Russian entrepreneurs adapt to virus lockdown challenges

“I still don’t understand how people could have disappeared in a day and where,” she recalls. The lockdown lasted six weeks, but with the borders closed, its business prospects were bleak.

A year later, Skazka is still open – thanks to the creative thinking of its owners – but with fewer guests than before.

Russia was never completely locked down after last spring, and as a result its economy and some of its businesses did not suffer as much as some countries did during the pandemic. But she has also seen her death rates rise.

When infections spiked again in the fall, the government resisted the imposition of restrictions that would have shut down many businesses.

If there had been another lockdown, “we would already be closed,” Konstantinova said.

A six-week lockdown further damaged the weak economy and deepened Russians’ frustrations with falling incomes and deteriorating living conditions. President Vladimir Putin’s approval rating fell from 69% in February 2020 to an all-time low of 59% two months later before rebounding, according to the Levada Center, Russia’s largest independent pollster.

For the remainder of 2020, industries and businesses remained mostly open. During a resurgence of the virus in the fall, some areas imposed restrictions that limited the hours or capacity of bars, restaurants and other businesses, but were rarely closed completely.

According to the Organization for Economic Co-operation and Development, Russia’s gross domestic product fell only 3.6 percent – slightly more than the world average of 3.4 percent. By comparison, UK GDP fell 9.9%. France 8.2%, Germany 5.3% and Canada 5.4%.

Yet it was Russia’s biggest fall since 2009. In recent years, its GDP has grown by around 1-2% per year.

At the same time, Russia has seen a significant increase in mortality, said Sergei Guriev, professor of economics at Sciences Po’s Institute for Political Studies in Paris. The total number of deaths in 2020 increased by nearly 324,000, compared to the previous year, according to statistical agency Rosstat.

The country has recorded more than 97,000 deaths from COVID-19, according to Johns Hopkins University, although experts say the real number is likely higher and even Rosstat said more than 200,000 people with the virus have died between April 2020 and January 2021.

“These losses, which obviously could have been avoided, are the price to pay so that the Russian economy does not shut down and that Russian GDP only shrinks by 3%,” said Guriev.

Online sales had a good year. Ozon, a major Russian e-commerce platform similar to Amazon, saw sales increase nearly 2.5 times last year, said the company’s communications director, Maria Zaikina.

But even without a second foreclosure, some small and medium-sized businesses needed creative ways to stay afloat, with government support mostly limited to tax deferrals, cheap but hard to get loans, and direct grants. relatively modest. Many are not earning what they were doing before the pandemic.

A survey of 5,000 such companies found that around a third still saw a decline in revenue at the start of 2021. The survey, conducted by Russia’s Business Ombudsman Boris Titov and cited by RBC media outlet last month, reported that about 27% of revenue reported the same level as last year and nearly one in 10 was looking to close. Only around 19% said they were slowly starting to recover.

Almost 60% of companies surveyed said that continued depressed demand for products and services was one of the biggest challenges they face.

Russians’ incomes fell 3.5% last year, Guriev said, noting that Moscow has spent far less to support businesses and consumers than other countries, where governments have taken “generous steps without previous”.

This could be because the government, with its sovereign wealth fund valued at $ 165 billion in April 2020, was reluctant to open state coffers last spring, when oil prices plunged.

During the first lockdown, Konstantinova still wanted to use her hotel, which is located in a museum and entertainment complex built in a style that mimics 17th-century Russian architecture. Working with NGOs and humanitarian groups, she has offered free rooms to victims of domestic violence, refugees, doctors and foreigners stranded in Russia.

With tourists unlikely to return anytime soon, Konstantinova was looking for ways to transform her hotel. Some of her non-paying clients were from India, and she decided to use their expertise to add a restaurant serving authentic Indian cuisine. The project took off and his business is now breaking even.

“Profit is out of the question at this point, of course, as is prepayment of loans,” she said. “But the fact that we are working at a breakeven point is important. It means that when the market recovers, the business is likely to turn a profit.”

Artyom Borovoy, co-founder of a company that builds stands for exhibitions, was in a similar situation.

When convention business ended, Borovoy’s company, Stend-Do, began making folding desks for those who worked from home – an idea he said came from Zoom’s discussions with his friends “out of desperation.” “.

Simple, inexpensive plywood desks that fold like an easel and can be used sitting or standing have proven popular for those working remotely from small apartments. Borovoy sold around 2,100 of them last year, but admits the new project is only earning enough to cover costs.

“In terms of profit, there isn’t one yet,” he said.

Borovoy and Konstantinova both say they have not obtained any significant government support other than tax deferrals.

Amid the restrictions, some companies have turned to acts of defiance to preserve their revenues.

In St. Petersburg, where severe restrictions were imposed due to a virus outbreak during the New Year’s holidays in December and January, owners of restaurants and bars who were ordered to close between December 31 and January 3 were raped. to close at 7 p.m. for a week after that.

Dozens of owners joined in what was called the ‘resistance card’ – a pop-up website listing bars and restaurants that refused to obey the restrictions.

“How were we supposed to survive otherwise?” Said Mikhail Kavin, manager of the Commode bar – just off the city’s famous Nevsky Prospekt – which offers rooms named after different cultural figures such as “Gershwin,” “Brando,” “Rockefeller,” and “Lebowski.”

“People had to be able to eat and work. The authorities were unwilling to engage in a dialogue. They did not provide any support, neither to the employees nor to the business leaders, ”he said, stressing that joining the Resistance Map“ was our only way to be heard ”.

Police raided Commode in early December for serving customers behind closed doors after 11 p.m. Security video showed a dozen hooded officers walking through the door and later walking in the middle of clients who were allegedly forced to lie on the ground and beating some with batons.

Authorities eventually relaxed the restrictions: cafes, restaurants and bars were still banned from operating between December 31 and January 3, unless they had “winter terraces” serving customers outside, but they could open between 6 a.m. and 11 p.m. the following week.

Commode operated over the holidays despite the restrictions, but even flouting the rules it did not bounce back to its pre-pandemic sales level, Kavin said.

“Maybe a few months or weeks has been an exception to the rule, but it’s a very long way to go to achieve a full recovery,” he added.

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Daniel Kozin reported from both Moscow and St. Petersburg.

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