— Herr Overstolz, how do matters stand concerning the Bosch Group and its clients from Moscow and other regions of Russia?
— To answer this question, I must obviously first define the term “Russian client”. In working with the Russian consumer, certain paradoxes can be observed. On one hand, he is loyal to brands and good service, and on the other, he approaches prices with the principle that what is good is cheap. The second paradox is that, for example, the choice of one or another electrical tool when purchasing is largely determined by women, in spite of the fact that men will subsequently be using these articles.
— By what criteria do the women do this? By how elegant the electrical tools look?
— Yes, that is one factor. Quite an important part is played by aesthetic aspects and the external attractiveness of the product. Another is what I call the technical activity and higher innovative culture which are inherent in Russian consumers. For example, for the number of software apps downloaded, both in the professional and private spheres, Russian consumers hold third place in the world.
Thus, if you take into account these paradoxes and the almost “family” attitude of Russians to any equipment, you will be successful in this market.
— Does the Bosch Group find it difficult to trade in this country?
— Here there are two important aspects concerning the Russian mentality of consumers. On one hand, it is a combination of high emotional intensity and firm pragmatism. Russians try to achieve a deal with no loss. The second aspect is that our business partners, regardless of the size of their business, expect an individual approach. But when you hold negotiations with them, it very soon becomes clear that it is only a matter of the size of the margin, not of other aspects such as productivity, storage costs, rotation, or pricing. In the end it all comes down to direct expenditure and income, but even these are only taken into account when they can be expressed as a cash equivalent.
— Are there differences between trading, on one hand with Moscow and the rest of the country, and on the other, for example, trade with other European states?
— Firstly, Russia (including Moscow) is one of the biggest markets in Europe and in the world as a whole. Secondly, the particular features of the mentality, which I have just mentioned, need to be taken into account. As a manufacturer, we have dealings here with widely different clients. Thirdly, we practise innovative forms of trading, which are very large-scale in our segment. For example, sales of electrical tools on the internet account for 25% of the total. And fourthly, we have to take account of the legal limitations placed on us as regards the clients we can target. We have to know how to use legal framework relations, for example in extending warranty periods. Within a certain period, maybe as little as 24 hours, the client must provide full information about the product or service, or provide the product itself. We have to know how to offer the best discount off the price, right here and now. Anyone who can’t cope with meeting all these requirements is not going to get anywhere in Russia.
— When you see the list of all the product of the Bosch Group of Companies, you somehow get the impression that it produces literally everything, from domestic appliances, including washing machines and refrigerators, to heating systems, packing equipment, cranes, ignition plugs and so on. Which of these products are you trying hardest to sell in Russia?
The Bosch Group was created in 1889 in Stuttgart by Robert Bosch as a “workshop for precision mechanics and electrical equipment”, with only two people working there. The turning point came in 1897, when the enterprise, which produced mainly ignition devices for stationary engines, began producing ignition systems for motor vehicle engines. Today it has the status of an industrial empire, which marked its 130th anniversary in 2016. It employs approximately 370,000 staff all round the world. This economic giant, with an annual turnover of more than 70 billion euros, is one of the ten biggest enterprises in Germany. The Bush Group has a presence in the markets of more than 150 countries, including Russia, where it has been operating since 1904. In the 2015 financial year, the turnover of the company, which employs 3660 people in Russia, was roughly one billion seven million euros.
— Bosch has four main lines of business activity: solutions for mobility, construction technologies and power generation, industrial technologies and consumer goods. The consumer goods include both domestic appliances and electrical tools. In terms of turnover, sale of consumer goods accounts for two thirds of the main line of our business, including manufacturing in Russia. Domestic appliances are produced at an enterprise near St. Petersburg. We produce washing machines and refrigerators there. Electrical tools, ignition plugs and heating equipment are made in Engels (Saratov province). But we are also expanding in the motor vehicle systems field at our two factories in Samara (Volga area), producing automatic braking systems (ABS) and electronic stabilization programs (ESP). We also recently began producing steering systems and ignition plugs at the factory in Engels. Altogether we have seven factories in the Russian Federation.
