RRC increases overseas sales, expansion yields good results

Russian and overseas revenues of a distributor company RRC approximately equaled in 2005. RRC comprises RRC EN, a project distributor, DiFo, consumer electronic appliances distributor and the RRC Training Center. The 2006 total turnover hit US$230 million. It also demonstrated significant structural changes with around 60 percent of RRC's 2006 revenues received beyond the Russian border.

Source: OSP International

"I believe 40 to 60 is a good ratio that we are content with", sais RRC Group President Konstantin Sidorov. The company's Russian and Polish offices bring around 28 to 30 percent of the turnover each. Then come RRC's offices in Ukraine and Hungary.

Azerbaijan and Kazakhstan were the last to add to the list of RRC's overseas operations. Today the company has twelve offices half of which are in Eastern Europe. RRC also has two sales representatives. Before the end of this year RRC has plans to start operating in Croatia as well as setting up sales representatives in Bosnia and Macedonia.

For financial reasons there are no further plans at the moment to open proper offices that require hiring a staff of at least five people. Instead, RRC will go for a more economical alternative of sales representatives. Besides, from mid-2006 RRC's Eastern European offices started selling actively not only in their own countries but abroad, too, including Turkey and Israel.

"If we speak about geography and our operations, I am quite content", said Sidorov. According to the RRC President, another important objective is to improve quality, extend the list of suppliers and the product portfolio. In terms of regional expansion, task number one is to strike an agreement with a vendor. This is the first thing one needs to do before starting any investment in the country. The next important task is to find qualified personnel. Now that RRC has a reputation of a European company, this has become less of a problem. Depending on the personnel an office employs the company creates competence centers that can be used by RRC offices in other regions if needed. For instance, the main team of Cisco System specialists is based in Russia while Symbol Technologies team is in Poland. According to Sidorov, this human resources diversification is one of the reasons why RRC business has shown such good growth in Eastern Europe. Typically, an overseas office starts bringing profit in the second year of operation. Today all RRC offices are breaking even.

However, RRC top management is not quite satisfied by the company's growth rates in Russia. "While focusing on development in Eastern Europe, RRC has climbed down a bit in the Russian market", says Sidorov. While the Group's 2006 turnover showed 38 percent growth on the previous year, the Russian business only demonstrated 17 percent of growth. This is a significant drop given that RRC's Russian business growth never went below 35 to 40 percent over the past eight years. RRC aims to get back to these figures in the near future, and the market has potential that makes it an achievable objective.

RRC has already replaced DiFo's Russian team whose performance spoilt the general financial picture in 2006 showing only five percent of revenue growth.

Besides, RRS has plans to get to grips with e-commerce. In Czech Republic, for example, RRC received 90 percent of orders online while in Russia this figure is at the zero level. RRC invested over $1 million in implementing Microsoft Dynamics AX. The project is scheduled to be completed before the year-end. The plan is for all RRC companies to switch to Microsoft Dynamics AX. At the same time RRC is launching Microsoft's CRM and developing an e-commerce system. RRC expects all of its e-commerce resources to start operating in early 2008. According to RRC's own forecast, the company's 2007 turnover will exceed $300 million.