Sci & Tech

Why Cellphone Traders Fear Iran Deal

Why Cellphone Traders  Fear Iran DealWhy Cellphone Traders  Fear Iran Deal

Alaeddin Shopping Mall on Tehran's Jomhouri and Hafez intersection has been the hub of independent mobile phone retailers in the capital city for the past 20 years.

Each floor of this warren-like building is packed with small businesses selling all sorts of phones and accessories.

Distributors and salespeople at this mall sell phones in small numbers and buy their stock off phone dealers. They are also well known for not offering warranties, as many of the phones are imported through grey channels.  

Phones are bought in Persian Gulf littoral countries and brought in via sea or Iraq, avoiding to pay their share of the income tax.

  The Poor Reputation of Alaeddin

Retailers like these have also been described as "charlatans who will try to catch you out" by one tech enthusiast, Mohammad Imani. One female reporter said she is actually putting off buying a new phone, adding, "I've developed a phobia of buying new phones from so many bad experiences."

The poor reputation of Alaeddin comes from 20 years of bad reviews from underhand tactics used by traders operating there. Buying a mobile phone in Tehran has been a battle of wills and wallets, too. These traders, having saved money buying their phones and covering the black market track, have also got quite a reputation for fiddling with end products, according to one disgruntled customer—opening new phone boxes and pilfering accessories before selling it is standard practice.

Whether urban rumor or reality, most traders here have historically been on the wrong side of the consumers and Tehran Municipality.

Alaeddin's building safety also became a serious issue in recent years, as its owners attempted to work around construction regulations and added extra retail space on the roof and in the basement. The seventh floor of the building was demolished by the municipality and the owner was fined for the illegal construction. One possible reason these traders have been able to get away with it for so long is that there has been no accountability or oversight by authorities in the mobile phone industry. Iranians can recall at least one occasion in the past where they, or someone they know, has been hoodwinked by one of these "cowboy operators".

  Multinationals Move In

However, in recent years, as multinational corporations began to acknowledge the Iranian consumer–South Korea's Samsung and LG to be specific—competition has increased to the detriment of these independent traders.

The international producers have offered after-sales services and 12-month warranties, something unheard of before.

Unfortunately, as Samsung sells many of its phones in Iran, some of its products are still being resold by independent retailers at cheaper prices of around 15% off, without warranties, either bought in bulk from some grey importer or channels like Iran's Kurdestan town of Baneh, a major source of such electronics.

Now that the doors to this country of just under 80 million opens wider after 30 years, the country is now faced with the prospect of not only Korean electronics manufacturers being present but the holy grail of electronics–Apple, in some guise.

The Verge recently said the Cupertino company is now "officially looking for a local partner". Some local sources say they already have a partner.

The news of Apple entering the market, albeit tentatively with a third-party distributor, would spell the end of independent retailers selling their products. At present, there is no "official" retailer or repair shop, with many people still forced to deal with unscrupulous independent dealers.

  Iran Mobile Center & Charsou Bazaar

Charsou Bazaar, Iran's most luxurious mobile phone marketplace, opened earlier this year. Designed by a leading local architectural firm and backed up with one of the country's premier design studios, it has attempted to combine the traditional independent merchant on the upper floors with flagship international stores on the ground floor.

Iran Mobile Center further down Hafez Street, built some eight years ago to great fanfare, was also a challenger to Alaeddin's dominance of cellphones. However, since Charsou opened, a clear percentage of their footfall has now moved to the newer center. The center continues to have flagship stores but now acts as a middle actor between Charsou and Alaeddin.

Companies like Samsung, LG and HTC have all opted for flagship stores in both Iran Mobile Center and Charsou, with supporting stores on upper levels. What this does is now attract the consumer to buy from the larger official stores.

As more international electronics companies are expected to reenter the market and some newer ones open their stores for the first time, the activities of independent dealers will suffer the fate of their bad business practices.

As with other markets, customers are likely to vote with their feet, with independent dealers' share of the mobile phone market diminishing in the years ahead.

Or as Mohammad Imani, the tech enthusiast, says, "I am done with dealers. Now that Charsou is open, I will never go back to that shopping center."