Yevgeny Butman: “Prices in Apple for Apple products will never be equal to American ones”

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

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

Do you have any interests in the ECS Group (stocks, consulting, maybe planning a position on the board of directors)?
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No, I went out completely and have nothing to do with the ECS Group. Of course, I wish the company every success. I believe that in each of the group companies there are strong and professional teams that are able to successfully go through the upcoming transitional period and continue their development.

Recently, re: Store service 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 substantially. The number of computers sold is one and a half times more than a year ago, two versions of the iPad appeared, sales of the iPhone grew. That is, the number of devices sold in just one year has more than doubled. Therefore, the number of those who are dissatisfied also doubled.

Now about the service itself. Apple, having opened a representative office in Russia in 2007, took a number of consecutive steps to bring the entire service under its control. To date, re: Store, like other retail chains, is not engaged in self-service, but sends devices for repair to Apple-authorized service centers, which, in turn, purchase parts from an authorized service distributor. This process is still imperfect, but 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 didn’t enter the Russian retail market for so long (i.e., didn’t open the Apple Store)?

Let's divide. Apple entered the Russian market, as is known, in 2007. Today, dozens of people work in the representative office. As for the rest, here I highlight the program AppleCare, the online store AppStore, iTunes, and, actually, the Apple Store stores.

Opening a representative office was the first step. Translation localization in the hands of Apple and start AppleCare - the second. Further there was a stage by stage, even if not so noticeable. Step by step, the backlog with Europe on the start of new products is reduced. The iPad 2 could even start at the same time as Europe (as I heard by the edge of the ear, the delay was partly due to certification deadlines and logistical issues). Wait - everything will be, everything will come.

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

I do not know, Apple does not announce me about their plans. And if I had, I would not have said it anyway, this is an obvious secret).

The issue of prices for 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 fully correspond to European ones, you can easily check it (there is only an iPhone difference, and it is connected with the fact that in Russia operators do not subsidize phones). If you ask me, when the prices in Russia for Apple are on par with those in the United States, 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 (there are already 29 stores open), say, on the Macbook Air they start at 867 pounds, in France (seven stores) - from 999 euros (and there, and there - about 1450 dollars), and in the USA - from 999 dollars. In re: Store - 39990 rubles., Or, at the rate of 27.8-1440 dollars. Q.E.D…

Will the gray import of Apple products ever disappear and what should be done for this?

Gray imports do not exist by themselves. It appears there and then, where and when there is a shortage of popular goods, or a noticeable difference in price with other countries. If the brand is widely represented, then gray imports may not 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 a little more on the iPad, due to the continuing deficit and due to the fact that in Russia the start of sales is late. But iPad prices are even lower than European ones, the delay from iPad 2 was already quite small, so here gray imports are declining. According to the iPhone, gray imports are consistently high, since in America and the European Union countries, the iPhone is subsidized by operators (in Russia - not), the sale price is low there, and, when certain manipulations are performed, you can detach the phone from the operator and sell high in Russia. So I don’t expect quick progress in the fight against the gray iPhone import.

What to do? Develop sales channels, especially in the regions, reduce prices, release new products for sale simultaneously with the global launch. To do this, in my estimation, Russia needs to increase sales of Apple 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, 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 “Svyaznoy”, which has already twice planted “pig” Apple's plans 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 from the iPad 2 encourage you to postpone the start of sales from autumn to early summer?

I treat with bewilderment and misunderstanding - like, adult guys. I cannot evaluate the actions of the “Svyaznoy” as “laying a pig”, they do not pull it. Not prompted.

In general, I want to dispel some myths. Until now, I have to read that a letter from Chichvarkin to Steve Jobs has accelerated the arrival of the iPhone in Russia. Advertising campaign "Ion" has accelerated the emergence of iPhone 3GS. The actions of "White Wind" brought the appearance of the iPad in Russia, and the actions of the "Connected" - the arrival of the iPad 2. All this has nothing to do with reality. I suppose, and I have reason to believe that those people at Apple who really influence the timing of the emergence of new devices in Russia, and have never heard of a letter, nor of the described actions and promotions.

Here I can speak about the predictions of well-known “leading analysts” about how many “gray” Apple devices are imported, sold, installed. I can say that these comrades do not have any reliable sources of information, and all the data repeated and cited mainly by Vedomosti and Kommersant are calculated using the well-known half-finger-ceiling method. Do not believe.

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

You know, this is like in a well-known 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. Apple IMC employees have been doing this for many years, we had a special department, since 2007 Apple itself has been involved in localization. If we talk about non-localized products included in MS OfficeforMac, then I dare to remind you, MS is Microsoft! And for many years this respected company has not made localizations for the “Makovsky” office for most of the world's languages. The Russian version of Office for Mac appeared only last fall.

I can not remember any sensible presentation of Apple in Russia from your company. You simply did not devote this time, relying on the merits of Apple’s general marketing, or do you consider the practice of strong presentations not suitable for our market?

Know, and I can! So I was lucky more! We have been doing conferences for professionals and prosumers for many years in a row, by the presenters from Apple, Adobe, and by our employees. We have been running large-scale Apple RoadShow since 2002. On the first show on May 31, 2002, people sat on the steps. The hall had 500 seats, and more than 600 people arrived. After the opening of the representation, all this was collapsed, unfortunately. In May 2007 we did a 30-day exhibition at Apple's GUM, where we exhibited Apple products from the first Lisa computer to the latest models in the ground floor gallery. It was the first Mac to be released on Apple’s 20th anniversary in 1997, the 20th-Anniversary Macintosh, and Cube, and more.

