Coffee revolution: In June, Kyiv authorities threatened to shut down mobile coffee shops, a burgeoning micro-business across Ukraine. The owners protested against this at the Kyiv City Administration
It’s a row of pale, dirty-colored little shops with various contents: some selling dishes, some selling kids’ toys, some popular “Everything for 10 hryvnias,” some selling produce. Kiosks. Officially known as MAFs, meaning small architectural formations, we run into them on the streets, in underground passageways, at bus and tram stops, every day, year in and year out. Sometimes they disappear, others come in their place: where you bought flowers yesterday, today they’re selling cigarettes. In another six months, it’s alcohol; a year later it’s clothing.
The lives of these micro-merchants are not easy. Too many of them are barely breaking even or earning marginal profits. Most of them would rather move into a shopping center, but the truth is that they just can’t afford it.
“Courtesy visits” from inspectors
A tram stop in Left Bank Kyiv. A cluster of white MAFs nearby. Despite it being the weekend, there are almost no customers, so the sellers huddle together, talking about life as they sip on their coffees. Trying to keep warm. We enter the nearest shop, which sells toys. The shelves hold a wide selection, from matchbox-sized toy cars for kids age 3 and older, to board games and remote-controlled helicopters. A young woman called Viktoria stands behind the counter. She looks about 25. She’s complaining: the power was cut “for two hours” nearly a week ago.
“I would say that lack of electricity is our biggest problem,” Viktoria says, stamping her feet to keep warm. “My terminal doesn’t work so I can’t track sales in our online shop. Not to mention how cold it is. In the fall, you can still more-or-less handle it, but when it’s wintertime, who’s going to be able to stand around at -20C? Half an hour, an hour, max.” Outside, it’s 6C.
“How much do we pay?” Viktoria responds. “Well, the official rate that they tell you is a joke. UAH 500 a month. Of course, there are no such prices. The real rent we pay takes about a week to cover. It depends on luck.” The young woman turns to her latest customer and shows some shiny cars. “Earlier, this shop was at one of the shopping centers not far from here. But the rent is even higher there. Four years ago, when the dollar was worth 8 hryvnias, the same space cost at least UAH 3,000.”
Yet things would have been just fine had the management of the mall not decided they wanted more. “They would suddenly change the terms and conditions of your contract, even though those were not written into the contract that you had signed with them,” says Viktoria. “For instance, I came to work one day to find that the shop had been sealed shut and I can’t get in. We had to call the police and resolve it. In fact, this kind of attitude was one of the reasons why we left the mall and moved to the market.”
Lately, however, there haven’t been any inspections. “But two-three years ago, they loved to pop in unexpectedly,” the young woman explains. “For instance, some young guy, an inspector, comes in and says, without even setting foot into the space, ‘I’m not even going to talk to you for less than UAH 3,000.’ Of course, if everything’s above-board in your business, this kind of ‘inspection’ doesn’t worry you. I have a folder that I keep with me with all the documents, permits and bills so that I can show them and they will go away.
“But sometimes that doesn’t work. Lately, the Pension Fund has been picking on people. Supposedly we didn’t pay our tax for 2012. Or maybe 2011. In that kind of situation, you take all your bank invoices, go to them and twist their noses a bit,” says Viktoria with a quiet smile. “It really was pretty funny: they said that we hadn’t paid our taxes for 2009, but I only registered as an entrepreneur in 2010. On the whole, though, I agree that something has to be done about these kiosks. Especially downtown. They are really pretty hideous, especially in the historical parts of the city. The $64,000 question is what alternatives can be offered so that they can continue to work. Maybe renting space in buildings on the ground floor or something.”
At the entrance to a Metro station, a cluster of ragged plastic booths leans into each other, creating a gauntlet to the subway. Crowds of commuters flow past the burned-out and advertisements. Sometimes someone stops for a couple of minutes to check out a display case, but not thinking for long. Within seconds people are moving on, often without even opening the door to the tiny shops.
We go into one of these MAFs, a large-ish space with dishware on display. At the counter, a woman of about 45 stands, carefully measuring visitors from behind her glasses. She speaks without hurry, occasionally casting a glance at the door.
“To tell you the truth, I don’t like these shops much myself,” says Oksana. “They look absolutely wretched. Too many of them look like that even when they are being set up: ugly, uneven, higher in one place, lower in another, inconsistent colors. You don’t even feel like going to the Metro when you see things like this. But there isn’t much choice these days. I’ve worked here since 2003. I started out with a small shop of my own, and later we expanded.”
