─ Where did you get the idea of coming over to Moscow from?
─ As a matter of fact, I started learning Russian whilst still at school. It just happened like that, quite by chance. Russian is a very difficult language. It occurred to me that while most people choose English or French, if I learnt Russian, then further opportunities would present themselves to me; that it would help me to find an interesting job. I carried on learning Russian after school, at university. And, as it so happens, I got to know some guys there who I later did business with in Russia.
About Marcel Baltes
Graduated from the Otto Beisheim School of Management in Vallendar (Germany). Worked for KPMG, the Russian company KupiVIP.ru, and the German company kaufDA. One of the founders and CMO of Lokata since 2011.
Lokata (lokata.ru) is the Russian project of the global company Bonial International Group. It is a mobile service operating according to the principle of “we search online, we buy offline” which assists the user in finding the right goods from the nearest location. By downloading the mobile application, the user gains access to a search engine, a geolocational platform, and is also able to peruse the catalogues and brochures of local retail outlets online in order to select the right goods at the best price.
─ Did Russian come easily to you?
─ Not at all! In 2010, I came to Moscow for five months on a cultural exchange programme at the Financial University under the Government of the Russian Federation. And, although I passed my exams, I still hadn’t completely mastered the language. So I decided that I absolutely had to return to Moscow to finish off learning Russian.
─ But you didn’t return to the Russian capital purely for the sake of the language, did you?
─ Needless to say, no. Good prospects working in a rapidly developing Russian trading company opened up for me. Damian Doberstein and Oscar Hartman set up KupiVIP. That is the very same Oscar Hartman who, along with Pascal Cleman and Marina Treshchovaya, formed the startup incubator Fast Lane Ventures. They were launching a startup company every month. It was causing quite a stir! And, right after university, I set off for Moscow to work at KupiVIP. I decided: I’ll work for a while, and then see if staying in Moscow was both possible and what I wanted. It was possible, and it was what I wanted.
Our advertising doesn’t annoy people: on the contrary, it generates interest.
There was another factor, too. I had got to know some German fellows who had launched a startup in 2008 and who had already sold its company Axel Springer. This startup turned into what is now known as Bonial International Group. They went global, operating in Germany, France and Spain, and they were setting their sights on Russia. The result of which, in 2011, was the project Lokata.ru: a Russian version of the portals set up by Bonial International all around the world.
─ Advertising is the engine of commerce. But it is also a major irritant. How do you drive trade without irritating the consumer?
─ The whole difference between advertising which works and that which irritates can be described in a single word: relevance. If a company earns money from advertising, then all of its business depends upon such relevance. But we don’t ram anything down the consumer’s throat. Russian trading organisations send us information on what they can offer customers, and we process this information, post it on our system, and whether the user wants to look at it is up to them. But people download our app because it is handy: you can be walking down the street and find out where there is a supermarket or a specialised shop nearby, and what they sell there. We get over 600,000 downloads, and have a high rating: 4.5-5 stars. That says that our advertising doesn’t annoy people: on the contrary, it generates interest.
─ Working in a commercial enterprise in Moscow you are bound to have come up against problems which you wouldn’t come up against in the West. Which of them is the most serious?
─ The attitude towards the target audience, the recognition of the importance of targeting. If you want the people most likely to buy your product to see your advert, and not just random people, you know that you are deliberately sacrificing your breadth of reach. This is disconcerting to Russian retailers. But such is the law of the market: there is nothing you can do about it. When it is a matter of image promotion, raising overall brand recognition, then there is no dispute: the more people who see it, the better. But for businesspeople engaging in retail trade, they need people to come into their shop and part with their money, which means that they have to show their advert, first and foremost, to those for whom it is of genuine interest. That is far more important than the overall number of viewings. Russia is five years behind Germany in this respect. As ever, Russian trading companies are mesmerised by the opportunities offered by television, by huge advertising hoardings in the streets, and those little posters above the escalators in the metro. Fine, let’s say a million people see an advert on television and in the metro. What of it? How many of them will be coming into your shop?
Retail chains are more geared up towards traditional media. It has to be explained that online advertising encourages offline sales, too.
─ Who are your clients? Big business? Medium-sized?
─ We encompass all the main retail categories: electronics, furniture, food… Two dozen categories, and we have partners in each of them. Of course, it is better to have dealings with large chains operating across the whole of Russia.
─ Do sellers jump at the chance to join your service?
