Posted Sep 23, 2015 in Investments & the Business environment 0

Market analysis: The 3 “Romanias” and the one you should invest in

Romania has an excellent potential for the years to come.
Before investing, choose carefully your target audience

Ten years ago… I was going to Raiffeisen bank in Calea Mosilor and I was always surprised by the fact that a particular department was full of clients, at 08.15 in the morning. As I was living nearby, I was entering in the branch, then turning left and reaching the queue of ladies. They were patient, despite the expectation that was sparkling in their eyes. Quiet, respectable, they were checking their papers one last time, before they would reach the cashier. Usually I was redrawing myself to a yellow chair, so as to watch them more carefully. You see, they were waiting so as to receive money from abroad, while I was “researching” and trying to understand the extend of this phenomenon. After 20 – 30 minutes of research, I was receiving the 20 Euro that my (upset for the time lost) brother was sending from Greece.

This was one of the “unorthodox” means I was using so as to understand Romania in 2005. Many years later I realized that back then I was witnessing 2 of the 3 “Romanias” communicating…

Today’s 3 “Romanias”

Romania is the result of the unification that occurred almost 100 years ago. Today, after a century, we can identify 3 different “countries” co-existing in one, but not all of them living in it. The differences between each of the “countries” are significant from all points of view: Cultural, political, economic and more. So, in 2015 we can split the Romanian population in 3 main categories*:

The “Europeans”
The “Traditionals”
The immigrants

Plus 1.5. The ones in transition

For more information please contact me via the contact form.

Let’s see the main characteristics of each “country”

1. The “Europeans”

A “country” with approx. 8 million inhabitants
Mainly living in Bucharest and the main Romanian cities
Its “citizens” can be also found in smaller cities, even in rural areas
Their income is much higher than the national average. My (unjustified) estimation is that they control / produce 60 – 65% of the country’s GDP.
Entrepreneurs, employees of multinational but also national companies, IT experts, lawyers, bankers and consultants, state servants and pensioners with higher income, owners of valuable properties and people who are officially poor, but in reality they are rich.
They are educated more than the national average (I would say even the European average).
Already 20 – 30% of the Romanian entrepreneurs has learned business “the right way” and they are building their companies according to international standards and principles.
Here we find mainly 3 income categories: A. The rich Romanians and the wealthy foreigners, B. the biggest part of Romania’s middle class and C. people with lower salaries (for the moment) but ready to move up.
“Europeans” travel a lot (in every possible occasion) and try to correlate with whatever new happens around the planet.
In a conservative country, they are the ones less reluctant to change.
The majority of them is always ready to name 100 things that are wrong in Romania, while in the same time they love their country, they are patriots and religious
Their main characteristic is AMBITION to improve their lives. Here one can easily identify that the majority is ambitious in a wrong way (“money without hard work), while a strong minority is ambitious with the right approach. Still, ambition is the characteristic of this “country”.
They buy properties, consume a lot, but also deposit money in the bank.
With healthy or wrong role models, they are the ones who are driving Romania higher
They can be your clients for commerce, services, or properties. They will be the ones who will try something new, if they feel that it can enter in their life planning. They are the ones who have the money to perform spontaneous purchases based on feelings

1.5 The ones in transition

When I came in Romania, back in 2004, the “Europeans” were probably less than 3 million. Now they are circa 8 million and growing.
There is a real social movement through which millions of Romanians aim to change their lives, in Romania or abroad
A woman who left her village, moved to the capital (or a bigger city), studied and became a respectable lawyer not only did she manage to change the route of her life, but she is also an example for others too.
While Romania is set to grow in the following years, the “Europeans” will become more and more, as this “buffer” category will be fulling with ambitious Romanians who wish to change their lives

2. The “Traditionals”

A “country” with approx. 12 million inhabitants
Partially present in Bucharest and the main Romanian cities
Mainly living in smaller cities and predominantly in rural areas
Their income is much lower than the national average. My (unjustified) estimation is that they control / produce 30 – 35% of the country’s GDP, even if they are 50% more than the first category.
Business owners, workers, employees of multinational and national companies (but for the jobs with the lower revenues), local service providers, state servants with lower income, pensioners with unfairly low pensions, or people (millions) living on public allowances. Couple of million live in a state of extreme poverty, but they are taught to be unable to change that.
What is interesting in this category is the fact that it is also split in 2 clear subcategories:

