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. Last Updated: 07/27/2016

Big Firms Get Bigger on Handset Market

MTThe dummy hanging at Yevroset's store.
Moscow's large mobile phone retail chains like Maxus, Yevroset and Tekhmarket are using their size to cut costs and crowd out smaller shops, and company officials said the trend is likely to continue.

"The retail cellular market will eventually be divided between four or five big players," Yevgeny Chichvarkin, vice president of Yevroset, said in an interview last week.

There are around 3,000 cellphone shops in Moscow, but the market is currently divided between just over a dozen companies, executives said. The leaders are Maxus and Yevroset, followed by Anarion and Tekhmarket. Other well-known but smaller chains include Dixis, Mobilniye Sovety, Mobitel and Beta Link.

Yevroset has grown from three stores in 1998 to 120, and the company has plans to open between 30 and 50 more shops in Moscow by the end of the year, Chichvarkin said.

Maxus has grown from just 10 shops a year ago to 125, more than 90 of which operate under the Svyaznoi brand. Tekhmarket, meanwhile, has boosted the number of stores from 60 at the end of 2001 to 75 now, and the company hopes to reach 90 by the end of the year.

Anarion, which has more than 80 shops, declined to give growth figures.

Vladimir Bogdanov, marketing director at Tekhmarket, said the larger chains have economies of scale, meaning they can cut costs by being larger and are thus more profitable than small stores. "Big chains, if properly organized, can decrease costs by 25 percent to 30 percent and double sales," he said.

Alexei Chebotok, advertising director at Maxus, said closer relations with suppliers also help the bigger chains. "We have direct supplies from equipment manufacturers, and for them, it's better to put on promotions and special marketing actions through big chains," he said.

From 280,000 to 400,000 cellular phones are sold monthly in Moscow, worth between $35 million to $50 million, according to figures from Yevroset, Maxus and Tekhmarket. Some 300,000 accessories are sold monthly for a total of $3.5 million to $6 million.

About 300,000 to 400,000 contracts are sold monthly, and cellphone dealers earn commissions ranging from around $30 to $60 from operators for signing up new clients.

Chebotok said contracts make up 50 percent of Maxus' sales, while accessories account for 35 percent and telephones for 15 percent.

Chichvarkin and Bogdanov said contracts provide the most stable and lucrative sales.

"With contracts, the costs are small and the commission is decent because turnover is high," Bogdanov said.

Some of the chains are considering moving into the regions as the country's Big Three cellular providers -- Mobile TeleSystems, Vimpelcom and Megafon -- expand nationwide.

"Retail companies will follow cellular operators," Chebotok said, adding that Maxus is planning to move into the regions. He declined to give details.

Mikhail Dorogov, director of Dixis, which runs 20 shops in Moscow and 14 shops in St. Petersburg, said the quality of customer service is vital for a successful chain.

"We want to make our customers feel positive when they enter our shops so that this positive mood makes it easier for our shop assistants to work with clients," he said.

"I fire two or three people a week for bad customer service," said Yevroset's Chichvarkin, who himself spent one year selling telephones and contracts.

"We have a dummy hanging over the entrance to our central store portraying a hanged manager. The sign next to it says: 'hanged for bad customer service.'"