with the option of a buyback in the future. That’s what McDonald’s did, and now instead of this global brand, the Russians enjoy a new one with a very original name: “Tasty. And That's It!”. When you enter a traditional McDonald’s restaurant in Moscow, you can't help but have the feeling that you are inside the good old fast food point, but with a new name written inside.

And it is not about hamburgers and pommes-frites only. For instance, the same situation is with cosmetics: A case in point is the French brand L’Occitane, which closed the business in Russia, transferred its assets to the Russian partners, and opened the shops again under the same name, but written in Cyrillic letters – Л’Окситан. By the way, the popular coffee brand Starbucks is called Stars Coffee now. And there are also other examples of such deals: many Western brands suspended their business, hoping to save the presence at the Russian market somehow – either by rebranding or by selling.

But it is the only one side of the medal, because there are also brands that have completely left Russia without trying to save access to the market with the help of local partners. However, it does not mean that the Russian customers will miss their popular clothes, household products or food. Because there is a thing called parallel import, which means the possibility to buy necessary goods (in some cases not under native brands) in third counties that did not impose sanctions on Russia. So the goods are the same, but brands are different.

So today’s Russia is on the verge of a brand revolution: many brands will or have already changed their names, and the others will be imported to the Russian market in so called “parallel way” – under different brand names. And this poses a question: how to promote them now? Especially when most part of the promotion of common brands is traditionally done in the social media. The promotion challenge faces further setback because the social media market is also in the process of change in Russia. Facebook and Instagram are blocked — Russians use VPN services to use them but their audience is shrinking. YouTube, which is the most popular video hosting in Russia, is also on the brink of a ban. And the Russian competitor to it called RuTube is far from being an ideal service for promotion of consumer goods at this moment.

It means that the Russian consumer market will be full of new brands with the lack of traditional tools for their promotion. Instead, new approaches, sometimes quite experimental, will be put into force. The advice for businesses working in the Russian market is quite clear: it is necessary to choose the partners wisely for promotion of your goods and services. Old leaders of the PR industry can let you down although they were successful in the past.

That is why for economists and SMM specialists nowadays, Russia is a great destination for experimentation because it is a unique chance to see the way this country will regulate its consumer market using parallel import, to analyse how business takes up new challenges and which new strategies for brand promoting in social media it will choose. Everything is in motion in Russia now, but soon it will be possible to make a decision on how successful is the country in overcoming current challenges.

Alexey Pilko is the Director General at ECC Communication Group