The Russian mindset is very different from the Western mindset. In Russia, relationships are much more important than any contracts. In fact, an agreement might not be enforceable in some cases where there is no document to back it up
This has resulted in a process where everything has to be documented with papers at a very screw-tight level.
With one contract, you will need five or six documents to confirm the transaction. In Russia, a transaction might require the following:
There are also closing documents every month from the finance departments that have to be reviewed and signed.
You can't extend your sales and marketing strategy by simply adding Russia or Ukraine because the digital channels are very different. You can lose a lot of money if you don’t do your media buying correctly. For example, most people think that Google is the leading search engine, but it is Yandex, the local search engine, that is leading and Google is a runnerup. You might think that Facebook is leading in the social media space, but it has a marginal market share. In the offline channels like television, there is a very limited and state-controlled quantity of channels. You need to line up and buy ages ahead of being aired.
Basically, Russia Post is like the U.S. Postal Service. Then, there are courier companies, but they are poor in execution.
For example, let's say you buy three pairs of shoes. They're identical in style, but in different sizes. You would order them and have them delivered to your house by a local, foreign or U.S. courier company operating in Russia. Then, you would try them on and two pair would not fit, so you want to return them by giving them back to the courier. But the courier would look at you startled and say, “Well sorry. I have a printed receipt here for three pairs.” So, he can only take the three pairs and not two.
Imagine this happening dozens of times and complaints start coming from the e-commerce company. You go to your courier company and say, “Listen, I would like you to do partial returns.” And they reply. “Sorry, we don’t have the IT infrastructure for that.”
If you want to do e-commerce from a local distribution point, you will need to get some volume in your own warehouses and set up your own courier system in the vital cities.
Also, if your target audience and partners are in other areas of Russia, keep in mind that:
Forget about credit cards. Forget about plastic pre-payments. There are 250,000 ATM or cash terminals across Russia operated by only one company. You need to put in the cash manually and then that cash is used to pay your bills as a Russian citizen or pay for your e-commerce purchase.
Eighty percent or more of all transactions are actually cash on delivery. This means your capital velocity cycle needs to be much longer. You need to purchase the stock, sell the stock and then wait until the parcel is delivered and paid for by the recipient.
If you want to set up a business in Russia, you are subject to criminal law. If you fail in your business, you may have broken a rule without even knowing it.
As a foreigner, you cannot deliver any services – not even as a freelancer or as an entrepreneur – without a work permit. And Russia has a quota for approving these permits. This is part of the highly-qualified or highly-skilled foreign specialists law. There are a lot of things you need to do before you can get a permit. They demand, among other things:
The process can take three months or more and then you will pay a lot of taxes. But, if you survive the first six months or so, the taxes get lowered so you can pay a balanced average percentage over the full year. You can also work through an agency, which can do everything in two weeks and at little cost. Otherwise, you will be spending tens of thousands of dollars to get it arranged.
Keep in mind that, when you set up even the tiniest local legal presence, you will be signing hundreds and hundreds of documents every month – even if your revenue is zero. You can try to get some of those delegated to a third party, but you will also be the person who can be jailed if something is wrong.
The digital sector is a young sector in Russia. Finding anybody with more than five years of experience is nearly impossible, because nothing existed in the sector five or six years ago.
This means a company wanting to sell products in Russia will probably be dealing with a 25-year-old who has seven sales people on his or her team, but can't speak English. They may have certain sales skills, but they're not geniuses. You have a lot of outflux/influx job openings in this market.
A company can train someone and then, after six months or a year, he or she is gone. Western HR firms need to understand that this market is running extremely fast and it's an emerging market. People jump ship all the time.
Standard Western metrics can't be applied. It doesn't mean there aren't a lot of young people extremely eager to learn. It's just that people in Russia have absolutely no nine-to-five mentality, at least if you get the right ones. And Moscow never sleeps. It's 24/seven.