Traditionals, A

There are “Traditionals” who have self-respect, take care of their family and try to survive in this world with dignity, even if they don’t like / cannot get used to the new style of capitalism.
Out of the big cities, you may find people who have their house, cultivate their lands and obtain a legitimate income, even if they are not sophisticated.
(Travelling around the country as consultant and broker, I have met several decent people whom I appreciated even if they were signing with a cross, or pensioners trying to live on 80 – 100 Euro pension whom I respect more than several “millionaires” I know)
They may work in badly paid jobs but many of them deliver, even if they are not very happy about it.
Still, for the majority of them professionalism is not their strongest virtue, it is more like “an obligation” which is done “mechanically”.
Without their (unseen) work, the country would not develop.
When they have the possibility, their education is at the national average level.
They don’t really have a problem with the country’s situation, good or bad. They are used to accept it, without too many comments. The same happens in personal level too, where they can be happy with “few”. “Asta este” (this is it) is their reply to the question “why don’t you ask for more?”
Their characteristic is not ambition, they are searching for “peace” and “lack of problems”. The ambitious ones of this subcategory try to move to “country” 1.5, targeting to become “Europeans”.
They are very religious and conservative, even if they are friendly. They are patriots and this gives them power and pride.

Traditional, B

There are also “Traditionals” who are totally the opposite. Uneducated, unprepared for life, they damage Romania’s image with their behavior, ready to do almost anything for 0,01 Ron
Their education is a disaster.
In a rare honest discussion with someone from this category, you will have to agree with him that the Romanian state has not managed yet to offer them equal opportunities like the ones that other citizens enjoy.
Their votes are usually bargained for small amounts of money or commodities
Many of them manage to earn significant sums of money (don’t ask how), which they lose in a significantly fast way as well
Many others are simply used to live poor without working, being a choice of theirs.
More or less, this type of people exists in all countries of the planet.

Traditionals are the ones hired in the factories, working on agricultural fields and in any other “hard” work that we find in Romania nowadays.
Actually one of the country’s “advantages” is the combination of an EU country close to Central European markets, where salaries of unqualified people are low and available workforce will continue to be very high.
It will be a major surprise if the minimum salary in Romania reaches 400 Euro / month (net) by 2025, when at least 8 million people will be part of the “Traditionals”.
The “Traditionals” are clients of FMCG products. They are the main basis of consumers buying cheap products due to their reduced purchasing power. Lately they tend to add couple of a bit more expensive options in their shopping cart, this is their “luxury”. Recommendations of friends are the most important criteria for a purchase. They pay for services only when it is very necessary, while they are buying different type of properties, ones of lower value (and quality at the limits of being acceptable).
The “Traditionals, B” with money (it happens) will be the ones who will spend a lot on “whatever shines in their eyes” as they are trying to imitate the role models they see on media. They can pay 5.000 Euro for a watch and tomorrow not to have money for the electricity bill. The ones without money barely participate in the economic activity of the society.

The Immigrants

“Which is the second biggest Romanian city?” “Madrid”. This is what people were telling me back in 2008, when I participated at SIMA Real Estate Fair.
A “country” with approx. 5 million inhabitants, living in England, France, Italy, Spain, Canada, United States, Greece etc.
It is considered that almost 80 – 90% of them keep their relations with their families back home, sending all their savings
Between them, we may identify tens (if not hundreds) of thousands “who did it”, succeeded abroad and reached achievements beyond expectations.
Let’s not forget that until recently the country’s best minds were abroad, while even nowadays thousands of doctors and other well educated citizens migrate.
According to World Bank’s World Bilateral Migration Remittances Matrix, in 2013 Romania cashed in some 3,4 billion dollars by its immigrants.
Adding the money that people carry when they come back home on vacation, I have the (unjustified) estimation that more than 5 billion Euros are poured in the local economy, annually. This is 3% of the GDP and it is strictly directed to consumption and investments (because immigrants tend to deposit their money in local banks where they stay). Adding their properties and overall economic presence / influence, they control 5 – 10% of Romania’s GDP.
Immigrants and their families are traditionally investing in consumption, home appliances and furniture, but also properties. Actually in some areas of Romania, the “measure of success” for someone who migrated is to return dressed in expensive clothes and renovate / buy a property.

Investing without trying to understand your potential clients: A guaranteed failure

It does not matter if you are a Romanian or a foreigner. If you wish to start a business venture, a startup, or invest in Romania, it is very important for you to understand how the society is structured and how people are thinking / acting on various different things.

Above I have tried to briefly describe to you the “3 countries” that create Romania nowadays. Obviously each category includes more subcategories and each of them is identified by tens of different aspects, but I hope that you can get an idea about what is going on and also try to spot your potential target audience.

What is sure is that without understanding who your clients may be, you will not be able to design your product / service so as to match their needs, you will not price and market it correctly, you will fail to build the right sales channels, so you will have a guaranteed failure in your attempt to enter in the Romanian market, or expand in new fields of activity.

For more information please contact me via the contact form.

What is your opinion?

* I personally don’t say that it is good for these categories to exist, I am just presenting the situation as I understand it. This article has nothing to do with politics or anything else except business consulting.