“But right now,” she says with a sad look at the shelves, “times are tough. I used to buy goods worth UAH 15,000 at a time. Our bus would come back full of boxes with different kinds of china. Now, there’s only 3-4 boxes. You find yourself looking at them and thinking, where’s my order? You can see for yourself that the shelves are half-empty. People are becoming poor, we are becoming poorer. Earlier, when shoppers came in, you would assess what they were likely to be able to afford and you could propose well-known brands. People bought expensive dinner sets and left satisfied. Now, customers look at the prices, buy a mug for UAH 30 and leave. The more expensive German dinnerware collects dust on the shelves.”
Recently a shopping center opened its doors right next to them. “Some reps dropped by from the center’s management and proposed that we rent space for our shops,” Oksana says, remembering the visit. “I even considered moving there. Who wouldn’t want to? To work in a well-lit, clean place that’s warm, so that you could take your coat off and not freeze. But when I added up the costs, I had to stay here. Right now, I’m paying UAH 200 per sq m, while the mall charges around UAH 400-600 and more. Most of us simply can’t cover this kind of cost. For me to buy product and pay the rent, I need to bring in at least UAH 40,000 a month. Lately, this has become impossible. So we’re working at the expense of purchases.” She turns around and addresses the next customer.
“Visits from inspectors?” Oksana thinks a minute. “It’s quieter these days, but about five years ago, everybody and his monkey’s uncle would drop by. Firemen, the consumer protection union... These last guys were particularly persistent. They arranged inspections and even scandals. Of course, they usually only wanted cash from you. So we had little choice but to ‘resolve the problem.’ Well, you understand where we paid a fine and where we simply cut a deal. Although all our documentation is above-board, as is the rent, and the shop has all the necessary documents.” We say goodbye as another customer walks in.
Settling scores with the MAFs
Nor are such tiny shops spared conflicts with competitors, especially if the retail space is in a competitive location: next to the metro, at bus and tram stops, opposite shopping malls. And if someone decides that they want to set up their own shop on your spot, even permits won’t save the owner.
“Try to put your kiosk at a bus stop?” says Svitlana, repeating the question. “Nope, someone just off the streets can’t do this. You have to have connections.” Svitlana is sitting next to a small heater in her tiny women’s shop. She’s been operating this shop for nearly four years. Before that, she worked in a bank.
“You have to understand that you need lots of permits to put up a kiosk,” Svitlana explains. “Some of them are issued by the district administration, so at the least you have to have good connections there. And a MAF can be good business for someone else.. What’s cheaper—buying an apartment and renting it out or putting up a small shop and rent that out for the same price?” She laughs.
“Everything depends on the spot where you want to work,” Svitlana goes on. “Metro stops and shopping malls are all listed, but rent is high there. Let’s say I pay UAH 3,000 a month for 7 sq m. My friends who sell cheese opposite a shopping mall are paying UAH 10,000. And even so, they were pushed out not long ago...because the mall considered them competitors! The management announced that the kiosk was into their territory by 5 cm and next thing you know the kiosk’s gone. Of course, it came back after a while. I think some money must have crossed hands.” Svitlana glances out the window for potential customers, but they are only looking at the mannequins in her showcase. When we see that no one is planning to come in, the conversation continues.
“According to law, a MAF is supposed to be given two weeks’ notice before being taken down,” Svitlana goes on. “Hard to know if that really happens or not. For instance, there was a guy next to us selling vegetables. He had a kiosk and a small trailer. Then one day, he was taken away. We only know that, come November, there will definitely be some kind of kiosk on that spot.”
Her colleague, Irakliy, works at a roadside café that has taken over Kyiv in the last few years. Irakliy says that it’s hardly reaching for the stars, but it could be considered to be cutting into business from Moscow!
“I’m from the Donbas myself, not far from Artemivsk,” says Irakliy. “At one time, I was going to Moscow to work but this year I decided to try my chances in Kyiv. There are definitely pros: you’re in Ukraine, your passport is in your pocket, and you’re a citizen. And the pay’s about the same. You can make at least UAH 7,000. In Moscow, I had 30,000 rubles.” He pours us some mulled wine and continues to explain.
“When I went through training, I was in a spot near one of the institutes, where were several of these roadway cafés,” Irakliy goes on. “However, one day, someone showed up to inspect us and took everyone away, except me. It appeared that all the ‘neighbors’ were missing the necessary permits to operate there. At that point, I began to take in around UAH 3,000 a day.” Irakliy laughs.
“If it comes right down to it with the kiosks, and cafés, then you have to start with the legal aspect,” he says. “I mean, making them all operate according to law and pay taxes to the budget. To make sure they’re all operating conscientiously. Then comes the question where to put them in the first place.” The young man moves the mulled wine to the side and serves another customer.
“It all depends on the rental rates,” explains Oksana. “Maybe if the shopping centers were run by the cities or the government and not private owners, the cost of retail space would be more reasonable. I think this would probably resolve the issue of junked-up streets. Right now, there is no one answer to this problem.”