As a white goods reporter, you are never free. When in Russia for another job, you can’t resist to explore the state of white goods, by visiting MediaMarkt (or Media Market, the European version of Best Buy).
This German retailer is leading in Europe, together with sister chain Saturn. Five years ago it started its Russian operations--now up to 40 stores—which is quite modest for a country with 140 million inhabitants. In St. Petersburg, the cultural and avant-garde capital of Russia, there are four stores. On your way to the south-east of the city, where one of the stores is located next to Ikea in a large Western-style shopping mall, you get a first glimpse of Russia as it is outside the rich city center of St. Petersburg: Run-down housing projects, roads full of potholes ,a total lack of maintenance and women trying to sell fruit on the street.
Once inside the mall, life is just like back home: an abundance of goods and pristine decoration. Still, one wonders if the shoppers can afford all this. Yet according to the average annual income (around $3K, but measured in actual purchasing power it is around $20K) they can’t. (To put this in perspective, the American gross domestic product per capita is $40K). But at least you can have the illusion for a moment that you live in a normal country.
Once inside the store, the first thing one may note is the horrible pink house style color. It is not a warm pink, but a flashy and cheap tint, tuning towards purple. A salesman claims that it is magenta. But why not red, as in the rest of the world? It turns out that the competition was so scared of MediaMarkt that they copied and patented the color and most other aspects of the store formula, so MediaMarkt had to choose another color. Competitors are MVideo (2000 stores), Eldorado (1500) and Kalinka (500).
The second aspect, more shocking, is the complete lack of Russian brands. The main brands are Italian, together with some Germans and Koreans. Italians have always been better in the value-for-money market segment, which is what Russians can afford. So none of the classic Russian brands were seen suitable for continuation after the demise of Communism. At least Volkswagen revitalized the Czech car brand Skoda, from a region with a solid industrial culture and a pre-war sense of democracy.
President Putin is now forcing foreign companies to produce in Russia (cars, white goods) but if you want a solid industrial base, you need your own companies and brands. Just look at the Turks who are quite successful in manufacturing as well as brand building (for white goods Beko and Vestel).
Regarding products, most of what you see is familiar. Cheap, Italian, and the Germans only sell their entry level products. Normal European (horizontal drum) washers with their 60 by 60 centimeter footprints are too big for many small Russian kitchens so a lot of models are reduced-depth; not 60centimeters, but 45 and even 30 centimeters, with smaller capacity, of course. An idea for cramped Manhattan one-step kitchens?
Most dishwashers are also smaller: 45 centimeters wide instead of 60. From what you see in the store the Russians like big refrigerators, as many are almost 2 meters high. Some SBS models are offered as well as other sizes from Korea or Turkey, with French doors (unusual in Europe) or freezer drawers. In cooking some hobs and ovens come in a very typical Russian visual style: big porcelain knobs with fake gold decorations; far too tasteless for other markets. Few dryers are sold, too expensive, and the power grid is too weak. In small appliances there are more offerings for food preparation: bread makers, meat grinders, mixers for dough kneading. In design the communist past shows: some pretty horrible over-the-top fifties products are shown, as well as strange combinations: kitchen scales with built-in clocks. Bosch offers mixers in orange and brown. As Russia is a tea country there are a lot of water kettles. Strangely there are also a lot of capsule espresso systems, where one would expect this to be too expensive.
For business, Russia is a disaster. The country has no industrial or manufacturing culture, as most revenues come from oil and gas. It is pretty normal for any bureaucrat to see businesspeople as a source of money, not as customers who bring jobs. At all levels, commercial or public, corruption is rampant. Of course the reason is that you don’t make enough money as a civil servant to support your family so you need some extra.
BSH has a cooling plant and warehouse near St. Petersburg, and it is not a secret that the company regretted this initiative, as the amount of obstruction was totally unexpected. There are a lot of stories on Ikea. BSH tried to open a store in Samara, and the opening was delayed nine times because of political obstruction. A few days before the final date they were asked for a tornado license. That was a surprise as there are no tornados in this region. In St. Petersburg the power was shut off, also right before the opening. So Ikea decided to use generators. But later it turned out that their man in charge of these generators overcharged 200 million euro’s together with the generator sales company. Ikea did something unusual: telling their tales in the business press.
Not that private life is much easier here. A registered nurse makes 500 euros, where most prices are Western. You can’t get a mortgage here, so housing is very difficult. You have to search a state-owned room or apartment in a former communist housing project, where many apartments are shared by several families, each occupying one room. Then you need a job (which is often difficult to find), a school or day care for your kids (also difficult), if you are a woman you might like to have a husband, and if you need a doctor or a teacher you’ll have to bribe them too.
There seems to be not much progress towards modernization and economic development. Sadly, if you want to develop something like a factory, you’ll have to compete with the Chinese who work for $150 per month; the same problem as the Egyptians are facing now that they got their freedom back, more or less. Then, the Putin regime is weaker than ever and is trying to compensate that with more repression, not only against political opponents but also against business. Ask British Petroleum how their oil joint venture went. That’s why a lot of rich people are securing their money outside the country and are desperate for foreign passports. So when we complain about the housing crisis, the state of the Kardashian family or the newest dress of Michelle Obama, it might be soothing to realize that life elsewhere is not always better.