Eugene Butman: "Prices in Russia for Apple products will never be equal to the US"

    Eugene Butman, the founder of ECS Group (owning the re: Store network), recently decided to leave his post and radically change his sphere of activity. Recall that Eugene has been promoting Apple technology in Russia since 1990, but from now on he goes out of business.

    Users of Habrahabr asked a couple of dozen questions to Evgeny Butman, and he kindly agreed to answer them and tell how he sees the future of Apple in Russia.

    Do you still have any interests in ECS Group (shares, consulting, maybe a position on the board of directors is planned)?

    No, I went out completely and have nothing to do with ECS Group anymore. Of course, I wish the company every success. I believe that each of the group companies has strong and professional teams capable of successfully passing the upcoming transition period and continuing its development.

    Recently, service on the re: Store network has deteriorated significantly. How do you explain this?

    I do not have such data. It may well be that this is your subjective opinion. However, please pay attention to such facts. Recently (about a year), sales at re: Store have grown significantly. Computers sold one and a half times more than a year ago, two versions of the iPad appeared, iPhone sales increased. That is, the number of devices sold in just a year has more than doubled. Consequently, the number of dissatisfied also doubled.

    Now about the service itself. Apple, having opened a representative office in Russia in 2007, has taken a number of consecutive steps to transfer the entire service under its control. To date, re: Store, like other retail chains, does not do service on its own, but transfers devices for repair to Apple-authorized service centers, which, in turn, purchase spare parts from an authorized service distributor. This process is still imperfect, but is slowly improving. In previous years, the service was organized by our company, now Apple. But all this is exactly what they wanted, right?

    Why do you think Apple did not enter the Russian Retail market for so long (i.e. did not open the Apple Store)?

    Let's split up. Apple entered the Russian market, as you know, in 2007. Today, the office employs dozens of people. As for everything else, here I highlight the program AppleCare, the online store AppStore, iTunes, and, in fact, the Apple Store.

    Opening a representative office was the first step. The transfer of localization into the hands of Apple and the launch of AppleCare is the second. Next came the stage after stage, albeit not so noticeable. The lagging behind with Europe on the launch of new products is being reduced step by step. iPad 2 in general could start simultaneously with Europe (as I heard from my ear, the delay was partially due to the timing of certification and logistics issues). Wait - everything will be, everything will come.

    Do you have information when the Apple Store in Russia will finally open?

    I don’t know, Apple does not inform me of its plans. And if I had notified, I still would not have said, this is an obvious secret).

    The question of the price of equipment is the most popular. How will prices change with the arrival of the Apple Store in Russia? What will change with your departure?

    Nothing will change with the opening of the Apple Store, nor, especially, with my departure. Prices in Russia are fully consistent with European, you can easily check it (the difference is only on the iPhone, and it is due to the fact that in Russia, operators do not subsidize phones). If you ask me when the prices in Russia on Apple will be equal to the US, I will say diplomatically - not very soon, but not diplomatically - this will never happen.

    About the Apple Store - you can also easily check that in England, for example, prices in the Apple Store (29 stores are already open there), say, on the Macbook Air start at 867 pounds, in France (seven stores) - from 999 euros (and there and there - about $ 1,450), and in the USA - from $ 999. In re: Store - 39990 rubles., Or, at the rate of 27.8 - 1440 dollars. What was required to prove ...

    Will the gray import of Apple products ever disappear and what needs to be done to do this?

    Gray imports do not exist on their own. It appears there and then, where and when there is a shortage of a popular product, or a noticeable difference in price with other countries. If the brand is widely represented, then gray imports cannot be significant, since there are no stable sources of supply and financing, prohibitive measures by the manufacturer and problems with customs. In the case of Apple products, gray imports are negligible on computers that are sold widely and go on sale simultaneously all over the world. It is slightly larger on the iPad, due to the ongoing shortage and due to the fact that the start of sales in Russia is late. But iPad prices are even lower than European ones, the delay with iPad 2 was already quite small, so gray imports are declining here. On the iPhone, gray imports are stably large, since iPhone is subsidized by operators in America and the EU countries (in Russia - not), the selling price is low there, and, after performing certain manipulations, you can detach the phone from the operator and sell it at a high price in Russia. So I do not expect rapid progress in the fight against gray iPhone imports.

    What to do? To develop sales channels, especially in the regions, reduce prices, release new products for sale at the same time as the global launch. For this, in my estimation, Russia needs to increase Apple's sales to the level of the four largest Western European countries.

