The Russia-Ukraine conflict has taken longer than we thought, and the scope and extent of its impact have far exceeded initial predictions. But amidst all the negative noise about escalating tensions between the two sides, mutual sanctions between Europe and Russia, and global economic turmoil, there has been some good news.
On Wednesday, M.video-Eldorado, Russia’s largest electronics retailer, said Chinese smartphones accounted for two-thirds of all new sales in Russia from April to June, the latest sign that the Russo-Ukrainian war is affecting Russian consumption. Chinese smartphone brands Xiaomi, realme and Honor were reported to account for 42 percent of Russian smartphone sales in May 2022, up from 28 percent a year earlier.
It goes without saying that the smartphone industry as a whole has had a tough year in 2022, with everything from terminals to the supply chain under extreme pressure to ship after several rounds of cutbacks due to a significant reduction in market demand. Even during the traditional peak consumer season, the overall performance of cell phone brands was not as good as before, with a new study by Strategy Analytics on June 30 indicating that during this year’s 6.18 online shopping festival in China, smartphone sales were 14 million units, down 25% year-on-year.
In this difficult situation, how to find new market growth space is the problem facing the industry chain.
The announcement by Apple and Samsung to withdraw from the Russian market after the Russia-Ukraine conflict is a silver lining for the industry chain manufacturers. Industry sources said, “If only Apple may still have a relatively small impact, because Apple’s sales in the Russian market is not much, but with the addition of Samsung’s volume is more substantial, Samsung is the Russian market share of the highest cell phone brands.”
Strategy Analytics senior director Sui Qian said in an interview with China Business News that Apple sells an average of 4 million iPhones in Russia each year, and that the brand’s share of the Russian market is about 10 percent, so it can be estimated that the average annual shipment of the local cell phone market is about 40 million units.
In addition, according to data released by Counterpoint Research, Samsung’s cell phone market share in Russia will reach 30% in 2021, which means that the withdrawal of Apple and Samsung will give other cell phone brands a maximum of 40% market share, with a shipment gap of nearly 16 million units.
Industry sources continued: “Although there is no way to compare with the volume of the domestic market, but for the current stage of cell phone brands are also very important, several domestic manufacturers are under more pressure this year, so everyone will try to grab the market as much as possible, not to mention that there are now two less favorable competitors. If the brand performs a little better in the market, then the supply chain can certainly be relatively easy. For example, M.video-Eldorado mentioned Xiaomi, Honor and realme, the supply chain must also benefit with the three brands’ significant market share growth in Russia.”
“In fact, there are opportunities not only in cell phones, but also in electronics-related markets. Because since the conflict between the two countries, one after another announced the launch of many brands in the Russian market, covering home appliances, computers and many other product areas, the domestic industry chain in these areas are obvious advantages. If the demand in the cell phone market is not large enough, then the combined market demand in these areas is certainly able to bring a more significant contribution to corporate revenues.”
As M.video-Eldorado clearly wrote in its Q1 2022 earnings report, the main reason for the 28.1% YoY and YoY growth in the Group’s GMV (i.e. total merchandise transactions) for the period was the withdrawal of several manufacturers from the Russian market, ruble price fluctuations, and unstable supply, which stimulated user demand, with the best-selling products for the quarter including refrigerators, computers, and TVs.
It should be noted that the business opportunities arising from the withdrawal of major manufacturers from Russia are not limited to brands.
Beneficiaries of legal imports of “parallel” goods
On June 22, local time, Russia passed the law on parallel imports and published a list of goods that are allowed to be imported in parallel (commonly known as “parallel imports”); according to the law, Russia can legally parallel import some foreign goods according to the list without the prior consent of the copyright owner of the goods.
This means that not only the brand manufacturers and their suppliers have a chance to turn around in the Russian market, but also some white label and gray label industry chains have a chance to profit from it.
It is understood that the list of goods allowed for parallel imports in Russia covers a wide range of categories.
For technology and electronics, the list includes products from Siemens, Panasonic, Apple, Intel, Samsung, Dyson, Logitech and many other brands. Also in the automotive category, Land Rover, Jeep, Jaguar, Chrysler, Bentley, Cadillac, Tesla, Volvo, Skoda, Toyota, Nissan, etc. can be parallel imported to Russia.
Some industry chain manufacturers pointed out: “In fact, ‘parallel’ sales are expressly prohibited in many countries, because the price is cheaper compared to the products imported through regular channels, so once the proliferation, it is easy to cause a bad market competition environment. Especially in Europe and the United States brand for these industries is very strong suppression, Apple is one of the representative example, so in recent years the survival of these white label, gray suppliers are also significantly compressed.”
“This move is obviously detrimental to those brands that announced a temporary cut-off, but the impact on the Russian market itself is not entirely positive. In fact, Russia also banned the sale of ‘parallel imports’ after joining the WTO, but after being subjected to multinational sanctions, the prices of many imported products in Russia rose rapidly The price of many imported products rose rapidly after the sanctions imposed by many countries. Now open again is obviously a desperate move. The other side said.
The only thing that is certain about the above decision is that a large number of “parallel importers” and their supply chains will have the opportunity to enjoy this wave of dividends. In China, there is a very mature, complete and large industry chain. The world-famous Shenzhen Huaqiang North natural needless to say, the same in the Pearl River Delta region of Guangzhou, Dongguan and other places there is a very well-developed market for parallel imports.
To protect the interests of consumers in Russia. Several of Russia’s largest merchandise sales merchants have now announced that they are ready to cooperate with “parallel importers”.
