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. Last Updated: 07/27/2016

Handset Retailers See Gloomy 2009

MTYevroset chairman Yevgeny Chichvarkin making a presentation at a mobile phone retailers conference on Wednesday.
Handset retailers are predicting massive closures of retail outlets and a sharp decrease in sales next year as the economic downturn threatens imports and reduces the purchasing power of consumers.

"Handset sales will slow down to a trickle next year," Yevgeny Chichvarkin, chairman of Yevroset, the country's largest mobile phone retailer, said at a conference Wednesday. "All mobile phone retailers, without exception, are presently taking losses."

Consolidation in the sector, which has been aggravated by the financial crisis, could lead to thousands of staff losing their jobs come Jan. 1 when employees return to work after the New Year's holiday, Chichvarkin said.

"We'll see many empty shops in January, and the most popular brand after New Year's will be Arenda," Chichvarkin said, using the Russian word meaning "real estate for lease".

"It is obvious that the country no longer needs the current 22,000 handset retail outlets, which employ 120,000 workers," he said.

Sales of handsets in Russia, with a 2.3 percent global market share for mobile handsets, have been at low ebb, experts say, and the current economic crisis, coupled with market saturation, is making a bad situation worse.

"The market for handsets is highly saturated, and new customers are few and far between," Sergei Savin, a senior consultant with J'son & Partners, said at the conference.

"The only way handset retailers can hope to expand sales is if owners of old handsets decide to replace them."

Savin predicted that fourth-quarter sales would dip 24 percent from the same period last year and that there could be an additional 10 percent reduction in sales next year.

The number of handset vendors will also shrink as consumers try to hold on to their handsets longer, he said, adding that one-third of handsets presently in circulation are over three years old.

Consumers will also look for cheaper and lighter phones, Savin said, adding that $350 per handset is the current national average.

Falling phone prices might come at a cost, however, as consumers could find themselves with fewer options as retailers are forced to reduce the number of handset brands they sell.

Chichvarkin said the current consolidation in the sector has tempted operators and retailers to sell only fast-moving brands in their retail outlets.

Bundling handsets with contracts and heavy discount is already a standard practice, and a recent agreement between Beeline and Samsung, for example, has allowed the operator to sell Samsung handsets at half price.

"This would lead to more shop closures and fewer choices for consumers," Chichvarkin said.

Economic troubles will not be the only factor limiting consumer choice, however. As with before the crisis, operators and retailers still have problems importing handsets and gadgets "with certain frequencies," said Alexander Onischuk, president of the Association of Consumer Electronics Retailers and Producers, referring to equipment that operates on the same wavelength as military equipment.

"It is inexplicable that even today there are only 16 simple items, such as certain kinds of handsets, antennas and video phones, that can be imported into the country without going through a complicated and corrupt approval system," Onischuk said.