City.com 2.0: Where has the oldest electronics hypermarket gone?
Vladimir Kolodyuk on foreign exchange risks for importers, the business of selling electronics in the US and Europe, as well as on the monopolisation of the Apple sales market.
City.com on Petrovka used to be a record-holder in the Ukrainian electronics market. In 2007, its turnover had reached $5m before the New Year holidays. However, this hypermarket (the last remnant of the once mighty national chain) has recently become a thing of the past. It was succeeded by a small showroom-type store sandwiched between the Gorodok mall and Eldorado. A faded ‘tablet’, resembling an old Las Vegas sign, is the only reminder of the former glory.
Vladimir Kolodyuk, the brand’s owner, talks to LIGA.net about the present-day City.com and the plans to develop a new chain store format.
Unitrade Group currently comprises City.com, Service Master (electronics repair), Udicom (importer of electronics for corporate clients). In November 2015, Unitrade Express was launched (deliveries of goods from U.S., European, and Asian stores).
- What are your plans for this year? I hear, you are going to have showrooms instead of regular stores.
- We intend to launch small, a few hundred square meter each, outlets in Ukraine. Two such stores in Kyiv (on the Dnipro’s left bank and in the city centre) and four in the million-strong cities (Odesa, Dnipro, Lviv and Kharkiv) will be launched by this year’s end. It has more to do with the online business support. Buyers want to come and test the goods. Stores will open in a different format. We are currently developing a loft style design. Everything has to be very simple, functional and inexpensive. Investment will be relatively modest. This is the first stage. We’re not in a hurry. As soon as it’s finished, we’ll take a pause. See how it goes. And take next steps.
- How much do you intend to invest in a new chain this year?
- We plan to invest about three million hryvnias. Typically, this amount is invested in a single store, but we want to spread it over five or six. Of course, price of goods is not included.
- What makes your format special compared to the competition?
- Large supermarkets are not our direct competitors. We are completely focused on our segment. Today we have four key areas, such as laptops, tablets, smartphones, and gadgets, in the broadest sense of the word. Traditional consumer electronics supermarkets comprise about 10 segments. And our segments add up to mere 20-40 per cent of theirs. Besides, our product range across these categories is significantly different.
- Where do you purchase refurbished products?
- Abroad and domestically. Mostly in the U.S. Laptops, for example. Some of them are imported officially, cleared at the customs and sold from a warehouse in Ukraine, and some are sold to customers directly under a cross-border trade system. Sales of refurbished products are an established practice worldwide. America has been living off them for several decades now. This business generates hundreds of billions of dollars in turnover. In Ukraine, this is a relatively new area. Today, when people are not particularly rich, it has become relevant. People are well aware that electronics can be bought much cheaper.
- Will you sell refurbished products in new stores?
- Yes, among other things. We have the same product range in all stores. By the way, we do not sell refurbished products in the smartphone segment. It’s fifty-fifty for the tablets. The highest percentage is in the laptop segment.
- Do you have any other foreign assets?
- We keep online stores in Poland and Italy. For example, in Italy, quite a promising business was set up in eighteen months, but because of the jumps in the Euro exchange rates and disagreements with our partner, the project has been temporarily put on ice.
- How has the demand for electronics in Ukraine changed generally in these times of crisis?
- On the whole, people are willing to spend the same money in local currency as before. Only that the dollar exchange rate has tripled over the past two years. Therefore, the only salvation is that the products themselves are getting cheaper. Demand has dramatically shifted into the economy segment. Previously, it amounted to 50 per cent, while now (across our stores, anyway) it is somewhere between 80 and 90 per cent. Smartphones up to 4,000 hryvnias, laptops up to 8,000 hryvnias. We sell premium products occasionally, but demand is very specific. It peaks when gifts are purchased on the eve of major holidays.