─ It varies. Sometimes negotiations don’t go smoothly at all. Precisely for the reason I was just talking about. Retail chains are more geared up towards traditional media. It has to be explained that online advertising also encourages offline sales, too, not just purchases made over the internet. If both the search and the sale take place online, then it is easy to work out the conversion rate: here is where someone clicked on the link, and here is the result of it - goods bought to the value of 1,000 roubles. But the mixed kind of commerce is quite prevalent. The customer goes on Google or Yandex, researches on the internet the specifications and options for the product required, reads the reviews. Chooses the shop which is a little bit better and a little bit nearer, leaves the house, gets on the metro, and buys whatever they were after. For some categories of goods, the proportion of sales like this is over 50%! A TV, for example, is more likely to be chosen on the internet but bought in a shopping centre. It is an effective way of doing things, convenient for the customer, and it is good for us, as that is precisely the kind of customer we count on.
But large chains don’t quite get this. Many think in the same the way they always have done: that if an advert is online then it relates to online sales, and that offline sales are exclusively to do with offline advertising. In the real world, any variation is possible, including the reverse of the one I just mentioned. Someone sees a billboard in the street but makes the purchase at home with a credit card over the internet. But how can you account for that? And, of course, it perturbs retailers that following that path, establishing what it was that resulted in the completed purchase, in such circumstances, is nigh on impossible. It goes without saying that we will work out the conversion rate for you: we have the requisite tools and procedures, but convincing a trading partner of its effectiveness doesn’t always work.
─ You work with global companies and with Russian ones. Is there are a difference?
─ Of course. There are German retail chains represented in Russia. It is easier for us with them. We speak the same language in both the direct and figurative sense of the word. We are familiar with their goods, their way of working, and they understand what we need, and what that will bring them, because they know about equivalent companies in Germany. Working with global networks is usually more straightforward because they are more open, prepared to experiment, and are not afraid of new approaches and technology. Smaller trading enterprises are more cautious. The situation here regarding Russian networks is an interesting one. They are now focused on digital technology. This is, of course, good, on the one hand, but not so good on the other, insofar as the bulk of all of their sales, up until now, has taken place, not over the internet, but offline. Sometimes it’s astonishing: we can be talking to a manager about the ins and outs of online sales, at which point, it becomes clear that their proportion of their business is less than 5%. It is as if the other 95% have been completely forgotten about!
There are German retail chains represented in Russia. It is easier for us with them.
Even if we are talking about sales of food where, obviously, goods are selected on the internet a lot less frequently than, let’s say, electrical items, equally the proportion of goods found online but bought offline will be not inconsiderable and really should not be disregarded. The situation now with vouchers is indicative of this. In the US, vouchers are extremely popular, as they are in Germany. In the US, the conversion rate for vouchers is 60%. Over there, for example, there was a most successful campaign run by McDonald’s. This is also a particularity of the modern trading company.
To sum up, I would say that the main difference between the Russian and European approach is this. The importance of offline sales in Russia is perfectly understood, as is the importance of transferring online, but they don’t see the big picture where these possibilities are wonderfully intertwined. In the West, however, they do see this. But I am sure that a joined-up picture will soon emerge in Russia which means that the commercial sector has great potential for growth. Both for us and for others.
─ Is it harder working in Russia than in Germany?
─ A little, primarily on account of the paperwork. Germany is easier for that. But it is possible to get to grips with it all. It doesn’t hamper business very much. There’s something else which hampers it: the amount of time taken to sign contracts with large organisations. They can spend a couple of months just on checking us out as an organisation, seeing whether we are reliable or not. And then even more time is spent on some kind of internal procedures. It drags on for half the year! What are they up to? No doubt they have their reasons, but it all gets in the way of our, and basically, anybody’s, business.
I am sure that a joined-up picture will soon emerge in Russia which means that the commercial sector has great potential for growth.
─ Which problems are best dealt with by expats, and which does it make more sense entrusting to Russian colleagues?
─ Obviously, if it’s a case of law or accountancy, then it is better to get a Russian expert. This is no place for a Western accountant. What distinguishes us is that we are part of a group which has great experience in Germany and the rest of the world. My role is to pass on international experience to our Russian employees. They travel to Germany from time to time, and I speak with headquarters myself every day.
In certain circumstances, it is easier to find the right person in Germany than it is in Moscow. In Moscow, there is no lack of engineers and programmers, but there are far fewer managers experienced in our field. But that is natural. German retail is more than just a decade old whereas Russia has had to start virtually from scratch in the 1990s. However, that gap is narrowing rapidly.