Those operators are what any landlord would dream about: they are loyal even to the exorbitant rental rates and aptly work with space fitting their salons even into irregular and uncomfortable premises. As to the operators themselves, they dream of striding the human flows of middle-class shoppers in grocery and other hypermarkets. We are talking about the operators of mobile phones and accessories.

In the age of universal “mobili-zation” access to the much-desired communication devices should be as easy as possible, the mobile retailers reason. In recent years they’ve been interested solely in places with heaviest human flows: at the exits from subway and railway stations and the first lines of development alongside the busiest avenues. Showcase windows, the possibility to place gaudy adverts on the roof and facade, several telephone lines, heat, water and power supply and access to the Internet are welcomed.

Top Models Are Accessible

Five years ago all cellular communication shops leased premises both in street retail and in shopping centers. Now they still willingly rent space on basement and first levels of apartment buildings in most liquid places with heavy human flows. “The rental rate is usually higher than the market and closer to that for gambling clubs: from $1,500 in bedroom districts to $5,000 on Tverskaya St.,” comments Sergei Lobanov, director of the asset management division at MIELE – Commercial Real Estate. “Quality premises near to universities and other places popular with youth are also in high demand. Business owners certainly seek after long-term leases but may also agree to short-term contracts (11 months),” reports Mr. Lobanov. As for street retail, the basic requirement of cellular communication retailers is a premise from 60 to 100 sqm while the market leaders (MTS, Beeline and Megafon) prefer larger space from 100 to 150 sqm.

As reported by Astera Oncor, now street retail is mostly in demand with cellular communication operators, for whom this is a matter of image and additional advertising owing to showcases, signage and street pointers. Multi-brand cellular communication shops opt for accommodation in large shopping centers with heavy human flows. According to Mobile Research Group, cellular retailers pay $5,000-$8,000 per sqm/year when leasing 30-40 sqm in Moscow and $3,000-$5,000 per sqm/year in the regions. Per sqm rentals also depend on the total area of a rpemise: the lesser the space, the higher the price, as reported by the briefing service of Svyaznoy.

Thus Svyaznoy’s top priority in location selection is a premise of the set size at the intersection of human flows; the second concern is visibility and rental rates. “The ratio of shopping floor to auxiliary space at our stores is roughly 85:15,” says Dmitry Tomilin, adviser of Svyaznoy’s president. “We lease from 20 to 50 sqm for Svyaznoy format and 50-90 sqm for the gallery of digital technologies Svyaznoy 3 with a wider variety and open access to showcases, but never more than 120 sqm. We also plan to develop brand shops in a joint venture with the manufacturers of mobile telephones. Now the chain holds 267 stores in Moscow, of which 24 are accommodated at shopping centers. We normally sign long-term leases for 5-7 years.

Tatiana Moskaleva, PR director at Tsifrograd also mentioned “historically established places of business and central galleries at shopping centers” as fortunate locations. An optimal for our stores in shopping malls is 30 sqm at the entrance. The preferable neighbors include commodity-household retailers, points of laser discs sale, pharmacies covering 30-40 sqm.”

From the buyers’ perspective, a cellular communication operator is an exciting and attractive store. “Therefore the developer is also interested to place mobile retailers in the most price sections, ranging from 30 to 50 sqm, at the central entrance,” agrees Ekaterina Kruglova, director of the commercial real estate department of the marketing and sales division at RIGroup. “Most optimal for shopping complexes are such popular players as Betalink, Euroset and Svyaznoy. They are easily recognizable by the shoppers, occupy small space (40-70 sqm) and pay highest rents,” sums up Victor Rosenberg, spearheading the retail space lease department at RosEuroDevelopment. “Accordingly, the main competitors of cellular operators in the premise search are small consumer shops: drug-stores, souvenirs, accessories, tourist agencies, jewelry etc.” “In the province we look for 20-80 sqm of space; our back rooms normally do not exceed 10% of the total space. We also want the landlord to produce a full package of title-establi shing papers,” remarks Ms. Moskaleva.

Yet everything is not limited to whereabouts. “Our company ordered a survey to find out the most important factors for the consumer in choosing a place of shopping,” says Elena Nogotkova, head of the PR department at Svyaznoy. The monitoring revealed that buyers attach the greatest importance to personnel competency, reasonable prices, good reputation and reliability of the chain. A wide variety and convenient location proved the less significant factors in the eyes of the buyers albeit quite important too.

Not an Anchor as Such

Although they may function in many formats, cellular communication operators cannot serve as an anchor for a shopping center as it cannot take up 30% of the total retail space. “Perhaps the so-called showroom brand shop is the only exception because in this case a world-renowned manufacturer — Nokia, Motorola or Samsung, for example, —opens a branded store dealing only in the products of some particular company,” comments Mr. Rosenberg.

