Consumer Electronics Market in Russia-Dissertation Writing Help
Executive Summary
Income Increase and Lifestyle Changes Positively Influence the Market Performance
The most
important factor influencing market performance over the review period was the
increase in disposable income and continuing changes in lifestyle. Russian
consumers have been buying more and more houses, flats, summerhouses all of
which required more consumer electronics products. In addition, relative
economic stability allows the Russian consumers to buy new modern and expensive
products, which positively influences market performance.
the Main Market Performance Drivers
The Russian
market has grown within different product categories. The main development
driver was the in-home consumer electronics in such sectors as Digital TV,
especially HDTV. The reason for that was the introduction of digital TV into
Russia in 2005; others driver were DVD players and Home video and audio
products. Due to changes in lifestyle, Russian consumers were spending more and
more time at home. 2008 was announced as “Family Year” and therefore all
marketing activities forced Russian consumers to pay bigger attention to their
families and thus to spend more time at home. The third driver was PCs due to
business and internet development. In portable CE sector, the main driver was
portable computers, whose popularity was increasing due to increased business
activity. In the in-car CE sector
navigation systems was the main driver.
the Growth of Regional Markets
Due to market
saturation in the main Russian cities, the market developed mainly inside the
Russian regions. The economic situation and government investments into the
Russian regions allowed consumers to increase CE products purchases. The other
reason for regional expansion was that regional Russian consumers were not as
spoilt in terms of product availability and competitive pricing as consumers
from the main cities are and therefore it was relatively easier to introduce
new products. Regional markets appeared to offer considerable potential and
opportunities for high growth in volume and value sales for those sectors that
are already saturated in the centres, such as mobile phones.
Changes in the Market Development and Distribution Channels
The market
continued growing, although the growth rate was lower than in previous years.
The reason for market growth was regional expansion, which allowed for the sale
of less expensive and less modern models. Retailers were building their own
supermarkets and shops in the Russian regions and they developed franchise
systems.
Due to a
decrease of the ‘grey’ market and an increase in internet usage and
accessibility, distribution channels have changed. Internet purchases began
increasing fast. However, in contrast regional Russian consumers were buying
products in the supermarkets, special shops and retail chains.
Market Growth Rate Will Be Lower Than in Previous Years.
The Russian
consumer market will continue growing due to an increase in disposable income,
a change in the lifestyle of Russian consumers and consequently a shift in
popularity for certain goods and services. This trend is likely to continue
developing. The income increase and inflation decrease will influence market
performance positively. However, year-by-year the market will became closer to
saturation and therefore market growth rate will decrease every year in the
forest period.
Key Trends and Developments
Decrease of the ‘grey’ Market
The ‘grey’
market displayed a high share of the Russian CE market. However, this situation
began to change over the review period. Due to government legislations and
consumers preferences, the ‘grey’ market was decreasing which influenced a
price decrease and an increase in customer service in sectors laptops, mobile
phones and cameras.
The reason for
this market shift was the introduction in 2007 of the law of the border duties
cancellation. Historically, the Russians imported CE products illegally. In
2007, in response the Russian Government decided to cancel import taxes for
some CE products such as cameras and mobile phones. Due mainly to the tax
cancellation law companies are changing their strategies. Manufacturers are
increasingly looking for ways to increase customer service and improve consumer
relations.
Outlook (of the trend)
The development
of the legal market grew during the review period due to economic development,
government legislations and changes in consumer behaviour.
Products which
are now classified as legal are high quality, and command lower prices. In
addition, customer service levels have increased due to consumer demand and a
more competitive market environment. These developments are all expected to
continue in coming years.
Current Impact
The decline of
the ‘grey’ market pushed down the unit price of CE products, increased the
numbers of new models and increased the number of consumers who were buying the
products through the supermarkets, hypermarkets and speciality shops and thus
increased marketing activities. Volume sales increased because of the price
unit decrease and an increase in the number of consumers. This trend affects
the sectors of mobile telephony, digital cameras and laptops.
Future impact
This trend will
have a positive effect on the overall CE market. On the other hand as the
market becomes closer to saturation due to new entrants into manufacturing,
individual company profits will fall forcing all companies to become more
creative in their marketing efforts.
The market will
adapt in terms of legality and customer service. However, this trend will not
happen overnight due to high levels of corruption, bureaucracy and complex
legislation.
Customers’ needs
will begin to be served correctly and more efficiently as manufacturers respond
with sensitivity to customer feedback
according to which products and models attract most demand.
As illegal
products become less relevant in the Russian market this will lead to further
collaboration between Russian manufacturers and retailers and foreign
companies, which will have positive influence on the development of the overall
CE market.
Regional Market Development
Market
saturation in the big cities of Russia forced companies to focus toward the
regions.
The CE retailers
and manufacturers changed their strategy according to the market expansion. For
big cities, manufacturers and retailers provided more updated products, for
small cities within the Russian regions they provided cheaper and models with
fewer functions. However, 2008 showed
that there is still a degree of demand by consumers in regions for the latest
products.
Outlook (of the trend)
The regional
market trend is developing quickly due to market saturation in the main Russian
cities. It also has long-term implications due to the sheer geographical size
of Russia and its high population. As a result, companies are adapting their
marketing strategies accordingly.
Only about 20%
of CE products are introduced into the Russian regions which can force consumers
to travel to the city to purchase ‘grey’ goods. As a result, companies are
trying to find solutions to combat this.
According to
Euromonitor data, the number of urban households is increasing as well as
consumer expenditure on audio-video CE products. This information shows that
regional expansion into the Russian market is the main source of the additional
company profit.