    In general, what are the estimates for the share of gray imports?

    Already answered in the previous block of questions. More precisely, I’m not ready. We owned all the information when we had Apple IMC status. Now this question needs to be addressed to Apple.

    How do you feel about the actions of the "Messenger", which has already twice put a "pig" plans for Apple in Russia? First, with sales of the iPhone 4 a day earlier, then with the “official” sales of the iPad 2. Did the actions of Svyaznoy with the iPad 2 delay the start of sales from autumn to early summer?

    I am perplexed and misunderstood - like, older guys. I can’t evaluate the actions of Svyaznoy as “putting a pig”, they don’t pull on it. Not prompted.

    In general, I want to dispel some myths. So far I have to read that Chichvarkin’s letter to Steve Jobs accelerated the arrival of the iPhone in Russia. Iona's promotion has sped up the appearance of the iPhone 3GS. The actions of White Wind brought closer the appearance of the iPad in Russia, and the actions of Svyaznoy brought the arrival of iPad 2. All this has nothing to do with reality. I believe, and I have reason to believe, that those people at Apple who really affect the timing of the appearance of new devices in Russia have never heard of the letter or the actions and actions described.

    Here I can speak about the forecasts of well-known "leading analysts" regarding how many "gray" Apple devices are imported, sold, installed. I am going to say that the indicated comrades do not have any reliable sources of information, and all the data repeated and quoted mainly by Vedomosti and Kommersant were calculated using the well-known half-finger-ceiling method. Do not believe it.

    Why, despite the rather long presence of Apple products on the Russian market and the presence of official distributors, so little attention was paid to software localization, while competitors (MS) localized their software starting from very old versions (DOS 5.0, Windows for Workgroups 3.11 , Word)?

    You know, it’s like in a famous joke - if you make four mistakes in the word “bread”, you get “beer”. Every single MacOS operating system for 20 years of Apple's official work in Russia (since 1991) has been Russified. All versions of iOS since the official appearance of the iPhone in Russia in October 2008, too. Also, all versions of iLife and iWorks were Russified. For many years, Apple IMC employees have been doing this, we had a special department, since 2007, Apple itself has been engaged in localization. If we talk about non-localized products included in MS OfficeforMac, then I dare to remind you, MS is Microsoft! And this respected company for many years did not make localizations for the Makovsky office for most languages ​​of the world. The Russian version of Office for Mac appeared only last fall.

    I can’t recall a single sensible presentation of Apple in Russia from your company. You just did not take the time to count on the merits of Apple’s general marketing, or do you think the practice of strong presentations is not suitable for our market?

    You know, but I can! So I’m more fortunate! For many consecutive years, we have held conferences for professionals and prosumers, through the efforts of Apple, Adobe, and our employees. We have been conducting large-scale Apple RoadShow since 2002. On the first show on May 31, 2002, people sat on the steps. The hall was for 500 seats, and more than 600 people came. After the opening of the representative office, all this was minimized, unfortunately. In May 2007, we did a 30-day exhibition at GUM "Apple Legends", where we exhibited Apple products from the first Lisa computer to the latest models in the gallery of the first floor. There was the first "Mac", and released for the 20th anniversary of Apple in 1997, the 20th-Anniversary Macintosh, and Cube, and much more.

    In the same year (2007), our group of companies secured the start of sales of iPod Touch in Russia by conducting a series of promotional demonstrations of new items in shopping centers in Moscow and St. Petersburg. And in 2008, no less successfully and brightly launched the most portable solution from Apple - MacBook Air. In 2009, with our support, Mac OS X SnowLeopard was launched, the start of sales of which was accompanied by technical series for consumers and prosumers in Moscow and the regions.

    At the end of 2010, together with Microsoft, we were the first to launch sales of the Russian version of MS Office 2011 for Mac, which was dedicated to separate presentations for the media.

    This year, on May 27, we were among the first to start selling iPad 2, having held an AngryBirds tournament at the same time as the sales started. The tournament was held in re: Store in the European shopping center. The number of visitors to our network on this day exceeded all acceptable forecasts. More than 34,000 people visited re: Store stores during the launch day.

    Another big story is Apple's advancement in education, where thousands of presentations, workshops and technical series have been held.

    We would be happy to brightly launch the iPhone in Russia, too, but here the process was in the hands of mobile operators.

    Speaking of general marketing for Apple. What merits do you mean? Until last year, all of Apple’s marketing in Russia was done by our company, from beginning to end. This was done, of course, with the support and partial funding of Apple, but with the efforts of our employees. But maybe you know what I don't know?

