Polaroid Corp., which took advantage of Russia's tradition of street vending to build a national marketing network, now derives nearly 7% of its total sales from its growing business in the formerly Communist country.
"We saw business increasing in 1994 and we expect it to increase substantially in 1995," Lance Roulic, Polaroid's director of marketing and consumer goods in Russia, said in New York.
Svetozor, or Shining Light, Polaroid's 65%-owned joint venture in Russia, was profitable in 1994. Its $155 million in sales was 6.7% of Polaroid's total, he told a meeting of business executives, accountants and lawyers.
Cambridge, Mass.-based Polaroid does not break out Russian profits and declined to give specific 1995 forecasts. Russia is its biggest foreign market after Germany.
Roulic said a big part of Polaroid's success in Russia can be attributed to the company's establishment of a nationwide distribution network using kiosk vendors and people from flea markets. Russians' desire for instant cameras and photographs was also a big factor. Russians had been developing film in their kitchens and bathrooms. Roulic said Russians especially like the idea of having the only copy of a photo.
Polaroid entered what was then the Soviet Union in the fall of 1987, investing $2 million in what was then a 50-50 joint venture with the Ministry of Atomic Energy and Industries. The first retail outlet opened in May, 1990.
The collapse of the Soviet Union in 1991 "led to a dramatic change in Polaroid's assumptions," Roulic said.
Roulic, who was living in Moscow at the time, said Polaroid had to start changing the thinking of its Russian partners, who were not familiar with capitalism. Polaroid took control of the joint venture in 1993.
Distribution was the first challenge. Polaroid decided to be a wholesaler rather than sell directly to the public. The country's state-owned stores were not interested in dealing with Polaroid, however, he said.
"We had to look for new ways to distribute our product," which was difficult because the culture had given so little encouragement to entrepreneurs for so long, he said.
"We went to the flea market" and tapped kiosk vendors for their sales acumen, Roulic said. "We found that people selling from stands on the street were the only people who knew anything."
Polaroid began with about 200 vendors in a cash business. They would come to Polaroid with rubles and carry off boxes of film and cameras to sell.
"Within a year, we had dealers from St. Petersburg to Moscow to Almaty to Vladivostok," Roulic said.
Polaroid has since trimmed that network to 15 to 20 dealers spread across Russia.
Although Polaroid has had a positive experience in Russia so far, Roulic advised others wanting to do business there to be careful.
"It is still lawless," he said. "There is still a problem" with organized crime, "and there are still problems setting up business."