We are able to offer our clients all these products from one supplier: motor vehicle products, including engineering articles, and also construction technologies, power generation equipment and consumer goods. That is Bosch’s competitive advantage.
— Do you only sell articles produced in Russia to Russian consumers, and are these goods also exported to other countries?
— For many years, exports have been a reality at all the Bosch enterprises in Russia. Last year 60% of the ignition plugs were exported. When local competition is weak, we build up exports, and when we need the product at local level, we cut back on exports. In fact, we simply react to the competition situation. But this only concerns a certain segment, since, for example,75% of the electrical tools are exported to the European Union, whereas exports of power generation equipment are zero; it all goes to the local market.
— Apart from manufacture and direct sales in Russia, you are also developing servicing. Tell me about Bosch motor vehicle servicing.
— This refers to the Bosch-Car-Service chain of workshops, one of the biggest in Russia. There are 233 of them altogether. and they operated in all the Russian regions, including the most remote: Kaliningrad in the West, Kamchatka in the North-East or Khabarovsk in the Far East. All our partners offer full servicing for any make of car and for models of any age. Our workshops can service modern Russian motor vehicles, because they are well supplied with the necessary electronic equipment. A small garage cannot offer this level of service.
— In recent times, in which spheres of sales has Bosch been most successful in Moscow and Russia as a whole, and in which less successful, and why?
— I have been particularly impressed by the considerable increase in profit from sales in the electrical tool market, where we have managed to achieve very good results. But we encountered difficulties in the sphere of central heating and hot water equipment, because the construction industry was severely hit by the crisis. This sector of the economy has been drastically reduced. At the same time there has been the devaluation of the rouble, as a result of which imported goods and components have become more expensive. Therefore the client has turned from products in the medium and high price categories, to low-priced products. All this has created difficulties in the sphere of central heating and hot water equipment, But in spite of this, I am glad to say we still have our market shares. We have managed to retain and even slightly increase them.
Thanks to our strategy of the localization of production, under which we are producing central heating and hot water equipment here and Russia for the local consumer, and are not exporting it, we have managed to keep production and logistics costs under control so that we can offer a competitive price. That is how we have managed to maintain our market share in a difficult situation.
— In your opinion, is the Russian market still attractive and offering good prospects for foreign businessmen?
— Yes. Because of its great size and huge resources, Russia has every possibility of developing splendidly. We in Bosch believe in this country and its potential. There is no reason at all to doubt this! Even if there are sudden fluctuations in demand such as were seen at the end of last year. This could happen due to a change in priorities. In such a case, in conditions when the rouble has stabilized, some may decide it is better to go on a trip abroad, paid for in foreign currency, than to invest roubles in buying a new washing machine. This country is also attractive and has good prospects because of the family-like attitude of Russians to equipment, and is always open for future developments. So we are continuing to go along our planned road: to develop and receive profit, to expand our market share, to put new production facilities in place, and above all to increase the share of localization of production at all our enterprises.
— What are the key trends in the activities of the Bosch Group in the RF in the medium term?
— In the past two years, we have opened new factories and invested in the construction of a new Bosch headquarters building in Moscow, where we are talking right now. And all this at a time of crisis, which bears good testimony to how devoted we are to our location here in Russia. Now we must recoup these investments. Apart from this, we are always thinking about selling new products here, and assimilating new fields of economic activity.
— You have been in Moscow since February 2016. How do you find the city? Do you like it here in the Russian capital?
I am now spending more and more time in Moscow. This city is fascinating and opens up many possibilities. I like visiting museums, but I most enjoy music, Russian music. I go to concerts at the conservatory. It’s amazing! I could talk of the incredible intensity of perception, almost the obsession, of the musicians. Music is the link that binds me to this country.