Interview with Leo Kostylev IAPP Russia 2/2

Posted on 21/07/2008 by Laure Berthon Categorized: Interesting Market information

Kremlin With 70-80% of the sales of promotional products being done in Moscow, is the Russian market unbalanced? Where are advertising products produced? What are the most popular advertising products in Russia…? If you want to know more about the Russian market, you should read the second part of the interview made with Leo Kostylev from IAPP Russia.

The market seems to be extremely unbalanced with 70-80% of the sales of advertising products being done in Moscow. Does that mean that advertising products mainly arrive in Moscow and are distributed afterwards in other cities? Or is it a real fact that advertising products are almost only distributed in the capital? What about other big cities of the country?

In Russia there are about 3000 companies, which are engaged into business souvenir market. 600-700 of them are in Moscow and about 300 firms are located in St.-Petersburg. So as you can see, for the country with more then 140 millions of inhabitants such allocation of promotional companies isn’t equal. But it doesn’t mean that Moscow is the advertising center of Russia. Yes, it has permanent clients from all regions, but usually they are big companies interested in huge parcels of promo-production. In the regions there are no grate advertising structures, much smaller firms share regional markets and grant a full list of promotional services. But they are able to satisfy their native markets by working with one major supplier or looking for souvenirs at other dealers’ stocks under a specific order. Major market players in the capital run their own stocks that significantly reduce the timing of orders. These players don’t work with end-users and prefer to work through dealer networks.
By the way, sometimes regional companies are able to suggest more original or exclusive services in smaller lots than central enterprises, because they are not bound by common demand and especially hard competitive fight their souvenir market’s rivals at the capital.

I also read that 80% of the consumer products sold on the Russian market are produced outside of Russia, with 50% of them made in China. Is it the case for advertising products? And if yes, where are the other 50% produced?
China is the main supplier to the world market and production of business gifts by transnational companies is maintained there. So Russian suppliers and dealers who operate with European catalogues have to order souvenirs produced in China under special control of their mother-companies. Cheep souvenirs, produced in China without any label, are used in Russia to, but they are suitable for massive advertising campaigns only and not as corporative or VIP-gift because of their low quality.
It is still too expensive to have your own manufacture for advertising goods in Russia. And common opinion says that “anyway, they will make it cheaper in China”. But some factories produce promo-wares on the territory of our country and these enterprises are originally Russian.

How is the Russian advertising market built? Do importers sell directly to the advertisers or do they work with distributors? Can you identify the top 10 of importers?
inflatable handsThe structure of the Russian advertising market is based on differentiation of these market players. There are diverse ways to build Russian advertising market’s picture. And first of all, it is importing aspect.
As it was said in previous part of our interview, there are not many local producers of promo-goods on the territory of our country. It is much cheaper and easier to order big parcels of souvenirs abroad and personalize them in our country by particular request. And yes, importers have to work with distributors because of the lack of our advertising market’s development. Very few end-users are able to afford themselves to cooperate directly with importers. The majority isn’t prepared to make really big orders for business gifts and souvenirs so it isn’t advantageous to work directly with foreign importers.

For dealers it is much easier. They separate huge parcels of souvenirs into parts and sell them to advertising agencies or directly to end-users. Russian producers of promo-goods prefer to work with dealers too, but sometimes they take orders from corporative clients. It is much more expensive because of small parcels (many companies still haven’t begun providing funds for advertising needs).

Now it is advantageous for importers to run their own ventures on the Russian territory and to open their offices in Moscow for representation of their European activities and stocks and to carry on business without any middlemen participation. Their Russian offices keep show-rooms and also help Russian distributors with marketing tools, catalogues and samples. However sales happen directly between Russian distributors and their European mother-companies. We suggest, that the main reasons of this strategy are to cope with difficult Russian legislation and also unwillingness to import directly.

The Top importers on the Russian market are Project 111 (Amber Group), Krug Kroneberg, Vesta Alfa, Interpresent, Leon Direct, Renaissance College. I can add some more companies from Moscow, but enterprises I have mentioned before are the leaders.

Do you have American or European suppliers? And if yes, do they product in their home countries, or in China?
Yes, there are suppliers from other countries and most of them are European. Their goods and services are presented in catalogues and dealers operate with them suggesting end-users and advertising companies different items.
european flag For me one of the fundamental principles is cooperation with souvenir manufacturers only. The exception to this rule is made for global wholesale companies with ability to provide decent quality and reasonable prices for customers. Working with catalogs of such firms should be a thoughtful and well-balanced step, where you don’t just buy different directories of the warehouse for distribution, but also involved into drafting of the range of goods.
There is a branch of catalogues of different suppliers, which are most popular between dealers. They are The Catalogue, Impression, M-Collection, ProEmotion, Promotion&Design. All gifts presented in catalogues are manufactured by European of American brand-holders, but the most part of them is produced on the territory of China, India, Bangladesh, where the production is cheaper. But still those souvenirs have essential quality. On the other side there are promo-goods of the lowest quality and with out any guarantee from their producer.
All these goods are intended for different purposes, budgets and advertising objectives.

What are the most popular advertising products in Russia? Could you give us a kind of Top 10 of the sales?
I think the popularity of advertising products in Russia is the same as in other countries. The Top-list is headed by pens and other stationery. Office sets, diaries, address- and phone-books follow then regarding to preferences of end-users.
prmotional pen Now in Russia popularity of textile t-shirts and baseball caps is growing. The reason is arrival of rather cheap European quality textile produced in Asia to Russian market. Other popular souvenirs are USB-devices, such as flash-cards, digital photo-frames and various gadgets.
According to summer season, the state of being relevant for games, picnic-sets, umbrellas and t-shirts is going to increase. In the same way in winter people are interested in Christmas and New Year gifts.

What do you think the evolution of sales will be in the future concerning advertising products?
Russian market is rather conservative and novelties have to be tested by time. Advertising and souvenir companies make their own range of goods in order of last season sales statistic. And they add one or two new items into their catalogues in order to create future demand.
Overall sales are expected to grow up. More and more end-users understand the importance of using business souvenirs and advertising products in their corporative politics. But if the assortment hasn’t changed a lot, new ways of personalization of gifts would be required. In that sphere there are still very many opportunities and they are all available in our country. If we depend on goods imported to Russia, abilities for personalization are independent from foreign tendencies.

For more information concerning IAPP: www.iapp.ru

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