ECJ EUROPEAN Cleaning Journal

For Russian cleaning businesses life is becoming more challenging, says Oleg Popov of Cristanval.

Despite the growth and development of the cleaning industry, it is extremely difficult to discuss last year’s results, as not one marketing company did market analysis during 2013. Why is this? They all cite the low volume of the market and the hesitation of market players to disclose their figures. In such conditions, research is difficult to confirm, and professional marketers are unable to find buyers for such information.

Measuring the volume of the cleaning market in Russia is truly a difficult and thankless task – everyone has his own interpretation. In the experts’ opinion retail space increased by 13 per cent in 2013, office space by six per cent, and the share of newly introduced storage space was at least 30 per cent.  Growth in the Russian cleaning market was 20 per cent compared to 2012.

Market players are looking to an increase in government contracts and the opening of new facilities to bring growth to the market.  However, the current economic situation does little to boost optimism. The devaluing of the ruble, slowing production, the absence of available money within government structures and other factors cannot help but influence the demand for cleaning services.

In a Moscow market in which 85 per cent of staff are foreign workers, any change in migration law complicates the work of cleaning companies. Replacing migrant workers with Russians in cleaning jobs cannot be done overnight, if it is at all possible. Many companies are initiating recruiting programs aimed at Russian citizens from regions throughout the country.

Shifts are recruited for one month of work and are provided with housing in a dormitory. Sooner or later, this will mean only those companies that are sufficiently financially sound will survive - those that can afford to rent dormitories, pay their employees advances, and cover their meals and transportation.

We are seeing a tendency towards outsourcing at government treatment facilities and educational institutions, a tendency which is promoting growth in the market. However, the cost of cleaning services is rising as a result of the rising costs of imported cleaning supplies and personnel. Meanwhile, government clients demand lower costs for services.

The growing supply of commercial space makes it more difficult to find tenants, which accordingly negatively impacts the profits of owners and property managers. This in turn means greater attempts at lowering expenses. The first cuts to be made are generally in services such as cleaning.

Another steady tendency in recent years is the growing spectrum of services available from cleaning companies. Many of the largest can hardly be called cleaning companies, as they have become multiservice firms. Their services now include maintenance, trash removal, catering, landscaping, etc.  The profitability of cleaning has decreased, and companies are actively seeking niches in which margins are still high.

Regarding the outlook for the cleaning market in Russia, volume will grow in 2014.  Parallel growth will be seen in terms of turnover. However the profit margin in services will decrease. It is even possible that by the end of the year several companies will be disappointed by a lack of growth, if not a decrease in profits.