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How to open a cell phone shop

How to open a cell phone shop

Rapid development of mobile communications led to development of many related businesses. Sale of cell phones is one of them and it is still attractive for investors. But is it a profitable business nowadays? We will try to find this out on the example of Tashkent.

Cell phone market in Tashkent

Before describing business procedures, several words should be said about the market. Cellar phone market has been rapidly growing for the last years. Several million phones are being sold annually.

When talking about market peculiarities, it should be noted that the absolute majority of cellar phones in Uzbekistan are sold at specialized domestic appliances markets such as former “shopping street” on Navoi St. (The Fair). This fair has now been moved to the Fleshka mall situated at the place of former Malika factory. Cell phones are also sold at large Tashkent markets such as Urikzor, Chilanzar Clothing Market (Tashkent hippodrome), and Yangiobod.

Historically it happened so that separate cell phones shops in Uzbekistan are not popular. That is why there is only one brand-name shop in Tashkent where Nokia phones are sold. Domestic customers prefer to buy phones and accessories at specialized markets such as Urikzor as the prices are lower and variety is wider there.

Required capital value

Let’s come back to cell phone shops. As we could find out from talks with market participants and experts, you need at least 50 million Soums of initial capital to open a shop in Tashkent. If you want to sell phones at any larger market (bazaar), the required sum is considerably lower but this will be not a shop but an outlet.

Business plan

What should be taken into consideration when opening a mobile phones shop?

If you have finally decided to open the shop in four years, the first thing you should do is to write a business plan, including financial plan (primary expenses, income, payback forecast, etc.), where all business development steps are clearly outlined. Goods supplier, payment conditions, staff size and so on should be also indicated.

Place, variety, and prices

What is the most important thing about this business?

Experience shows that there are two main conditions of success in this business. These are:

1. Right place. You should choose right place for the shop, a crowded one and with good flow of traffic. It could be near metro station. Moreover, youll need money for renovation and shop equipment. Decent repair will require a lot of money (according to our experts, from 5 to 10 million Soums).

2. Price and variety. As you know, customers always pay primary attention to price. If the price is much higher than at wholesale market, you can forget about business development.

Variety is very important too. If you want to sell phones only produced by one manufacturer, you can hardly get decent return. That is why it is advised to sell phones from leading manufacturers such as Nokia, Samsung, LG, SonyEricsson, HTC, Apple and so on. The issue here is how you can arrange this variety because usually large manufacturers dont work with small shops.

Execution of documents

If you have made decision about the place, next step is execution of documents and permission receipt. First of all you should register a legal person (a company). Moreover, you need to receive the following documents for the rented place:

1. Permission from institutions of local government

2. Permission from sanitary-epidemiological station of the region

3. Permission from fire inspection

4. Record the shop in the tax office.

Competitive advantages of the shop

You should also decide the shop positioning. As it is clear that you wont be able to compete with prices at markets, your competitive advantages should be additional services and phone warranty.

The strong point is additional services to clients. You can arrange mobile network subscription (you need contract local mobile operators) and open payment office Paynet. The client who has just bought a cell phone in your shop can connect to the network right away and put money on mobile account.

Another option is the sale of cell phone accessories. If its appropriately arranged, it can be quite profitable.

Additional expenses

Which additional expenses does a cell phones shop impose, except for rental payments? The most important ones are as follows:

1. Computer – 1 million Soums

2. Scanner 150 thousand Soums

3. Telephone and Internet 100 thousand Soums

4. Furniture and shop equipment 3-5 million Soums

5. Cash register 600 thousand Soums

6. Guise 1 million Soums

7. Safe 5 million Soums

8. Alarm system 3 million Soums

Moreover, you need additional funds for wages payment to the staff of at least two people: accountant and shop-assistant.

Wholesale markets

Taking into consideration market peculiarities you can also start commerce on wholesale markets where the majority of cell phones is sold in Uzbekistan. For instance, at Fleshka mall. The only option in this case is to rent a place of 2 to 3 m that costs about 2 million Soums. On other markets the price can be lower or higher.

In order to pay the rent your shop should have a good variety of phones, at least 30 phone models from different manufacturers. You also have to make a deal with wholesalers for the purchase of goods for cash. No one sells mobile phones on account in Uzbekistan. The turnover should be at least 10 million Soums and more if you want to sell smartphones or communicators.

Repair of defected phones

As phone sellers suggest, additionally youve got to undertake repair or replacement of defected phones. Sellers in Tashkent usually give a month warranty on all sold devices.

You should also take into account current cell phone charges, wages to staff, expenses for lunch, goods transportation and other representation expenses that may appear.

If you choose to open a shop in one of Tashkent larger markets, as a seller you can purchase goods from wholesalers in small batches. In other words there is no need to go anywhere yourself to buy phones. But if you open a specialized shop somewhere in town, youve got to purchase goods from intermediary firm by transfer which considerably affects cell phones price.

According to our experts, business profitability at malls is not so high. Price markup is from 3 to 10% depending on phone model and market situation. In this case only rapid turnover of invested money can bring benefit from the business.

As you can see, everything depends on your abilities and persistence in achieving the goals, just as in any other business.

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