Moscow may dominate the computer business in almost ever major city in Russia but in St. Petersburg the influence of the capital city is minimal.


Local buyers, sellers and dealers not only outsell Moscow's largest companies -- they even actively combine to keep them out of the market.


The extent to which large Moscow companies have failed to penetrate the computer market in St. Petersburg is extraordinary. It is usual for the major international computer vendors to appoint a handful of Russian distributors to sell their products through a network of dealers across the country.


Yet almost without exception these Western vendors have had to appoint a special distributor for the St. Petersburg city and region. Moreover, the largest of them -- like IBM, Hewlett-Packard and Digital Equipment Corp. -- have even opened their own offices there in order to try to serve the market better.


In 1994 Moscow's largest distributors of imported computers and peripherals, Steepler and RSI, both recorded sales in excess of $100 million; yet neither managed to make much of an impact in St. Petersburg. Other big names in Moscow like CompuLink and Kami are apparently completely absent from the market in Russia's second city.


A common charge by Moscow companies is that they sell little in St. Petersburg because of the size of the gray market there. (The gray market is products sold by nonauthorized distributors). However gray markets exist only when there is some kind of market distortion at work.


When a Western firm's Moscow office proves too remote for the market in St. Petersburg, dealers buying from Finland, Germany or Austria often step in. Companies selling large amounts through unofficial channels rarely stay unofficial for long. Moscow distributors are simply feeling the effects of a widening breach between the two cities'markets.


In the local assembly sector in St. Petersburg the situation is the same. The city is large enough to have its own home-grown assembly firms which have effectively beaten off most Moscow competition. None of Moscow's big name assembly companies have made much of an impact in St. Petersburg.


The situation also works in reverse. There have been no examples of a major Western computer vendor successfully establishing its sole Russian operation in St. Petersburg.


The reasons for St. Petersburg's unique position are partly due to the particular attitude its people have towards the Russian capital. All dealers mention the civic pride of St. Petersburg customers who prefer to buy from local companies. Director of St. Petersburg-based computer assembly firm Eureca, Alexei Nikolaev, says when a Moscow company does try to enter the city market, local companies put existing rivalries to one side in order to drive them out.


Also unique about St. Petersburg is its proximity to Finland. The tiny country has now become a huge warehouse for exporters to Russia. Since it is possible to do a round trip to Finland in half a day from St. Petersburg, companies in the city can deliver faster and at lower prices than anyone from Moscow.


An indication of just how important Finnish suppliers to St. Petersburg have become is the opening this summer of a Computer 2000 warehouse in Finland -- just a few minutes away from the Russian border. Computer 2000 is a large, German-owned computer wholesaler which has cut itself a large slice of several European markets with a combination of low prices and fast delivery.


Its new Finnish warehouse is to all intents and purposes a massive duty free computer shop for Russian computer dealers. Computer 2000 Finland is offering dealers one-day delivery and one-day payment terms. Although only opened recently, its influence is already being felt in the local market.





Robert Farish is the editor of Computer Business Russia fax: 198-6207, Internet e-mail: farish@glas.apc.org