Revenue increased, but profit decreased: how a business survives sanctions

The extremely topical issue of how Western sanctions affect the life of Russian cities was investigated in his channel by Volgograd political scientist Alexander Saigin. To do this, he turned to his readers with the following request: “I know that people from various regions and cities (villages) read me. Please write in the comments what difficulties you have encountered since the imposition of sanctions. What has risen in price for you or what has disappeared from stores, what did you use? I will say about myself that so far I have not noticed much of the impact of sanctions. Sugar costs a packet of kilograms, but I don’t hunt for it. I note that blueberries have risen in price a lot. I marvel at the price of paper...".

The first consumer shock will subside soon

A day later, Saigin summed up the first results of his survey:

“The picture turned out to be interesting with no less interesting conclusions. What does the rating of "affected" territories look like (from more to less):

1. St. Petersburg
2. Moscow
3. Outskirts and northern territories (Vladivostok, towns of oil and gas workers)
4. Millionaires in regions
5. Cities with up to 500 thousand population
6. District centers and villages.

St. Petersburg largely depends on logistics from sea supplies and deliveries from the south. Moscow is the largest agglomeration in terms of consumption and the largest logistics center. In addition, these are simply territories with above-average incomes, so they can afford to consume more than usual. The northerners have a good income, but there are logistical dead ends, because some commodity items disappeared faster than they could be delivered. In millionaires, goods began to disappear by analogy with Moscow, but now there is less money there. In cities of up to 500,000, the needs are not so great, and people there already have some kind of reserves that are replenished and emptied according to the principle of a strategic reserve. Plus, in these towns everything is better with subsistence farming, the need is much less. The panic of the first three weeks was not much noticed there. There was nothing to panic about.

The first consumer shock was reminiscent of the impact of the New Year holidays. Roughly speaking, retail before the holidays creates a larger supply of what will be in demand (including marketers are needed for this, yes). Since no one was warned about anything, no additional capacities were used, which ultimately led to a shortage of sugar, salt (this is generally both funny and sad), buckwheat. With office paper and tampons, the situation is more interesting. With the first one, there really are problems that can be solved within a period of three months, for the second one there seems to be raw materials, but women also stocked up for the future (which, as it were, confirms the hypothesis that specifically women are ready to go to the analogue of the USSR only in words).

The drug shortage problem needs to be addressed urgently!

Separate pain is medicines. According to subjective feelings in the country there is a colossal problem with the thyroid gland in women. If the Ministry of Health does not urgently begin to solve it, then scenarios are possible from an open protest to a rapid increase in mortality. Same with diabetics. Some complain that gynecological drugs and anti-inflammatory drugs for children have disappeared. The Ministry of Health should now have a separate conversation with Evalar, which, under the conditions of the closure of AiHerb in Russia (they have long sought this at the legislative level), to put it mildly, went nuts and raised prices for some positions almost three times. In general, a sudden monopoly in the pharmaceutical industry can seriously worsen the situation with mortality (although, probably, some narrow-minded officials will say that the nation will get healthier in this way).

Business is not to blame for the rise in prices

Now for the price increase. According to the subjective feelings of the respondents, everything has doubled in price. "Everything" is a non-working category. Prices vary unevenly and depend on many factors. For example, the goods may be Russian, but interruptions in the supply of trucks and the rise in prices for components (especially if it is a foreign truck) automatically push up the price of transportation. And since the price of transportation has increased, the price of goods for the end consumer also increases. And if the goods are made from imported raw materials or even imported ... And if it is simply not there now, and what is in warehouses is the last thing in the foreseeable future.

Some entrepreneurs, in the wake of the jump in the dollar rate, have included inflationary expectations and further growth in rates in the price of existing goods. Not because they are greedy grabbers, but because if they collect money at the old prices, then they will buy half as much goods, which can push the price more. Therefore, do not rush to accuse business of all mortal sins. Anyone who has ever done something more difficult than organizing more than three people into a work team will never blame entrepreneurs. Therefore, the prices for food, medicines, the same hygiene products and so on are rising sharply. Russian producers often raise prices because they remain the only ones and are trying to somehow calm the rush demand (you can’t introduce new capacities quickly, and what’s the point if tomorrow demand falls below February?).

Why do retail chains keep prices, while others do not? They have access to cheap credit money. Magnit, for example, is largely owned by VTB, and VTB is seriously integrated into the state machine, so Magnit will always have money. And Aunt Lucine, who runs a shop in the village, can only borrow from her relatives if they have one themselves. So Lusine prices are growing faster than in Magnit.

Will prices fall?

For certain categories, a reduction of up to 15% is possible. In the event that the dollar will no longer rise. Someone will reduce the range or purchases. But here's the catch. The product does not only contain profit. there is also the salary of workers, which is now greatly lost in purchasing power. This means that wages will need to be raised. But acquaintances of entrepreneurs during the covid period had an interesting situation: revenue increased, while profit decreased. Now many enterprises without state support or cheap loans will face a difficult choice: take into account possible price shocks in the price or increase people's salaries. So far, only Deripaska's enterprises have decided on such a whim, raising the salaries of workers by 10%. But prices have risen by at least 50% on average. This means that we will still observe how something will fall off and close - the population goes into saving mode (I noticed it from myself and from friends).

Who is under attack?

First of all, the catering of the middle segment (the rich are doing great). The entertainment sector, the food sector at a higher level (by the way, I noticed that prices for red caviar just dropped a little). The money released from various foreign subscriptions will be redistributed a little (estimated that I have savings on these already inaccessible things, it will be about 3K). In fact, Russia was quite a developed country in terms of consumerism, so the abandonment of old habits will be long and painful. But the real impact will be assessed no earlier than six months later”.

Country at the crossroads between inflation and unemployment

The results of the survey were commented on in his channel by journalist Pavel Pryanikov:

“The government and the Central Bank are now at a dangerous crossroads. What is more dangerous for the Russian economy: inflation or unemployment? Each nation has its own long-lived fears from historical experience. In the US, it is the fear of high unemployment after the Great Depression. Therefore, all analysts there still consider the unemployment rate to be the main macroeconomic indicator, constantly monitoring the dynamics of those who applied for benefits (in second place are the strategic reserves of oil and petroleum products, this fear arose after the energy crisis of 1973-74).

In Russia, the main macroeconomic indicator is the level of inflation. Not interested in the number of unemployed and the level of strategic reserves (which either do not exist, or they are never openly declared).

This fear arose from the 1990s, when hyperinflation raged in Russia.

The second Russian fear is empty shelves in the store. Deficiencies in simple products served as one of the impetus for the collapse of regimes twice, in 1917 and 1991.

Therefore, the head of the Central Bank, Nabiullina, was probably left for a third term - as a specialist in the fight against inflation. And in general, the entire government is abandoned.

The fight against inflation in Russia traditionally goes in one way: to clamp down on the welfare of common people. And two problems are killed at once. Simply put: the proles have no money - and inflation is low, and store shelves are full (because there is nothing to buy goods).

Unemployment will be curbed for the time being in a way called in the special language "simple" - i.e. business pays employees for idleness for a while. But we have capitalism, and the most severe, of the level of the 19th century, and business, and the state, will not sponsor the proles for a long time. “Russians don’t need money,” remains one of the main conditions. So soon unemployment will cease to contain.

That's something like this would be laid in 2022 (no one will undertake to predict what will happen in 2023; the country is again living from scratch).