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. Last Updated: 07/27/2016

Kiosks: The Only Private Shelter

Why do kiosks exist?

Those freezing metal boxes where shopkeepers spend hours selling cigarettes, ghetto blasters, soft drinks, cosmetics and, above all, imported liquor - why don't they just move into normal shops ?

The big reason is that shops are just not available. There are some estimates that Moscow has about a quarter of the retail space of an equivalent Western city

And, of course, most of the shops are owned by the state.

Privatization is the only realistic way of buying a store because of the high price of real estate on the private market. Rental and purchase prices in Moscow are comparable to prices anywhere in the world.

The Moscow city government claims it privatized only 1, 462 shops and restaurants, or about 13 percent of the total, by the end of August. That still leaves 87 percent of the shop fronts locked in to the old state distribution system buying from monopoly suppliers. Even in Nizhny Novgorod, the leader in small-scale privatization, only about half of the shops have been privatized.

State-owned stores have no interest in selling the sorts of goods kiosks sell. A few have commercial sections which sell a better range of consumer goods bought from new sources, but most have no incentive to take risks with new product lines or break out of the state distribution networks.

But even the 13 percent of stores that are privatized are not always allowed to sell the sorts of consumer goods that pass through kiosks. For example, in Moscow, food stores have to keep selling food.

Many other cities are forcing stores to sell the same goods for up to 15 years after privatization. Even beer stands and perfume stores have been restricted from altering their lines of business.

Of course, small scale privatization is picking up speed and within a year, most shops will probably be in private hands. With ingenuity store-owners will find a way around restrictions on product lines. In the meantime, kiosks are filling the gap.

Kiosks are an instant distribution system. Tin sheds and sidewalks are still cheap. A top-of-the-line, ready-to-open kiosk can cost up to 1. 5 million rubles.

Moscow's city government has more or less accepted the kiosk phenomenon although it has made sure it gets a take of the profits. The city charges high rents for key locations like the Novy Arbat and it has also tried to give one Moscow company a monopoly on kiosk construction.

Most recently, it has passed a law requiring the licensing of stores that sell all the kiosks main product lines - chocolate, leather, fur, vodka and tobacco. The license fee will be a hefty 50 times the minimum wage, about 100, 000 rubles.