The appearance of a cellular store as a concomitant operator always depends on the arrangements between chain shops and anchor tenants. “For example DIXIS always cooperates with OBI and Svyaznoy is a partner of Perekriostok,” points out Natalia Davidenko, spearheading the brokerage department at Astera Oncor. “These operators well fit into the format of shopping galleries, though they capitalize on human flows rather than create them,” says Mr. Lobanov.

Yet some consultants rank mobile retailers among traffic-generating operators. “Mobile electronics salons also offer extra services to their visitors — the opportunity to pay for mobile communication and the Internet, to change tariffs, to print digital photos, to buy Internet and digital TV payment cards, download the mobile content etc.,” comments Svetlana Yarova, head of the project department at Astera Oncor. “They can be an additional attractive factor in neighborhood complexes and generate a denser traffic of buyers than ‘pseudo’ anchors on larger space.” In addition, large mobile electronics stores often want bigger showcases or a separate entrance (like Bely Veter at SC Sheremetyevsky) but are willing to prefer not very popular premises (for instance, ION center at Zolotoi Vavilon Otradnoe).

Sometimes several cellular communication operators of different chains meet within the walls of one complex. Thus Alttelecom, Dixis and Betalink were all accommodated at Ramstore Capitol. The latter opened here this August, as a matter of fact, in a renewed format as a store of ultramodern high-tech mobile novelties staffed with interactive catering technologies. “As consumers grow more demanding, not a single chain can fully meet all their requirements,” reasons Mikhail Getz, vice president of Blackwood in charge of strategic development. “At the present time many centers have 2-3 and sometimes 4-5 similar operators in addition to electronics and household appliances hypermarket as an anchor. Two tenants of the same profile may even co-exist on the same floor, according to Ms. Kruglova, when one of them is a mono-brand store and the other is a multi-brand store (MTS and ION are a good example).

As to the synergy effect from closeness to the retailers of other profiles, cellular operators have almost no such “friends”, Mr. Getz believes. “Buying a mobile phone is in most cases a deliberate rather than a spontaneous decision. Because cellular salons generally offer the entire range of goods and services (phones, accessories, tariff plans, payment opportunities etc.), other retailers cannot benefit from selling concomitant goods and services in the given segment,” illumines the speaker. Therefore we witness the trend of turning cellular communication salons into convenience stores where consumers do not care much about the phones themselves. On the other hand, rendering the services geared towards spontaneous consumption contributes to the generation of the stable client flow to the complex. “Of course, a mobile boutique is only an additional option but because our stores are best in the sector, we are a sort of ‘jack’ in some centers boosting the interest of buyers in the given mall and attracting more visitors,” underscores Mr. Tomilin. Payment acceptance accounts for 20-25% of the chain turnover, on average.

In his turn, Evgeny Chichvarkin, chairman of the board of director of Euroset, relies to a lesser extent on location benefits and reminds that eventually the consumer inevitably votes with her purse. But it is under the toughest competition that four strong chains have developed in our niche: Svyaznoy, Betalink, Dixis and Euroset. If the retailers can afford paying the expensive rent on the premium-class Tverskaya Street, which is ahead of Kensington Gardens and Oxford Street in terms of rental rates, it means they sell their products at overstated prices there. On the other hand, the recent repeal of laptop duties propelled the market to greater activity. “Unfortunately our shops are too small and we have to stake on smart phones and communicators to make the ends meet,” Chichvarkin recapitulates. The market volume has reportedly reached $15.6 billion in 2007 and, according to Euroset, 28 million mobile phones were sold.

Restless Neighbor
With growing demand of the Russian people for cellular communication, the number of points of sale trading in mobile phones and concomitant goods and services will also keep growing in grocery stores. However in spite of the symbiosis advantages, the profitability of cellular operators in super- and hypermarkets is insignificant. Moreover many stores become competitors of their cellular salons, rendering mobile services to their visitors. The average check of a cellular boutique in a shopping center is higher than in grocery store and may reach 5,000 rubles. Large digital and electronics retailers also stirred to greater activity on the market of mobile phones. Thus Eldorado turned to the format of small shops Eldorado-Svyaz. There are about 450 such salons all over Russia. Mosmart launched a project of cellular and digital salons in its hypermarkets under its own brand. The average area of each boutique is 32 sqm. The variety numbers about a thousand of descriptions of phones, contracts, accessories and digital equipment. The retailer engaged the professional player Dixis, which will supply equipment to Mosmart cellular communication salons and manage the variety and pricing policy. Partners invest in new points of sale on a fifty-to-fifty basis and share the profit in equal parts. Mosmart expects higher loyalty of buyers after the project is launched and Dixis hopes for audience enlargement and a higher margin.

In expert opinion, if the proceeds from 1 sqm of a standard cellular communication salon are estimated at $25,000 per year, the project will not be very profitable for the partners. Mosmart reports the yearly turnover of its mobile salon at about $400,000 and the net profit at about $25,000. Other grocery retailers think it is more profitable to lease spaces to large cellular chains.