IPhone Prices in Russia Tempting Tourists as Ruble Slides

By Ilya Khrennikov and Jake Rudnitsky 

Russians, who for years endured some of the highest prices for Apple Inc. (AAPL)’s iPhone, can buy the latest model for less than what shoppers pay elsewhere in Europe.
Russians have often been found in queues outside Apple stores in London and Frankfurt during product debuts. Now, thanks to the ruble’s decline in recent months, iPhone prices in Russia are the lowest in Europe when measured in dollars or euros, according to Russian handset retailer Svyaznoy.
In ruble terms the sticker price hasn’t changed. An iPhone 6 without a carrier contract starts at 31,990 rubles ($700), relatively high for many Russians. However, after the ruble’s 25 percent slide against the dollar and 18 percent drop against the euro in the past four months, the
Russian price has dropped below that of other countries. In neighboring Finland, long a popular destination for Russian iPhone shoppers, the iPhone 6 costs local shoppers about 700 euros ($870).
Re:Store, an official Apple reseller in Russia, said gray-market imports have been competing for sales at its stores in St. Petersburg, where people could travel just 100 kilometers (62 miles) across the Finnish border and buy anything ranging from clothes to gadgets.

Photographer: Sefa Karacan/Anadolu Agency via Getty Images

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“Now it probably makes sense to smuggle suitcases of iPhones in the opposite direction,” said Lyudmila Semushina, a spokeswoman for re:Store.
Russian prices still don’t beat the U.S., where the iPhone 6 without a carrier contract starts at about $650 before taxes.

Foreign Buyers

The ruble has fallen amid U.S. and European sanctions against Russia over President Vladimir Putin’s alleged role in the Ukraine conflict and a drop in the price of oil. The currency trades at 45.91 to the dollar and 56.98 to the euro as of 10:52 a.m. in Moscow.
Those coming to Russia to shop include entrepreneurs from ex-Soviet republics, who used to travel to other European countries or Hong Kong to buy iPhones and then resell them in their own countries, according to Eldar Murtazin, an analyst at Mobile Research Group in Moscow.
Non-Russians working in the country are also opting to buy iPhones locally, whereas previously they bought them when visiting their homelands, said Alexander Malis, chief executive officer of Euroset, a handset retailer co-owned by mobile-phone operators OAO MegaFon (MFON) and VimpelCom Ltd. (VIP) IPhone sales are on par with a year earlier even as the economy has cooled, Euroset’s Malis said.

Local Demand

About 1.93 million iPhones worth $1.3 billion were sold in Russia this year through September, according to research firm IDC. They accounted for 10 percent of the Russian smartphone market by units, up from 8.9 percent in 2013, according to IDC.
Apple representatives in Moscow didn’t return calls seeking comment.
IPhone purchases by Russians have also increased in recent weeks, said Maria Zaikina, a spokeswoman for Moscow-based Svyaznoy, which accounted for two-fifths of Russia’s iPhone sales last year. Consumers are fretting the ruble’s drop will push the device’s price up, she said. Prices for some Western products have already risen in Russia as they have become more expensive for wholesalers and retailers to purchase.
Luca Maestri, Apple’s finance chief, told analysts on Oct. 20 that while the strengthening dollar had little effect on the company’s results during the quarter that ended Sept. 27, it’s “becoming a significant headwind” in the current period.

‘Fact of Life’

“It’s a fact of life if the U.S. dollar strengthens, that creates a headwind for us both in revenue and margins for our business outside of the United States,” he said. “We have a comprehensive hedging program in place that mitigates the impact of foreign exchange. Over time, of course, these hedges roll off and get replaced by new hedges at new spot levels, and so the protection that you get from a hedging program is temporary.”
IPhone 6 sales, which started in Russia on Sept. 26, may exceed 200,000 units by year-end, Murtazin estimates. Representatives at wireless operators OAO Mobile TeleSystems (MBT), MegaFon and VimpelCom declined to give sales forecasts.
“The Russian sales this year started only one week after U.S. and Europe, causing a great influx of customers who chose official retailers over the gray market,” MegaFon said in an e-mail. “The demand for iPhone 6 still remains high.”