Current Impact
The regional
expansion is increasing the volume and value of the CE market. At the same
time, the market value increase is lower than volume increase because of
regional consumers buying cheaper models than consumers from the main Russian
cities. Such sectors as cameras, laptops, digital TVs, DVD players and mobile
phones sectors were affected by this trend.
Companies could
increase market share by cementing their presence in the regions; they also
have the opportunity to sell of less popular models in the main cities in order
to reduce stock. Products such as CDs and MP3 are more popular in smaller towns
than in the big cities so companies could rethink their distribution in order
to increase sales based upon this kind of information.
Future impact
Between 2009 and
2013 this trend is likely to continue however, the consequences of this trend
can negatively affect product development and the introduction new models into
the Russian market. In addition, this trend can increase unit price of new
models due to the lack of these products in the Russian market.
Increase of Popularity of New Technologies
New technologies
are becoming more popular in Russia and replacing old technology.
Rapid
development of new formats can be observed in the TV sector. Thus, analogue TVs
started disappearing from the Russian market to be replaced with LCD and
plasma. In contrast, the portable electronics market has seen a boost due to
the uptake of digital cameras and laptops. Russian consumers are attracted to
the multi-functionality of the products. The navigation market is also booming
in Russia due to the convenience they bring. Smart phones are also showing
positive growth.
Outlook (of the trend)
Although
globalisation and an increase in disposable income is a relative reality, new
technology development will be a long-term trend in Russia as companies are new
to the idea of investing in R&D. Companies needs to work at bucking the
trend for consumer demand for cheap goods to be replaced by more premium,
multi-functional products.
The market for
new formats is not restricted to the large cities. Regional demand is
increasing because of income increases in the regions.
Current Impact
The growing
popularity for new technology is resulting in companies offering discounts and
sale goods in order to increase unit sales but this will inevitably push the
unit price down. Sectors most affected are TVs, mobile phones, portable CE
products, laptops and navigation systems.
This trend will
help to develop new product features and drive the market. The resulting
profits will be reinvested into marketing and developing new products. It will also
result in replacing defunct technology such as VCR, CD/DVD players, and
analogue TVs.
Future impact
Those companies
who don’t develop and invest in new products will lose market share and even be
forced to exit the market due to the
increasing competitiveness of the market. The modern and dynamic companies
which can introduce new technologically advanced products and marketing
strategies are the main beneficiaries of this trend.
While
introducing new products in to the market the companies might also have to
revise their logistics system and marketing strategy in years to come.
Foreign Companies Partly Move Its Production in Russia (contract Assembly)
Many foreign
companies have moved their production facilities to Russia. The companies
decided to localise their production process in order to have a competitive
advantage not only in distribution but also in costings.
This trend
decreased the unit price on some CE products and thus increased sales volume
and customer service.
Outlook (of the trend)
In the period of
globalisation this trend developed rapidly. More and more companies moved their
production to Russia, such as Panasonic, Sony, and Samsung. This trend has
long-term character.
However, foreign
companies are keeping a close eye on the economic stability of Russia and
especially in the future government policy.
Current Impact
This trend
decreases the unit prices on some products, which allowed for an increase in
the volume of the market.
It is profitable
for the manufacturers to have contract assembly in Russia. The companies can
save money on the logistic, import duties and other border expenditure. For the
Russian manufacturers this trend was also beneficial because of the stable
income gained from the foreign companies.
Historically,
the Russian consumers’ purchasing decision was based on price sensitivity and
thus Russian consumers tended to purchase products assembled in Russia.
However, Russian consumers are shifting away from buying Russian products and
are paying more attention to the origin of products bought.
Future impact
This trend will
continue due to globalisation. In addition, the manufacturers will invest more
money in order to maintain the high quality of the products.
On the one hand,
this trend will play a positive role for the Russian manufacturers because of
the stable income from the contract assembly. On the other hand, this trend
will decrease the production and product development by Russian manufactures,
which will negatively influence the economic development of Russia.
This trend will
focus new product development for the foreign companies. For the Russian
companies, this trend will provide an
opportunity to develop its own private label products and thus to increase its
market presence.
Price Decrease
The unit prices
in some subsectors of the consumer electronics market are falling particularly
in the portable and in-car consumer electronics subsectors due to the wide
range of products on offer and the increase in disposable income. MP3s, DVD players
and TVs are particularly affected.
Outlook (of the trend)
This trend is
expected to continue in coming years affecting volume sales positively whereas
value sales increase is projected to be slower.
The Russian
customs authorities have strengthened their control of the “grey” market in
mobile phones by signing an agreement with a few foreign companies to ensure
that all manufacturers’ prices declared.
Current Impact
Due to the
cancellation of border duties and overseas production facilities begin moved to
Russia, the most affected market sectors were cameras mobile phones and TVs.
The main
beneficiaries of the trend are consumers, who had opportunity to buy more
products and thus to satisfy their needs; the manufacturers who could decrease
their stock volume and retailers who had opportunity to increase turnover and
thus to increase company profit.
Future impact
This trend is
expected to continue and will drive the market. The prices will continue
decreasing which will lead to an increase in the demand for certain types of
products such as laptops, PC, MP3 players, navigation systems, and TV. On the
other hand, the price decrease will decrease the value growth rate, which can
negatively influence market development.
All sectors will
be affected by this trend portable consumer electronics and TV sectors will be
most affected. The price decrease will influence these sectors more than others
because of the high level of product demand.
The
manufacturers will use this trend to decrease their stock volume and increase
market share and develop marketing strategies such as discount events and sales
.
The retailers
and manufacturers will have higher turnover and fewer models in stock. This
fact will allow the companies to develop the products and introduce
innovations.
