The gray electronics market in Russia in 2021 – survive at any cost

Without exaggeration, it can be argued that 2021 began very difficult for all segments of the electronics market. The shortage of components, inflation in any currency of the world, restrictions on production and rising costs of logistics - this is an incomplete list of factors that have changed the usual rules of the game. Add to this the fall in real incomes for the vast majority of people, and the picture starts to take shape. In Russia, the impact on the market is not as noticeable as in many other countries, the results of 2020 are noticeably better than in European countries. There are many reasons for this, but there is no uniqueness in our market, various measures have extended the market's decline over time, softening the blow (read, spread straws). In this article I want to consider the gray electronics market, how it has changed due to the global crisis.

First, we need to define the concept of a gray product. So, a gray product is a product that is not intended for sale in Russia. As a rule, it is supplied, bypassing the official representative office of the manufacturer, buying in foreign markets. Pricing policies in different countries may vary, or interesting offers from distributors pop up, and then, for example, Samsung TVs from Poland end up in Russia. Gray goods are not covered by the manufacturer's warranty, such goods are serviced in unauthorized service centers. Moreover, manufacturers often deliberately limit certain possibilities of a gray product, make efforts so that its use brings problems to the consumer.

At the dawn of the formation of the Russian market, almost all goods were gray to one degree or another, they were bought wherever they could. I remember how they bought a batch of Motorola phones intended for the Chinese market at MTS, they rushed about like mad trying to reflash them into English. The market was wild, going through the first stages of formation, the rules of the game were not established. By the early 2000s, manufacturers began to actively develop the Russian market, but gray supplies did not disappear and existed in parallel. In 2002, the share of official Siemens phones was about half of all sales, everything else was imported into the country from different parts of the world, including from Germany, where these handsets were then produced. In addition to the fact that such devices came to Russia, bypassing the representative office, they were also often imported as anything but telephones (sewer manhole covers, green peas, and the list goes on). Smuggling was considered the norm, and most large retail chains did not shy away from such goods. The interests of the state unexpectedly coincided with the interests of local representative offices, and in 2005 the whitewashing of the market began, the goods went through official channels, indicating the real cost (at least, not like peas). The problem of Euroset in 2005 and the departure of Zhenya Chichvarkin to London became a natural result of the whitewashing of the company, the need to pay people in uniform for importing goods, bypassing the standard procedures of the state, suddenly disappeared. Chichvarkin's problem was that he sincerely believed that the rules of the game had changed and changed his entire business to suit them. The irony with a touch of sadness is that in the end it all happened, but there was no longer Euroset with Zhenya at the head, and then even the trademark itself disappeared after the purchase of the Svyaznoy company (this did not bring anything good to the company, " Svyaznoy "lives like a patient on artificial respiration).

Today, by a gray phone, we usually mean a model that is not intended for Russia, for example, a smartphone from Samsung on Snapdragon, released for the US market. Many device samples do not have any differences, except for software, packaging and instructions, but at the same time, the difference in price can be noticeable, which pushes rational, knowledgeable buyers to choose just such models. What difference does it make for which country a smart bracelet was released if it costs a penny and works great with your phone? Such bracelets used to be massively brought from China, the business was profitable.

In 2019, only one brand dominated the gray market in Russia - Xiaomi. The shortage of officially supplied goods from smartphones to smart homes, something was not brought at all. The perception of the brand by customers was constantly improving, under the Xiaomi brand they were ready to buy anything, even a bald line. Because there was a concept in people's minds that Xiaomi is cheap, profitable and very good. Like any idea, it didn't stand the test of reality, but who cares? After all, the main thing is that the result was achieved.

High demand, lack of goods in official channels, plus a difference in cost, which reached 30-35% on smartphones, and even 50% on smart home, as well as on Braid Wigs in Nigeria bracelets. The reason for the flourishing of the gray market was clear: independent retail received a hot commodity that outperformed federal chains in terms of price. And everyone was happy.

One of the key features of the gray market, its formation and existence is the difference in prices in different countries. If such a difference does not exist, then the gray market has nowhere to come from, it makes no sense to carry the same smartphone to distant lands and sell it for more than the one that was brought officially. Traditionally, the largest difference in cost can be obtained on the most expensive models, for example, flagships. Therefore, iPhone and iPad were in good demand in Russia, as the sales market was noticeable. It was also clear how to buy and bring these models. But despite the volume of sales of gray iPhones, they hardly even reached 7% of the official ones. The reason is that all models appeared in Russia quickly, the prices were not prohibitively high. The margin of resellers has become minimal, on average, they earned about 1,500 rubles on such an iPhone (there is no typo, just that much). And the reason is that it was necessary to keep a noticeable difference in price with official devices. From the once familiar 30%, gray models went by 10-15% and the minimum margin for the seller, while the risks did not disappear anywhere (such devices were taken away, fines were imposed, and so on).

The third place was taken by smartphones from Samsung, which just cost much cheaper compared to the official price. The company turned a blind eye to the gray market of smartphones, since in percentage terms it occupied exactly the same 5-7% of total sales. And, moreover, it did not reduce official sales in any way, as if they were two parallel worlds that do not affect each other.