    By the way, direct advertising has always been forbidden to us. I mean - banned by Apple itself. And we could only do BTL marketing. And engaged, quite successfully.

    For a very long time, re: Store was perceived as the store of Apple itself. Was this done on purpose, or from the illiteracy of the consumers themselves?

    The first store appeared at the end of 2005, and it did not have its own name, called the Apple Center. We opened it as part of a pan-European program to create such reseller points of sale. Six months later, Apple renamed such stores into APR (Apple Premium Reseller) and ordered all APRs to come up with a name that should be written in capital letters on the pediment so that no one confused reseller stores with Apple stores. We did so. So everything was in front of everyone from the very beginning - the Apple Premium Reseller sign, the re: Store sign. But this is the essence of the retail franchise. What does illiteracy have to do with it? So you drink coffee at Starbucks, buy clothes at TopShop, baby products at MotherCare, a camcorder at Sony Center. But these are all franchises,

    By the way, I invented the re: Store brand, and re: as an element of the name, too, and I took the color of the logo from the then iPod Pink. In those days there was a dominance of red, orange, yellow and blue, and dark pink against a strict black background looked very fresh. He looks like that even now. We made a white marble floor, and not a parquet board, so that the store was only black and white, that was strict and elegant, in the spirit of Apple. We made bright lighting. We came up with uniforms, bags. We have opened a training center for training sellers, of whom we now have more than 300. By the way, this training center works for everyone. We have opened an online store, and now it generates more than 8% of annual re: Store programs. In the early years, while we still had Apple IMC status (ended in early 2009), we kept our free call-center to advise anyone. We came up with a program for selling additional services, and now they occupy a total turnover of 2%, which is very good. We ourselves began to publish and sell magazines and books in re: Store, such as “250 best sellers for iPhone / iPod Touch”, “iPad in Russian” and many others. We have developed a commodity matrix of accessories and are constantly improving it. We launched a loyalty program, etc., etc.

    By the way, I believe that the re: Store brand has become a high-quality and recognizable Russian brand. A friend of mine described a scene that he was an eyewitness - two young ladies at the Apple Store in London on Regent Street torture a seller for any accessories. They ask about one, it’s not there, about the other, it’s not either. Then one another speaks Russian - well, nothing, in Moscow in re: Store we will buy.

    Why is the Russian market less interesting for Apple than even the Chinese one? Have the sales of the iPad (first and second) changed the mind of the apple company?

    I'm not ready to speak on behalf of Apple, and I have no such rights. My opinion is this - I think there are no manufacturers in the world for whom the Russian market is more interesting than the Chinese. Nine times the population lives in China, and many segments of the consumer markets in this country are among the largest in the world. Computer is one of such leading segments.

    In general, we should stop comparing ourselves either with the USA or with China, that is, with the first and second economies of the world. Let's wait for Russia to enter the Top4 European countries for Apple.

    However, I agree that Apple has paid and does not pay enough attention to Russia. For various reasons, I see that this is beginning to change.

    Looking back now, do you think your decision to deal with Apple products is right?

    Yes of course. Although in 1996, when my company signed an agreement with Apple and received the status of Apple IMC, all the talk was about the imminent death of Apple. The company fell sales, it reduced staff and suffered significant losses. The lag of the then Power PC processors from Intel was significant, there was not much good news. Everything changed not even when Steve Jobs returned, but when sales of the first iMacs started, in August 1998. The following milestones that I felt in my company’s business are especially clear - the start of iPods, the transition to Intel processors, the advent of the iPhone, the advent of the iPad. Of the smaller but notable events for us are the appearance of the iMac in its current form of “a computer as a monitor”, the appearance of cheap MacBooks in a white plastic case, the appearance of MacBook Air. At the same time, the sunset of MacPro, the quiet departure of servers,

    If you come back to the right choice ... re: Store in 2010 grew one and a half times compared to 2009, and in 2011 it is expected to double compared to 2010. At the end of 2010, it entered the rating of 100 largest retail chains in Russia, taking 65th place. In terms of organic growth, overall growth, sales per meter, it is the absolute record holder in the segment of networks of a similar direction (BTE, computers, mobile retail). Judge for yourself ...

    Do you follow what is said about you and your former company on the Internet? What do you think about it? Do online community attacks offend you?

