Editor | Wei Bo

Chinese enterprises are increasingly turning their gaze towards Russia – an emerging market brimming with potential.

With the withdrawal of Western brands, a significant demand gap has emerged in the Russian market, presenting an unprecedented opportunity for Chinese enterprises. Against this backdrop, Chinese entrepreneurs have embarked on a "sprint" into the Russian market. To mitigate the uncertainties of the physical market, Chinese overseas businesses are leveraging digital advantages and focusing on the emerging internet sector.

According to Xiaguangshe's research, the "troika" driving Chinese manufacturers into the Russian-speaking market comprises the game, consumer electronics, and automotive industries.

"Consumer electronics, represented by Chinese-made mobile phones and tablets, as well as Chinese automotive brands, have intensively entered the Russian market over the past 3-5 years," a Chinese merchant familiar with the Russian overseas market told Xiaguangshe. "Another key area is gaming, where Chinese game publishers in the Russian-speaking market have experienced exponential growth."

A closer look reveals that Chinese-made products, particularly 3C electronics such as smartphones, computer accessories, and high-tech gadgets, are abundant on various major e-commerce platforms in Russia. These products, known for their practical technology and cost-effectiveness, have become bestsellers.

Yandex Ads informed Xiaguangshe that based on platform data, "Since the mid-2010s, we have observed a significant increase in Chinese brands." The recent surge in Chinese companies' business expansion began in 2020, most notably in the smartphone sector, where "many new Chinese brands exploring the Russian market have started to establish their brand image."

According to a December 2023 report by the Russian business newspaper Vedomosti, Chinese smartphones led sales in Russia's retail market for the first time. Chinese smartphone brands such as Realme, Honor, Xiaomi, Tecno, and Infinix have significantly enhanced their position in the CIS countries, including Russia.

Behind the success of these three industries – consumer electronics, automobiles, and gaming – in the Russian-speaking market lies a common thread: they fully utilize the depth and breadth of China's manufacturing sector, renowned for their cost-effectiveness. Through effective marketing and brand promotion, they are building brand reputation in the Russian market, especially among younger consumers.

So, what kind of lives are Russian young people leading, and how does this impact the northward expansion of Chinese products? After the "degradation" of Russia's offline retail sector, are Chinese consumer goods truly popular? How are Chinese consumer electronics and other products effectively leveraging Russian e-commerce platforms for overseas expansion?

Image source: unsplash

01.When Starbucks Loses Its Bucks

To understand the popularity of many "Made in China" products in Russia, we must first grasp the living conditions of local youth.

In the years following the "sanctions," Russian youth have experienced drastic changes in their basic necessities and entertainment.

Starting with the basics of food and clothing:

In recent years, Western fast-food brands have announced their withdrawal from the Russian market.

Their former market demand has been replaced by Russian domestic brands, with notable examples including Starbucks, KFC, and Pizza Hut.

Luxury stores on the ground floor of malls that once belonged to Western brands are now closed and dusty. The global coffee chain "Starbucks" lost its "bucks," leaving only a "Star," illustrating how local businesses have replaced their Western counterparts.

"Last spring, McDonald's left, and it was replaced by a similar domestic brand, 'Vkusno y tochka (Delicious and Modern),'" a local Russian businessman told Xiaguangshe. "Yum! Brands, which owns KFC and Pizza Hut, also sold these brands to Russian enterprises to continue operations."

In terms of clothing, Western luxury and high-end brands have withdrawn from Russia's offline retail market and have yet to recover.

"Trendy brands and luxury items from Western countries have virtually disappeared from our world due to sanctions imposed by Western nations on Russia," said Victoria, a young Russian who has lived in Moscow for a long time. "Brands like Mango, Marks & Spencer, H&M, and Nike closed their offline stores and froze their websites last year."

Apart from offline retail and dining, Russian youth have been most affected by online shopping.

Many "hot items" on Russian e-commerce platforms are in short supply.

Victoria shared an example: Since the "sanctions," vitamins and Omega-3 supplements from "iherb," which she used to consume regularly, have become difficult to find.

Brands that were once easily accessible are now only available for "flash sales" on a few online shopping platforms, with limited quantities snatched up quickly by eager consumers. Many people are forced to choose weaker local vitamin brands, though they secretly worry about their quality.

She explained, "The initial difficulties arose from disruptions in the logistics chain, affecting supplies of food, imported equipment parts, and hygiene products. Gradually, however, most of these were successfully replaced by Russian equivalents."

As a vast economy spanning Europe and Asia, Russian youth, especially those living in major cities like Moscow and Saint Petersburg, possess considerable spending power comparable to that of Western countries.