Look at the photo of the smartphone, you won't say exactly what country it is from, it looks exactly the same as the Russian device.

A buyer of a gray smartphone is usually a well-prepared person who clearly understands his risks. Many of these buyers are smart and rational: why overpay for the same product if a guarantee is not needed, and the quality, most likely, will not fail. Of course, those who ended up with problems could forever abandon gray devices, such incidents happened (no one is safe from marriage, and the question is who did you buy from and how much will they meet you halfway). There are many rational buyers among the audience, which is also proved by our survey. The percentage of those who choose gray devices is many times greater than they are sold on the market in principle.

Stereotypes of perception whisper to many that the gray market is huge. Let's evaluate it in Russia for smartphones. In 2019, sales of officially delivered smartphones amounted to 32 million units, the volume of the gray market added to this amount is about 900 thousand units. These are all iPhones brought to us in various ways, all Chinese smartphones and more. Not very impressive, is it? As a percentage, this is only 2.8% of all sales in pieces. In 2020, the situation has changed dramatically, the market volume has decreased to 500 thousand units, almost halved, and the smartphone market volume has remained the same, totaling 1.56%.

There is no doubt about the reason for the fall of the gray market in the pandemic. The gray market can be conditionally divided into two large segments - those who carry equipment in suitcases and hope to become fabulously rich, as well as those who bring equipment in containers. The former are directly dependent on civil aviation and the ability to smuggle something in the crew's luggage. The absence of regular flights around the world, the tightening of Aeroflot's rules for the crew and constant searches - all this has led to the fact that this trickle has dried up. There are still those who somehow drag exotics here, but these are piece stories, and they cannot have any impact on the market as a whole.

The legendary "Gorbushka" (the building of the "Rubin" factory) has always been the home of those who bring gray electronics, you could find anything here. Gradually, the gray market faded away, and the inspectors learned not only to demand papers, but also to look into them correctly, the cost of business for gray trucks has increased dramatically, they began to be forced out online. Only large companies remained that could bring goods in containers and live from the turnover. Including due to the fact that they actually lived in cash, they could sell cash and earn extra money on it.

In 2021, Gorbushkin Dvor plans to give up almost a third of its space to household goods, as the electronics segment shrinks. Many merchants who built their business on gray goods have disappeared. The small ones lost their usual channels for delivering goods, the big ones faced a different problem.

In 2020, the shortage began to grow, the same Xiaomi almost disappeared from the gray market, since the goods were not available either in China or in other countries. This means that the same difference in cost has decreased. Someone got the goods through personal contacts, but the deliveries were episodic, the risks remained at the same level. Same story with iPhone, Samsung and the list goes on. In fact, large gray market players have begun to invest their money in subsidies in order to keep the contacts of those who buy from them. The economics of such a business quickly became clear, the opposite trend began - a reduction in turnover, the abandonment of their own stores.

Towards the end of 2020, the situation became even more complicated. Moreover, it is interesting that many large gray market players are literally sitting on money. With one caveat, it's cash. And they have nowhere to buy goods. They can't walk into a distributor with a sack of cash and buy the iPhones they want at wholesale prices. It is also impossible to deposit money into the accounts of your companies, since the question will arise, where do they come from, today everything is transparent to the tax authorities. The business of intermediaries has flourished, who convert cash into non-cash for 10%, buy goods and give them to such companies. The irony is that everything turned exactly 180 degrees, now the gray players are buying official goods, and cash has become a problem for them.

Official goods are not what they are looking for in these companies, as a result, the turnover sags. We are seeing how gray traders enter the official market, which, on the one hand, makes room for those who remain. On the other hand, state pressure will increase, as the main sin in the coming years will be tax evasion, as well as black cash.

There is no doubt that the gray market will shrink, but it will not completely disappear. The reason is that there will always be those who want to try their luck on it, fill their own bumps and, of course, make millions. These brave people are driving the gray market, a few of them earn significant money, the majority go bust. It is impossible to make money on the same iPhone today on the gray market, but more and more students appear with brilliant ideas on how they will get rich.

The shortage of components, limited production capacity - all this leads to the fact that there is not enough goods, which means that prices for it will be more or less high everywhere in the world. As a result, the gray market will fall for a while, it will not be noticeable.

In the end, I want to say that every time I write about the gray market, I come across a peculiar perception of this topic. For some reason, many people believe that I am campaigning against the gray market and only for official supplies (it is clear who pays him, it is unprofitable for manufacturers, we are smart and buy profitably). There is nothing like this in such materials, there are always pros and cons, and then you choose for yourself which product you want to buy. The main thing is to understand what you are going for and soberly assess your risks. This material, however, is more about the market than about the consumer, but, nevertheless, I am sure that someone will want to leave such a familiar comment.

The market is in a fever, and many companies are starting to have a box office gap, which leads to attractions of unprecedented generosity and sales, but at least the same iPhone 12. Which, in turn, makes the economy worse for gray sellers. We are in a full-fledged crisis, the gray market was one of the first to feel it in its own skin.