Weaker rouble could entice more companies to set up shop in Russia

Per Hong, the head of AT Kearney’s Moscow office, agrees there’s some positive effect in rouble devaluation for local producers.

“Their goods relative to imported goods that are being brought into the market are cheaper, and that helps stimulate potentially some of that demand. However, the question ultimately in a market economy is whether you have that diversity of products in place in order to support it,” Per Hong said.

In the first quarter of this year a few local retailers with a notable market share reported that rouble depreciation had no major impact on their profitability. There even came out an absolutely amazing story. M.Video, the country’s biggest consumer electronics retailer, saw its first-quarter sales rise 8%, keeping pace with growth in the previous quarter, and that’s despite rouble devaluation.

The company also managed to open a net seven stores as it planned before, and increased online-based sales by 113%, year-on-year.

AT Kearney’s Per Hong agrees Q1 saw a rise in consumer spending.

“As inflation starts to rise a natural reaction is that consumers start to buy in the short term to try and offset during anticipation of rising prices, and I do think we’re seeing some of that effect in the marketplace today where there is continued consumption,” Per Hong said.

There is a view that a weaker rouble could entice more companies to set up shop in Russia. This seems especially important at a time when Russian industry is stagnating, and widely seen as being uncompetitive, while many experts and market participants admit that competitive forces in business are still underdeveloped in Russia.