The advertising market has preserved the status quo
A recently finished tender, which had been put on hold since 2013, has made no significant change in the balance of power in Saint Petersburg outdoor advertising market.
Less advertisement, the same players. A competitive tender for the right for outdoor advertisement installation for a 10 years period has been held four years past the originally set date. The contracts for using of 14,500 structures expired in 2013, but the tender has been postponed several times due to discussion of introduction of an outdoor advertisement state standard (GOST, effective from March 2016), and due to litigation between the city and the operators. The results of the tender that will boost the city budget by 1.13 billion rubles are hardly unexpected: the market leaders have kept their position. However, the largest operators, namely Russ Outdoor, Poster and Reklama-Center, will have to pay 80% more for placement, but the amount of advertisement is to reduce by 40%: advertising above the roadways will disappear, and its amount in the historical center of the city will plummet. The number of tender’s competitors totaled 17.
The last stand. An order of the Federal Antimonopoly Service (FAS) to set the tender aside was the result of complaints of several companies against the terms and conditions of the tender. It may become the only obstacle for contracts conclusion following the tender’s results. City authorities have refused to follow the FAS’s order, so the parties are to meet at court, the first hearing is to be held at the end of September. However, St. Petersburg authorities are not going to wait for the court’s decision, and intend to execute contracts with the operators before the hearings. For that purpose, the tender winners will transfer to the treasury 100% of the annual payment and a 5% payment security for every subsequent year.
A refreshed market. The most of experts agree that the tender was successful both for the operators in the advertising market and for St. Petersburg in general. The status quo preserved in the market provides vast opportunities for business development, and the Northern Capital becomes one of the most attractive advertising spaces in the country. At the same time, the city has managed to save jobs and, despite the reduction of the amount of structures, to get a substantial growth in the treasury’s revenue. Nevertheless, if the litigation between the Smolny and the FAS caused by the unsuccessful operators’ discontent drags on, the process may involve other operators that have concluded contracts, and their interests will be violated if the tender is cancelled. The annulment of tender results may become devastating for the market, and analysts suppose this scenario to be unlikely. However, we are about to find out the look of the refreshed outdoor advertisement market of St. Petersburg.
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Stable and strong small and medium-sized business is necessary for the Russian economy. The state has an increasing understanding of the importance of developing and popularizing this kind of activity - in practice it turns out that being an entrepreneur is not fashionable. At the same time, according to the Russian Public Opinion Research Center (VTsIOM), 74% of Russians approbate of entrepreneurs.
The business community sees three main factors affecting the low popularity of small and medium-sized businesses:
- 1) along with knowledge, the future entrepreneur has to steel himself for the intense rhythm of work, which is difficult to be taught;
- 3) simplification of business management is required to be more maximum than the state has been doing for many years, but this process goes very slow - this includes both legal and regulatory documents, control and supervisory functions, reporting, etc.
- 3) in the media the negative side of the business is covered, although this is a difficult and respected work, as entrepreneurs create jobs, products for consumers, dedicate taxes to budgets of different levels and bring a lot of important and useful for the country's economy in general.
The reasons of such a situation are significant costs due to unreasonable tariffs for monopoly services, high interest rates on loans, and growing tax burden. All these worsen the already difficult conditions for entrepreneurs and, first of all, for small and medium-sized businesses, for which the important conditions of "conveniently, profitably and safely" remain a dream.
Nowadays, small and medium-sized business is the basis of developed countries well-being. For example, with a share of employed of 35-48%, the contribution of small and medium-sized businesses to GDP in the UK, Hungary, France is 50% or more; in South Africa, the United States, Japan, China it is 60-63% at a share of employed from 42% in the USA to 77% in Japan.
Full-design study of small and medium-sized businesses in Russia is conducted once in five years by the Federal State Statistics Service (Rosstat). New data were formed according to the results of 2015, but final conclusion is not ready yet. Nevertheless, following Rosstat estimates, the share of Russia's small and medium-sized business, including microenterprises and individual entrepreneurs, in GDP was 19,9% in 2015, increased from 19.4% in 2011. The share of small and microenterprises increased by 0,7 percentage points and reached 13,8%. The share of employed in small and medium-sized businesses, individual entrepreneurs and their employees included, is just a little over 28% of all jobs in the economy.
To reverse the situation with small and medium-sized businesses, the state plans to hold 2018 as the Year of Entrepreneurship. The business community hopes that the general business climate will change and conditions for entrepreneurship will be facilitated in 2018. We expect organized meetings with the first heads of large companies and departments, forums, development of opportunities for b2b platforms. The draft decree of the RF President has already been agreed with the interested departments and sent to the Ministry of Justice. In September, a list of events for the Year of Entrepreneurship should be prepared.
When setting up the business, it is very important to find a free business segment. To date, according to Rosstat, the share of small businesses is high in retail trade, agriculture, individual housing construction and education. The Information and Analytical system Globas has opportunity to assess industries in terms of financial relations. By obtained results, you can find out about profitable industries and directions, assess risks, competitive environment, find partners and customers, and choose the sector of investment.