More, bigger and better exhibitions

Unlike in the Soviet era, when trade fairs served merely as propoganda tools, post-Soviet exhibitions are driven by a new economic reality – the need to expose products to a large audience on the spot, win more clients and increase market share in a particular industry. Indeed, the collapse of the Soviet planned distribution system has forced entrepreneurs to look for sales outlets for their products, including through exhibitions – in its traditional Western concept.

Consequently, several new companies have sprung up to provide exhibition services to Russian companies. According to experts' reports, the local exhibition market earns between $200 and $350 million per year in Russia, with over 1,000 expositions and tradeshows taking place every year throughout the country.

Although the exhibition business in Russia has developed substantially since the early 1990s, the level of activity has yet to catch up with that in Western countries.

However, the budding industry has a lot to be proud of in its 13-year history. Already, there are about 450 exhibition companies registered in the sector, out of which approximately 80 are highly active, while the number of new companies joining the fold is growing constantly.

Specifically, the number of participants in these exhibitions has more than doubled since 1998 – thanks to the country's unique location on two continents, Europe and Asia.

Such a location thus makes participation in Russian exhibitions a very lucrative business for companies operating in the Eurasia zone.

Also, the number of specialized exhibitions in Russia is on the rise and now represents around 80 percent of the total. The largest exhibitions are for agriculture, construction and foodstuffs production. Exhibitions for printing, oil and gas, labels, packaging, equipment and machine tools are also on the rise. Besides, Russian companies are more actively taking part in foreign exhibitions, too — last year, for example, several dozen Russian companies went abroad to take part in exhibitions.

Meanwhile, over 100 countries take part in exhibitions in Russia, with about 60 percent of the country's exhibition space concentrated in Moscow and St. Petersburg, where large-scale expositions are held each year. At the same time, 70 percent of all exhibitions take place in the regions.

"The way the world exhibition community sees it, only Moscow and St. Petersburg have a real exhibition business in terms of quantity, quality and level of organization," said Andrei Lapshin, president of exhibition holding MVK. "Moscow is the undoubted leader, a status linked closely to its role as the capital, financial and transport center, along with other advantages that this entails. Other cities are also represented in the exhibition sector, but the only successful projects are exhibitions linked to the specialization of a region such as the Russian Coal exhibition in the coal mining Kuzbass region."

Overall, the leading Russian companies in the sector run their business according to average European standards and are just as capable of organizing exhibitions as their foreign counterparts.

Looking at specific projects, exhibitions such as ProdExpo, MetalExpo, the Russian International Car Salon, Russian Farmer, Lestekhproduktsia, the United Russia Forum, the Baikal Economic Forum and others are widely popular. There are around 20 exhibition firms with world recognition operating in Moscow, including companies such as Svyaz Expocom, which enjoys deserved popularity among businesspeople from around the world in the telecommunications sector.

The list of key players is not very long, and although there are a lot of exhibition companies in the country, the leaders are few and stable in number.

"The leader in terms of annual exhibitions is probably ITE, but there is no precise information available," said MVK's Lapshin. "Expocenter openly declares that it is the leader. We also count ourselves among the leaders and are definitely in the top three. We have a lot of weight in the CIS too, given that we have now begun building up our network of representative offices in CIS countries."

A number of groups uniting different exhibition organizers operate successfully on the market. These include the International Union of Exhibitions and Fairs of the CIS and Baltic Countries (MSVYa), which brings together 70 of the main players on the market in the CIS and the Baltic states. This organization plays an important part in forming a unified business space and in organizing mutually beneficial cooperation between exhibition organizers.

Although the exhibition business has developed strongly over recent years, problems in the sector still remain. One of the main obstacles is the lack of a suitable legislative base. Surprising though it may seem, there are still no official documents approved to date in Russia defining the rules of the game for this sector. The legislative base that applies to the sector dates back to the early 1990s. It is a priority today to develop a clear legal framework for the business and define the rights and responsibilities of market players. Another priority is to organize exhibition companies' accounting and financial reporting along standard lines, because at the moment most companies have an unclear, ad hoc system. There are no licensing procedures and no kind of permission needs to be obtained.

Aside from the lack of a legal framework, another significant problem for market players is the shortage of infrastructure and suitable exhibition space. Moscow's Expocenter, for example, is limited in development possibilities because it is jammed in between the government White House and the Moscow City project site, giving it no room to grow. Market players also cite growing difficulties linked to exhibitions being held far from transport lines and problems finding enough hotels and public catering establishments.

Market players also say they are worried by the problem of more experienced, and more importantly, wealthier foreign competitors expanding in the Russian market.

Foreign companies have a wide range of advantages over their Russian counterparts and the state should take action and come up with a clear and consistent strategy for supporting the Russian exhibition business.

"One of the main problems in the exhibition business today is the shortage of financial resources," said MVK's Lapshin. "If we get the money, we will also get the awareness that any service comes at a cost, and that what you pay for should be of good quality.

"The real exhibition boom that we have seen in places like Germany, for example, will take some time to reach Russia," Lapshin said. "It is hard to imagine at the moment that the center of the exhibition business will move from Germany to Moscow. This is not possible at the moment because in the European countries the state itself encourages the exhibition business' development. We have no such state encouragement here and Moscow is no exception."

But market players nonetheless display a cautious optimism in their forecasts for the sector's future development.

Sergei Levit, president of exhibition company IFA, said that the arrival of foreign exhibition companies on the Russian market is a positive phenomenon, but that it must be regulated by Russian companies. "We need to consolidate and set common rules and statistics standards for all, and this will strengthen Russian companies' positions and create healthy competition on the market," he said.

The Russian exhibition business will see guaranteed success if an appropriate legal framework is established and large-scale investment arrives in the sector. The sector is still young in Russia and has already made considerable progress over little more than a decade. With some encouragement from the state, the exhibition sector could well become one of the driving forces that will help Russia's economy surge forward.