Corporate gifts market braces for change

For the past decade the Russian corporate gifts market has ridden both the economic boom and Russians love of giving New Years gifts. However the onset of an economic slowdown is leading to a dramatic change.

This year Santa Claus is giving out economy-class gifts. No to hi-tech gadgets; yes to cheap, traditional presents for relatives and friends. In 2008, the corporate gift market is estimated to be worth $650 million. But most Russian companies still believe in the power of luxury presents, according to Konstantin Kulyov, Deputy CEO, of Krug Kronberg.

“Budget cuts concern the cheap segment most of all. Promo and advertising souvenirs faced huge sales drops, but luxury gifts have held up.”

Many businesses see corporate gifts as the last accessible form of advertising under the harsh conditions presented by the financial crisis. Experts say it increases clients' and partners' loyalty.

But for some companies, corporate presents have become a little more than a big waste according to Irina Eldarkhanova, CEO Confael.

“There have been no serious changes in our retail sector, but there was a huge impact on corporate sales, as many companies which used to have big budgets for gifts, cut or got rid of them.”

For a decade, the Russian corporate gifts market grew more than 20% every year. Now about 3000 companies provide gift services. Konstantin Kulyov says the crisis could see the number of players shrink.

“Small advertising companies with about 10 employees and a few key clients are likely to be first to die by natural death. The future of large and medium-sized companies depends on the way they way they work at this difficult time.”

However, most analysts are optimistic about the future of corporate gifts. Those companies that have almost completely eliminated their advertising budgets opting for presents to provide that small reminder of their services.