By Boris Kuschev and Peter Kramerius, regional managers, Infosource
When the crucial OPEC meeting broke up at the beginning of this March due to a strong disagreement between Saudi Arabia and Russia, it immediately sent the price of oil into a fast downward spiral. As if this was not enough, lockdowns in most countries worldwide due to the spread of coronavirus and the connected depression of economic activities has resulted in a total destruction of demand for oil, leaving massive supplies unwanted and creating negative oil prices for the first time in history. What does this mean for the Russian economy and document scanner market—which represents about 65% of total Eastern European sales at the moment?
A plunge in oil price has meant a correlated plunge of the Russian ruble exchange rate with serious repercussions throughout the whole region and markets dependent on the ruble.
In Russia, the first calendar quarter of 2020 was pretty much a normal working quarter, as the lockdown was activated in the middle of March—a bit later compared to some other countries. Therefore, the majority of vendors fully implemented their business plans for Q1 to their satisfaction without disruptions. In addition, for many vendors, calendar Q1 represents the end of their financial years. Regarding the second quarter, which is usually the weakest anyhow, vendors are a bit worried about possible disruptions of the supply chain, but overall there are not negative expectations. However, as for the second half of the year, nobody really has any idea or realistic opinion about what may occur, and because of this unpredictability, vendors are afraid that Q3 and Q4 will bring quite lower results than usual.
As for the scanners market (but not only the scanners market), the main trend over the last two years has been a gradual price increase for devices. However, with the increase in the ruble exchange rate, the vendors will not be able to remain at the same price level as in the last year and will have to increase prices even more. In addition,many scanners are placed on the market via tenders, which now represent a trap, as they did under similar circumstances in crises in 2008 and 2014. In Russia, several tenders that were activated in February and March were planned at the beginning of 2020 with prices according to the ruble value at that time, of course. The winners of these tenders will now not be able to generate any profit out of them as they have the obligation to ship the devices, but with new ruble price corresponding with the new exchange rate. As a result, the winners could record negative margins.
All vendors in the Russian market are now operating with minimal margins and unable to make a profit. Since the beginning of April, they have been forced to raise prices, which will result in lower demand. While Russians and Russian businesses have put on a brave face in recent weeks as oil prices have plunged, in reality everyone is concerned about potential economic damage, also because Russia´s 2021 national budget will be based on the 2020 oil prices.