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17 Sep, 2007 03:59

Electronic music - with a difference

Russia’s small and medium-sized businesses are always looking for specialized niches where they can get ahead of competitors. The latest idea is locating vending machines, which make it easier to buy music and films, around the Russian capital.

Multimedia retailer, Nastroyenie, has an ingenious idea. It wants to start selling music and films through vending machines, a segment of the market that its management says is poised to grow.

“Our research shows that, in addition to higher sales of multimedia products such as CDs and DVDs, Russia will also experience an increase in sales through vending machines. This sector is something that’s not as well developed here as it is in Europe,” said Evgeny Kobzar, Director of Nastroyenie in Moscow.

The company has already sealed a partnership with Sedmoy Kontinent, one of Russia’s largest supermarket chains. It plans to have up to 350 vending machines in Moscow, its test market, by the end of the year. Analysts like the idea, but say location will be the key to success.

“Considering that most Russian consumers are not used to buying products through vending machines, it’s important to introduce them in places with a lot of traffic, like metro stations for example,” said Maksim Isayev, analyst at Rye, Man and Gor securities.

It looks like Nastroyenie’s timing is just right. Last year, street vendors selling mostly pirated products accounted for two-thirds of all DVD sales in Russia, but the new legislation, effective since March,  has prohibited street sales, opening the door of  opportunity for vending retailers.

“Each vending machine starts turning a profit in less than a year. That's a lot better than other investments, and it has a lot of potential, especially in light of the fact that there are hardly any competitors on the market,” added Evgeny Kobzar.

Films and music sold through vending machines will be around 30% cheaper than in specialized stores. What's more, the company says it will sell licensed products only.