3 Oct 2018
Defunct Brands and Belarus Assembly Key to Russian TV Set Market
Reviving brands familiar to Russian consumers, while benefiting from zero import tariffs between Eurasian Economic Union members, seen as prime means of taking on the Big Three manufacturers that now dominate Russia's TV-set market.
Despite many young, urban Russians following their counterparts across the world and all but abandoning TV in favour of digital device-delivered online video content, the country's television market, overall, has remained robust, with even some apparent signs of growth. This is largely down to the growing inclination among certain consumers to enjoy a widescreen home-cinema experience when viewing favoured TV series or music videos.
The combination of these two demographics has resulted in a surge in demand for smart TVs, systems that can deliver traditionally sourced programming, streaming services and all other forms of online video content. Their take-up has been further boosted by Russia's high level of internet penetration, with affordable high-speed broadband access and competitively priced subscription services also playing their part.
Against such an alluring backdrop, then, it is perhaps no wonder that Shenzhen-based Skyworth, one of China's largest manufacturers of TV sets, has now seen fit to enter the Russian market. The company made its move in August this year, with its sets made available exclusively across the country via Tmall, the Alibaba-owned b2c website that launched into Russia late last year. The deal marks another milestone for the e-commerce site as it looks to make good on its aspiration to be the primary platform for China-origin goods in Russia.
The site now offers the full range of Skyworth TVs, with the models on offer ranging from the more modest 32-inch sets to its premium 50-inch systems, while prices span a broad US$120-650 spectrum. All the TVs come with Russian-language applications and menus as standard and guaranteed after-sales care, as well as having been duly certified in line with local requirements.
Despite such concessions to local preferences, Skyworth will have its work cut out if it is serious about building market share in Russia. At present, three overseas manufacturers – Samsung, Sony and LG – dominate the sector, together accounting for some 80% of the market in value terms. It is, however, an expanding sector, with unit sales having grown by 15% year-on-year, reaching a total of 2.6 million.
Despite this growth, average receipts in the sector have declined by 5% in the past 12 months, with the majority of sales clustered around models retailing for $350 or less. There are also few signs that that the Big Three's hold on the market is likely to loosen any time soon. Despite there now being some 15-20 domestically produced TV brands available, Samsung, Sony and LG still collectively account for 60% of all unit sales.
According to many in the industry, in order make any real headway in the market, Skyworth will have to look to localise at least part of its TV set assembly activity within Russia, a practice already adopted by the Big Three. Even many of the smaller overseas players in the sector – including the likes of Sharp, Toshiba and Akai – have relocated some production work either to Russia or to another member of the Eurasian Economic Union, with Belarus proving a particular favourite on account of its competitive labour costs and relatively high skill base. The advantages of such localisation are clear, with the 20% accrued saving on VAT and import duty allowing for such sets to be sold at prices that easily undercut wholly-imported models.
As well as remaining price-conscious, would-be Russian TV purchasers are also notoriously brand-aware. With most consumers expecting TVs to have a useful life of up to seven years, the reassuring familiarity of brands such as Sony and Sharp plays a huge role in the spending decisions of middle-aged consumers, a demographic that also displays considerable faith in some of the lower-priced brands, such as Blaupunkt.
Indeed, so pervading is this affinity that it has almost entirely stifled the growth of own-label TV sets throughout Russia. It is, however, a problem that many mainland-based tech exporters are only too familiar with. In the case of the China-origin smartphone brands – now a staple of the Russian market – it took several years of investment and promotion before they won wide acceptance from the country's brand-conscious consumers.
In line with this, any Hong Kong-based manufacturers of TV sets, whether wholly or partly assembled, looking to make inroads into the Russian market would be well-advised to look at reviving one of the many brands – such as Grundig, Akai, Supra, Finaj or Shivaki – that are still well-known in the country despite no longer being in production. They should also consider the opportunities arising from switching production to one of Belarus' free economic zones, where overall costs and labour charges are significantly lower than those in Russia. Such a move would also circumvent the need to pay customs tariffs, which do not apply to exports between members of the Eurasian Economic Union, which includes Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia.
Leonid Orlov, Moscow Consultant