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Beyond basic necessities and scarce supplements, Russian youth also have significant demands for communication, entertainment, and transportation.

The younger generation actively uses mobile internet for social media, communication, entertainment, and information acquisition.

Like domestic youth, they adapted to smartphones and other electronic devices, social media, online shopping, and online gaming long before the "sanctions."

According to Statista data, in 2022, 90% of Russian children aged 12 to 14 used smartphones to access the internet. In March 2023, the monthly internet penetration rate among Russians aged 25 to 34 was the highest, reaching 97%. Even among Russians aged 65 and above, the monthly internet usage rate reached 45%.

In terms of transportation, European and American automotive brands have withdrawn from the Russian market due to the conflict in Ukraine, leaving a market vacuum. Chinese-made cars, with their cost and smart configuration advantages, have gradually won over Russian consumers.

"More and more Chinese cars are appearing on our city streets," Alex, a local young man living in Moscow, told Xiaguangshe. Chinese enterprises such as Weichai Power, Haier, Xibao Group, and Lovol Heavy Industry have decided to expand their business in Russia since 2022, with the number of Chinese private enterprises in Russia surging during this period.

Many cross-border e-commerce merchants have also established independent stations in Russia, witnessing visible growth in business orders, particularly in fields such as 3C products like computers and mobile phones, as well as industrial products like automobiles. Chinese products have surged in popularity over the past year, successfully filling the market gap left by Western companies.

Haval car advertisement in the Russian-speaking market

Image source: Provided by the interviewee

02.Heading North for Overseas Expansion, Focusing on "High-Level Demand"

Maslow's hierarchy of needs categorizes human needs into five levels: physiological, safety, social, esteem, and self-actualization.

After the "sanctions," while basic necessities like food, clothing, shelter, and transportation have been replaced by Russian domestic products and brands,

high-end clothing, fashionable items favored by youth, health supplements, and other "non-essential" items, as well as high-tech 3C electronics and internet apps, remain relatively scarce and unfulfilled in the Russian market.

Many Chinese merchants have perceived the robust consumer demand and significant market gaps in this region, presenting opportunities for Chinese overseas businesses to expand into the Russian market.

Let's first look at consumer electronics and gaming.

The successful northward expansion of these internet-based social entertainment industries is directly related to the development level of the Russian internet.

Especially after the sanctions, Google and Facebook have exited the Russian market.

Today, Russia's internet landscape is dominated by two major players: VK (VKontakte in Russian) and Yandex.

These two companies also control the main search engines and social media platforms used by Russian youth: "VK is similar to WeChat in China, while Yandex's main business resembles search engines like Baidu in China," explained Jasper, a Chinese internet entrepreneur expanding overseas.

However, the business reach of these local "internet giants" has extended to all aspects of internet life.

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Taking Yandex, a typical "internet giant" in Russia and other CIS countries, as an example:

Young people in CIS cities use Yandex services in almost every aspect of their lives. Popular services include Yandex Search, Yandex Maps, Yandex.Taxi, Yandex Music, Kinopoisk (Yandex's video streaming service), and Yandex Disk.

Based on this internet penetration, Russia's social entertainment and local life internet markets still offer vast "blue oceans" and opportunities.

Currently, many popular social entertainment apps in Russia are backed by Chinese overseas enterprises.

"There's a saying now that 'Chinese manufacturers have occupied the Russian social entertainment market,'" said Jasper, an overseas merchant.

"Half of the top 10 games on the Russian game charts come from China," another game industry practitioner expanding overseas told Xiaguangshe.

The Russian mobile gaming market is projected to grow by 6.73% from 2024 to 2027, reaching a market size of $620 million.

Market research firm Statista predicts that the Russian casual gaming market will significantly expand, growing by 10.52% from 2022 to 2027 and reaching a market size of €105.6 million.

Russia is also rising in the global esports scene, with talented players and teams participating in various gaming competitions. Russian players have achieved success in games like Dota 2, Counter-Strike, and PlayerUnknown's Battlegrounds, with some teams consistently performing well in international competitions.

A small game exported to Russia

Image source: Provided by the interviewee

To more effectively reach the vast Russian audience, Chinese consumer electronics and gaming apps have increased their advertising on Yandex platforms over the past year.

They cited two successful cases of game publishers expanding into Russia:

"The popularity of Chinese publishers' games is attributed to their diversity, high-quality storylines, localization efforts, and social functions," Yandex Ads told Xiaguangshe.

Smartphones are closely related to gaming apps – "one is the device, the other is the content. They rely on each other as technology advances," they added.