    Last year, I’m not watching very much. This is what the re: Store marketing department does. I was periodically interested. It was interesting to me during the formative years of re: Store, from 2006 to 2008. The peak of my interest is an interview on Habré. In general, I think this interview is a milestone for me, it marked the watershed between two realities - the old (Apple IMC) and the new (Apple itself controls the business in Russia). Since 2009, the flow of information has stabilized. The Mac community, as well as the completely autonomous iPhone community, have broken down into understandable groups that group around several of the most popular Internet resources. I would even call it that - MacOS community and iOS community (Mac OS and iOS). The level of radicalism has decreased, although a stable group of frostbitten outcasts continues to be active. Radicals are basically the relict part of the MacOS community. Because "Agios" are interested in absolutely practical issues related to Apps, with the functional features of devices and applications, updates, firmware, etc. Judge for yourself, the number of users with at least one device from Apple is already measured by millions of people, and those who are interested - an order of magnitude more. So what does the attack of old users have to do with it ... Both Apple’s business and the user environment around it counteract the marginals and force them out of their environment.

    Your business is not only re: Store, but also DiHouse, which is a distributor. Has the appearance of a second distributor in Russia affected the business?

    Of course, it influenced, could not but affect. But Dyhouse remains Apple’s largest partner in Russia, and I think it’s extremely difficult to shake its position.

    When Apple opens its store, will Dyhouse's distribution business die?

    Judge for yourself. The Dichaus sales channel is divided into four blocks - large (federal) retail, small (including regional) retail, old large resellers, small resellers. In total - about 600 companies. The business is pretty steady. In addition, in my personal assessment, the Apple Store will attract no more than 20% of all Apple sales in Russia. I also expect that in the next five years, Apple’s business in Russia will grow by at least 20% per year, that is, three times in five years, so there will be a place for Dyhouse to expand.

    DiHouse delivers not only re: Store, but also to other Apple sellers. Are there any privileges for re: Store - after all, both companies belonged and belong to the same owner?

    There are no special privileges for today. re: Store has conditions similar to the largest retail chains in Dyhouse.

    DiHouse sells something other than Apple technology?

    Yes, Sony, Toshiba, Dell, Wacom. Accessories Sales of MS Xbox are starting, negotiations with other suppliers are also underway. But Apple still dominates, although its share is gradually decreasing.

    Which of your businesses, DiHouse or re: Store, is more successful? And what was more interesting for you?

    This is how to choose which of the children you love more. Dyhouse is an old business, it is over 16 years old. The whole history of the group is connected with him. Dyhouse is the direct descendant of Apple IMC, re: Store - young, he is a little over five years old. Of course, retail is a much more complex business than distribution. Distribution is potentially larger. Both companies are approximately equal in profitability, but retail is growing faster, and in a couple of years the gap will be very noticeable.

    About what is more interesting ... Everything was interesting. It was interesting to build, develop, invent, and form management teams. When the business as a whole has already been built, I want to do something else.

    Having been in the business of technology for twenty years, what do you do now? Will it be a new retailer project or go on a well-deserved rest to rest on our laurels?

    I do not plan to go on a well-deserved rest. I used to work a lot, and have not yet lost my taste for it. What I will do, I’m not ready to say yet, but it certainly won’t be a business related to electronics and computers. And I will create it with a completely different team.

    Here everyone writes books, Tinkov, Chichvarkin. Would you like to tell about the history of the formation of the "apple" business in Russia, so to speak, without cuts? Now you are not bound by obligations.

    Actually connected. Yes, and certain ethical obligations, too. But this is not a matter of secrets at all, but precisely in the history of business development. We have very few such books. I would like to write. However, I am not sure that such a book will be of interest to a wide circle of readers. And then, I didn’t retire, write memoirs, I’ll work again. In general, I'll think about it, maybe I'll write (in hot pursuit).

    Eugene Butman today and Eugene Butman twenty years ago. If you had to start a similar business with today's experience, what would you do differently?

    The simplest answer would be to drop everything and leave. And I would spend twenty years on something more meaningful and productive. Because my current experience and managerial qualifications allow me to do business anywhere. And I spent most of these twenty years on overcoming countless obstacles and barriers, with enthusiasm being built for business by our government, as well as on combating all the charms of the wild market.

    Speaking seriously ... I would do everything much faster, on a larger scale. I would pay more attention to the formation of a professional team. Otherwise, he built relationships with partners (ideally, he would have no partners at all). Well, of course, I wouldn’t start a business without money, as in reality I did when creating my company in 1995.

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