Back to simple features.

Russian handset retailers are cutting top-end phone handset prices by nearly 20%, as disposable incomes evaporate among youthful shoppers and generous promotional instalment plans are abruptly curtailed.

Consumers had been used to frequent upgrades of handsets, with so-called "smart phones" popular among young people, who viewed them as status symbols.

The mass market has now turned to thrift over expensive features, amid the economic downturn.

Average smart phone prices have fallen to around US$340, breaking with the trend for young consumers to replace their phones with upmarket iPhones or the latest Nokia models.

First quarter 2009 figures indicate cumulative sales of smart phones at around 800,000 units and valued at US$280 million, or a 9% volume increase, but with sales worth 12% less than at the same time last year.

The top-priced products are commonly substituted for less expensive but still multi-featured devices that flatter the owner's sense of prestige.

An instructive example is shown by Apple's 3G iPhones, which were introduced to the Russian market in October 2008, as the economic crisis began to grip Russia's three major mobile operators.

Now, original prices of these phones have been cut by up to 15% - partially due to the limited distribution of related iMac computers, with only top level marketing of iMac and iPhone download features, such as music and promotional video.

By contrast, the market for more conventional mobile phones may not see drastically lower sales figures; just 5.5 million such phones were sold in Russia in the first three months of 2009, with average prices dropping 10%, to some US$150 per unit.

Besides the economic "reality check", the new trend towards simpler, less enriched handsets could be down to a reality of another kind: many consumers realise that they make use of less than 80% of their handset features. They're now more concerned with just voice calls, recording and SMS features.

In this respect, private label mobile phones distributed by major operators or offered by principal nation-wide consumer electronic chains are very likely to enjoy better demand in Russia.

One mobile phone market expert was asked about his vision of a bestselling mobile phone for the country; he replied that the ideal kit would consist of a long life battery, two sim cards, a stylish case and a price below US$50.

Hong Kong suppliers should bear the advice in mind when considering exporting or investing in the Russian mobile handset market.

from Leonid Orlov, Moscow Consultant