Image source: unsplash

03.Opportunities for Overseas Expansion in Consumer Electronics and Automobiles

According to Vedomosti's report on the aforementioned data, Chinese brands delivered 29.5 million smartphones to the Russian Federation in 2023, a 13% increase from the previous year.

Data released by analysis firm GS Group in February 2024 showed that Chinese brands accounted for 79% of smartphone imports to Russia in 2023, a 4 percentage point increase from the previous year and a 29 percentage point increase from 2021.

After US brand Intel exited the Russian market in April 2022, a Chinese manufacturer's electronic accessories began "racing against time" to establish its independent station in Russia.

"After people couldn't buy European and American brands of computers, they generally believed that the quality of electronic products made by Chinese brands would be better," the head of this Chinese manufacturer told Xiaguangshe.

With a relatively lagging local 3C electronics manufacturing industry, Russian electronic products are generally more expensive than their Chinese counterparts in a largely untapped market.

Meanwhile, this Chinese manufacturer found a reliable overseas warehouse to stock products locally.

In less than a year, many Chinese electronic accessory manufacturers like them quickly opened up the Russian market.

Confident in the future of the Russian market, they established dedicated localization teams and settled on platforms like Yandex Market and OZON. They also promoted their own Chinese computer brands on YouTube and various Russian media and technology forums.

In fact, establishing a presence on local e-commerce platforms is a crucial step for Chinese consumer electronics platforms expanding into the Russian market. The most popular online shopping platforms among local youth include Wildberries, Ozon, and Yandex Market.

According to E-commerce DB data, over 70% of Russia's urban population regularly shops online, especially in categories like electronics, fashion, toys, and health, with each sector attracting over 50 million customers. Russian e-commerce platforms like Wildberry, OZON, and Yandex Market have deeply penetrated the lives of local youth.

Nowadays, more and more Chinese overseas merchants are seeking to establish a presence on these platforms.

"People barely knew about Russian e-commerce platforms before, but in the past two years, with the establishment of offices in places like Shenzhen, there has been more discussion about Russian e-commerce in cross-border circles," said Dong Ge, an overseas e-commerce practitioner in Russia.

Yandex Ads' business team in China also told Xiaguangshe that they "attach great importance to localization in China":

"(Our Chinese team) is proficient in three languages (Chinese, Russian, and English), thoroughly familiar with our products and main industries, and has a deep understanding of the cultural backgrounds of both countries. This not only simplifies our communication with Chinese clients but also helps them navigate various business situations in Russia through our expertise and consultation."

It is evident that Chinese merchants' interest and involvement in the Russian market are significantly increasing.

Similar phenomena are also observed in the expansion of Chinese automotive brands into the Russian market, with more and more Chinese automakers setting up factories in Russia to achieve localized production:

Great Wall Motors has a complete vehicle factory in Tula, Russia, covering stamping, welding, painting, and assembly processes. Its Haval brand's soaring sales in Russia are a direct result of this. Meanwhile, Chery partners with the local automaker UAZ (Ulyanovsk Automobile Plant) to leverage UAZ's manufacturing capabilities and market resources for local development.

According to data from Autostat, an automotive industry analysis agency in Russia, in April 2024, Russian car sales reached 75,622 units, a year-on-year increase of 170.4%. All ten top-selling car brands were from Russia or China.

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Russian consumers' recognition of Chinese car brands is also gradually increasing. Chinese car companies occupy eight of the top ten brands, including Haval, Chery, Geely, and Changan, effectively claiming half of the Russian automotive consumer market.

In summary, the development trend of Chinese manufacturers in the Russian market has become increasingly clear. Particularly in the fields of gaming, smartphones, and automobiles, Chinese brands have visibly become major driving forces in the Russian-speaking market.

In terms of the gaming industry’s expansion northward, Chinese games have achieved exponential growth in the Russian market. Especially in the absence of large domestic internet companies in Russia, Chinese game publishers have seized this market gap, providing diverse and high-quality game content. In the consumer electronics industry, the sales of Chinese smartphones and consumer electronics products have significantly increased in the Russian market. Chinese 3C electronic products have also been well-received by Russian consumers for their practicality and high cost-performance ratio.

Beyond meeting the high cost-performance demand of Russian consumers for electronic products, Chinese automobile brands like Great Wall Motors and Chery have successfully filled the market void left by the exit of Western car brands.

For the future, targeting the markets of CIS countries, including Russia, rapid response to market gaps, high cost-performance products, effective localization strategies, and fully leveraging local internet resources will all serve as important factors for Chinese manufacturers in their "northward expansion."