Russian businesses continue to develop amidst turbulent conditions. What changes can we expect in 2024 and what trends will influence the market?
1. Economic challenges
In late October, the Central Bank increased the key interest rate to 15% per annum, hoping to turn around inflation from its current level (officially, 7.4% in late November) to the target inflation of 4% in 2024.
Eventually, the key rate was increased once again, on December 15. Even if it had not happened, there was a high probability of the key rate being increased next year.
A high interest rate makes loans more expensive – and not only for businesses. It becomes more difficult for companies to raise additional funds for scaling up while consumers prefer to cut costs and save up. The economy slows down in its development.
In addition to that, the economic sanctions are still in place, complicating companies’ import and export operations.
2. Import substitution
Despite all the difficulties, Russian businesses have found themselves in a unique situation. After foreign companies left the market, so many niches are now vacant, in both budget and luxury segments. Local companies have a great chance of filling them.
According to 2023 data, the amount of import substitution products has increased by 15%. In certain niches, such as clothing and shoe production and cosmetics, it is around 30–40%. This indicates that Russian companies are actively using the opportunities that opened up in these new conditions. Competition has already grown in many niches.
What niches I see as promising in 2024:
- production of eco-friendly and sustainable products, food and services;
- digital platforms and business digitalization;
- domestic tourism and all types of associated businesses;
- healthcare;
- IT.
3. Online trading, delivery services and marketplaces
Ten years ago, we said: “If your business does not have a website, you don’t have a business.” Five years ago, it was “if you’re not on [prohibited social network] you don’t have a business.” Today it would be absolutely fair to say: “If your business is not on a marketplace you don’t have a business.”
During the second quarter of this year, the turnover of small-sized and medium-sized Russian businesses online grew by 63%. People increasingly prefer online trading, and a substantial share of all niches are moving online. So I believe that delivery services and marketplaces are must-have assets for any business offering goods and services in 2024.
4. Implementing digital technologies
On the one hand, digitalization and automation are very convenient. But on the other hand, businesses must be able to adapt to this trend quickly because experience in this area may be very highly priced.
What areas of IT development deserve particular attention:
- online trading tools;
- data analytics;
- cloud services for data storage;
- CRM systems;
- setting up business processes;
- end consumer communications (e.g. chat bots).
5. Government Regulation
The state is increasingly focusing on business regulation and business processing compliance, so businesses need to be prepared, including companies with offline and online operations.
It is a good idea to streamline your accounting and make sure your business is civilized, legal and transparent, that all your contracts and offers, and all processes are in perfect order.
By Maria Kuznetsova, investment and business scaling expert, founder of Frontiers