Import substitution has not become the benchmark for Russian SMEs

7th August 2015

In June 2015 “Alfa-Bank” conducted research "SME Pulse”. The survey involved 1,828 companies and entrepreneurs with revenues up to 350 million rubles per year. The results of the research indicate that the majority of small companies in Russia continue to use imported supplies, despite weakening of the ruble.

According to the research, despite weakening of the ruble 42% of companies, which worked actively with foreign partners (dependent on imports for 50% or more), started to seek more competitive imports for conducting their business and only 20% started to use domestic equivalents. However, some respondents said that they have to keep buying more costly imported products, which cannot be replaced by domestic equivalents. Among these were IT companies (purchase of the software, equipment) and cargo transportation companies (auto components).

The survey showed that the proportion of Russian SMEs, whose activities are related to the purchase or sale of goods and services in overseas markets, is 36 percent. Thus 70% of these companies said that they are dependent on imports for 50% or more.

Negative impact on business caused by economic sanctions was reported by 48% of respondents. Falling demand for services / products of companies, rising costs, devaluation / rate fluctuations, problems with foreign partners, economic situation in the country, inability of import substitution, and deterioration of credit conditions had a negative impact on SMEs.

On the opposite, about 7% of respondents felt positive changes due to import substitution, increase in demand / the number of customers, reduced level of competition, and the beginning of cooperation with Asian countries.

Decrease in revenues and profits over the past three months was noted by 54% and 57% of companies, respectively, for 18% and 14% of companies these figures have increased, while for 25% - have not changed. Reduction in frequency of purchases, average ticket and the number of clients was reported by 45%, 36% and 43% of companies and individual entrepreneurs, respectively. The most significant drop in revenue was reported by freight transportation and retail trade companies.

Representatives of all sectors are looking to the future with optimism. Increased profits, revenue, purchase frequency and average ticket is expected by 30-36% of SMEs and increase the number of customers - almost a half, 44%. Reducing these figures is expected by less than 25%.

The improvement in their business, to a greater extent, is expected by representatives of marketing, advertising, consulting, IT and production companies. In the area of freight transportation expectations are more restrained, however, they are also in the positive zone.

As shown by the June survey, 48% of respondents do not plan to change the number of employees, 16% of companies plan to cut staff and 25% plan to increase the number of employees. Most SMEs - 65% - intend to maintain wages at the same level, 11% plan to increase wages, and 13% plan its reduction.

Overall, about 71% of the surveyed see the development opportunities in current economic crisis. Mostly they are companies operating in Moscow and St. Petersburg, representing the manufacturing sector, IT, marketing, advertising, consulting and doing business for more than five years. The increase in turnover and expansion into new markets is planned by 46% of respondents.

Thus, almost half of respondents plan to increase their turnover, while the share planning to change the scope or the closure of the company does not exceed 20 %.

Maintaining and increasing the loyalty of its customers is currently the priority for Russian SMEs. Over 40% of companies surveyed reported a revision of the model of sales, 47% out of which improved the quality of their service, and 63% launched new solutions in order to keep existing customers.

Source: Interfax

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