In the same year (2007), our group of companies ensured the start of sales of the 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 vividly 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 consumer 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, to which separate presentations for the media were devoted.

This year, on May 27, we were among the first to start selling iPad 2, having spent along with the launch of sales the tournament on AngryBirds. The tournament was held in re: Store in the European Mall. The number of visitors to our network on this day exceeded all permissible forecasts. During the day of the start of sales, re: Store stores were visited by more than 34,000 people.

A separate big story is Apple's promotion in education, where thousands of presentations, workshops and technical series were held.

We would be glad to launch the iPhone in Russia brightly, however, the process was in the hands of cellular operators.

By the way, about the general marketing of Apple. And what merit 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 by the efforts of our employees. But maybe you know something I don't know?

By the way, we have always been banned direct advertising. 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 Apple store itself. Was this done on purpose, or from the illiteracy of the consumers themselves?

The first store appeared in late 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. After six months, Apple renamed such stores to APR (Apple Premium Reseller) and told all APRs to come up with a name that should be written in large letters on the gable, so that no one confuses the reseller stores with Apple stores. We did just that. So everything was in front of everyone from the very beginning - Apple Premium Reseller sign, re: Store sign. But this is the essence of the retail franchise. What does the illiteracy? Here you drink coffee at Starbucks, buy clothes at TopShop, baby products at MotherCare, a video camera at Sony Center. But these are all franchises, these are private companies under a contract with a brand that represent it in accordance with a given standard.

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

By the way, I think that the re: Store brand has become a high-quality and recognizable Russian brand. An acquaintance of mine described the scene he witnessed - two young ladies at the Apple Store in London on Regent Street are torturing the seller for some accessories. They ask about one, it’s not, about the other, either. Then one other says in Russian - well, nothing, in Moscow in re: Store we will buy.

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

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

In general, we should stop comparing ourselves with the United States, now 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 is not paying enough attention to Russia. For various reasons, I see that it is beginning to change now.

Now, looking back, do you think your decision to make Apple products 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 demise of Apple. The company fell sales, she cut staff and suffered significant losses. The lag behind Intel’s Power PC processors at that time was significant, there was little good news. Everything changed, not even when Steve Jobs returned, but when the sales of the first iMac 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 appearance of the iPhone, the appearance of the iPad. Of the smaller, but noticeable for us events - the emergence of the iMac in its current form “computer as a monitor”, the appearance of a cheap MacBook in a white plastic case, the appearance of a MacBook Air. At the same time, MacPro's sunset, quiet server maintenance, and the general extinction of a professional theme.

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

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

Last year I do not really watch. This is the re: Store marketing department. I was periodically interested. It was interesting to me in the years of formation of re: Store, from 2006 to 2008. The peak of my interest is an interview at Habré. In general, I consider this interview a landmark for me, it marked the dividing line between two realities - the old (Apple IMC) and the new (Apple itself rules the business in Russia). Since 2009, the flow of information has stabilized. The Mac community, as well as the completely autonomous iPhone-community, were divided into clear groups, grouped around several of the most popular Internet resources. I would even call it the MacOS community and the iOS community (MacOS and iOS). The level of radicalism has decreased, although a steady group of frostbitten outcasts continues to be active. Radicals are basically a relic of the MacOS community. Because "Ayos" 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 who have 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's the point of attacking the old users ... And the Apple business itself, and the user environment around it, are opposing the marginals, pushing them out of their midst.

Your business is not only re: Store, but also Dyhaus, which is a distributor. Did the appearance of a second distributor in Russia affect business?

Of course, influenced, could not affect. But “Dihaus” still remains the largest partner of Apple in Russia, I believe, to shake its position is extremely difficult.

When Apple opens its store, will the distribution business of Dihaus die?

Judge for yourself. The distribution channel “Dyhausu” is divided into four blocks - large retail (federal), small retail (including regional), old large resellers, small resellers. Total - about 600 companies. Business is pretty steady. In addition, in my personal assessment, the Apple Store stores will draw 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 no less than 20% per year, that is, three times in five years, so Dyhaus will have a place to turn.

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

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

Does Dihaus sell anything other than Apple technology?

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

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

It's like choosing which of the children you love more. “Dihaus” is an old business, it is over 16 years old. The whole history of the group is connected with it. “Dihaus” is a direct heir to Apple IMC, re: Store is young, just over five years old. Of course, retail is a much more complicated business than distribution. Distribution is potentially larger. In terms of profitability, both companies are approximately equal, but retail is growing faster, and in a couple of years the gap will be very noticeable.

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

Twenty years of doing business related to technology, what will you do now? Will it be a new retailer project or will you go on a well-deserved rest to rest on your laurels?

I do not plan yet to go on a well-deserved rest. I used to work a lot, and have not yet lost the taste for it. I’m not ready to say what I’m going to do, but it’s definitely not a business related to electronics and computers. And I will create it with a completely different team.

That's all they write books, Tinkov, Chichvarkin. You would not like to tell about the history of the formation of the "apple" business in Russia, so to speak, without cuts? You are not bound by obligations now.

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

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

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

Speaking seriously ... Everything would be done much faster, bigger. More attention would be paid to the formation of a professional team. Otherwise I built relationships with partners (ideally, I would have no partners at all). And, of course, I would not start a business without money, as in reality I did when I created my company in 1995.