<b>Russia 2010:</b> Optimization Year for Russian Bike Market
MOSCOW, Russia – 2010 was a dynamic year in Russia. Everything was balancing between an abrupt downturn, a second wave of financial crisis and glorious rise, call it growth pick-up. Caution was a vital habit. No new projects, no big investments, no hiring or salary rise. The feeling of danger penetrated through all industries and society as well
MOSCOW, Russia – 2010 was a dynamic year in Russia. Everything was balancing between an abrupt downturn – a second wave of financial crisis and glorious rise – call it growth pick-up. Caution was a vital habit. No new projects, no big investments, no hiring or salary rise. The feeling of danger penetrated through all industries and society as well.
According to, the governmental statistics organization Rosstat, inflation was 8.8%, the same as the year before. At the same time food prices have risen 22.7%, hitting hard families with lower income in regions where average monthly wages are as low as €350, and in some places even less. Luckily enough oil and natural gas prices were higher than expected, but despite that fact the GDP fell 4.1%. Official statistics for unemployment stabilized through the year with an average of 7.5%, about 1% less than a year before.
Keeping in mind that everything, including the Russian ruble exchange rate could collapse in a moment if oil prices drop, no one was eager to order lots of quality bikes. The plan was to break even. Some companies were cutting jobs and moving to smaller offices, others reducing their orders to the essentials. Thus if there is a word to describe the year 2010 in Russian bike market – it is “optimization”. Those with lots of stock after year 2009, were able to get rid of it – a shortage of branded bikes was obvious already in June. Curiously one market segment slipped from everyone’s attention – children bicycles. New customs policies contributed to this situation, so even in Moscow it was a challenge to get a branded bike for a kid.
Boom in component sales
In the same time almost every company representative told us about a successful year, with sales increases of 10 to 50%. The components market was said to increase significantly, due to a more conscious approach to bicycles among users. People were repairing old bikes, and postponing the purchase of a new one. This trend was mentioned several years ago and still developing. It may be a reflection of the mountain bikes’ popularity.
The fashion to buy multi-geared “mountain bikes” of the cheapest kind brought along a need for maintenance and most old bikes end up as a squeaky monster with petrified ‘suspension’ and only 3 or 4 gears working. This, couple with the fact many adult Russians lived during the Soviet period of total shortages and learned to rely on themselves, helps explain the big boom in component sales. It was necessary to be able to make a small repair of whatever broke in your home, so it’s no surprise to see a senior manager of a serious company in front of his house fixing a bike by himself.
With smaller amounts of imported quality bikes, local production took the initiative. The largest Velomotors factory assembling bicycles near Moscow under Stels brand is said to sell between 750,000 to one million bikes a year. One wishing to buy a bike for himself and another for his wife and one more for a kid should look no further than Stels. Its catalogue covers all ages and lifestyles. Prices are affordable and bikes are attractive in design. It’s fair to mention some limitations of such a generous offering. Quality remains mediocre and higher end models are unavailable. But being serious about optimization, they are continuing to evolve as a company.
Another big local market player from the town of Perm is making bikes under the Forward brand. Some 400 thousand bicycles were sold mainly in the eastern regions, but gradually marketing focus is shifting towards the west of Russia. Forward bikes are similar to Stels ones with only some insignificant differences.
One more prominent company to take a note of is making old-school single gear road and folding bicycles in Minsk, the capital of Belarus, but Russia is the traditional market for Aist bikes. 300 thousand of these very basic bicycles selling costing less than 100 euro are easily sold in rural area. They are marketed as worker-bicycles, not joy-bikes. Steel road frame with horizontal top tube, 28 inch wheels and one gear – it’s wouldn’t look unfamiliar to a cyclist in post World War-II Soviet Union. There’s still a great market for this type of two-wheeler. The typical customer knows how to fix everything. Specific wrench set could be found in every barn or attic and in case you don’t have one, you can manage repair with simple tools. To illustrate the point imagine the crank attached to the bottom bracket axle with a wedge hammered in and tightened with a nut! Despite predictions this business model would be done in by market forces, Aist remains surprisingly alive and well.
Unfortunately, optimization prompted a noticeable reduction of global brands in 2010. For several years Kona bikes had been selling in the largest sports chain Sportmaster, but after the economic crisis, the chain store got rid of the Canadian brand. If you are in Moscow, you can still find Kona in a small bike shop, but freeride fans from the regions will have to come to Moscow to get a bike or order it online, which could be quite a hassle.
Mass brands are available – one can get Trek, Giant, Merida etc. But usually only lower-end models are available immediately. More expensive ones have to be preordered. Price scales are different in Moscow, compared to other cities with over a million population and small towns. In the capital the typical customer is ready to part with as much as 500 euro, but in the regions that figure drops by half, and not so many customers will dare to buy ‘exotic’ an bike. Like it has always been – Moscow and the rest of Russia, are two different countries with a great gap in customer mentality.
One phenomenon changing the provincial approach is Internet. With online access spreading throughout the country and connections available even in villages, consumers got a hint they can get what they want directly from Moscow, or USA, or Europe and leave the lazy and uncooperative local dealer out of business. But it is still a long way ahead to overcome the fear and anxiety of the average consumer from some regional center, like Tver, Rostov or Ivanovo. He or she may not have a credit card yet, isn’t fluent in English or any other foreign language, and is frightened with the stories of Internet fraud. But computer literacy is making an impressive jump.
Online buying has become the vicious enemy of specialty bike shops. Dealers complain that local Internet shops are misguiding customers. They claim that they have a good selection of bike models with attractive price tags, let client place the order with operator calling back and offering another bicycle, which may be very different and a bit more expensive. Sometimes the customer pays even more online than in a specialty shop.
On the other hand European and American online bike shops suddenly became popular when Russian customs changed the non-duty price limit for parcels from abroad. Before it was about 250 euro per week. One had to clear more expensive packages from customs, which was a excruciating and time consuming experience. Last autumn however, the price limit was set at 1000 euro per month with no strict control allowing people to order more products from abroad.
A typical online deal saves some 25-50% and what is more important, one is no longer limited to the colors or sizes available in a local shop. But customs didn’t relax its grip all over the market. It became more difficult for the importers to clear their deliveries. Customs bureaucrats demand letters from the chamber of commerce of originating countries, approving the factory’s prices. Lack of the appropriate paperwork leads to higher duties. As it is elegantly put, “Stringency of the law is compensated by optionality of its implementation”.
Prospects for the year 2011 however, are good. Dealers hope to increase turnover 20% or so. The market will hopefully bring more variety. Last year’s extremely hot summer made bicycles became less attractive as a leisure accessory and it was not a first choice for commuting in the cities. But with the advent of spring, clouds over the bike market are vanishing, dealers busy with their logistics are sayng, “Ask me in May!” As long as the bicycle doesn’t fall from fashion, interest to personal mobility and healthy lifestyles is high, there is money to grease this machine for another year.