Embed Size (px)
DESCRIPTION
First of all, I would like to thank organizers of the RBCC and LOVELLS Company seminar for an opportunity to deliver this speech and comment on the development of e-commerce in Russia before such a dignified audience. I will start my report with informing you about the current situation in online shops, those that are engaged in Internet trade only (so called “pure” Internet shops) and those that are controlled by off-line companies (or multi-channel shops). All examples will concern Russia only. I will comment on parameters typical for such shops and their outlooks for the near future (a year or two). Later in my speech I will pay attention to problems typical to all online shops on the Russian Internet. Then I will comment on application software preferred by online shops. At the end of my speech, I will draw the conclusions. So, let’s consider the state of e-commerce in Russia In fact, there is no e-commerce in Russia in the true sense of this word because an activity, which brings no profit, cannot be called “commerce”. If we consider pure online shops (I mean shops that exist only in the cyber space), we can characterize their activities by the following proportion 50x5x0.5 (thousands of US dollars) 50 – means expenditures necessary for maintaining an online shop for a month; 5 – means a monthly turnover of a pure Internet shop; 0.5 – means revenues an online shop gets per month These figures testify that there is no profit in Internet shops or it is negative. The above proportion is true for typical pure Internet shop. If we consider the largest of them, every figure in the proportion should be multiplied by about 3. As a result, we will have the following proportion: 150:15:1.5 If we consider the situation in a small Internet shop, we will have to divide the first proportion 2 but not more. Otherwise, they will have no money to pay salaries to their personnel. If we consider activities of an Internet shop engaged in another offline business (for instance, department store), the proportion would be reversed (as compared to the first one) 0.5x 5x 50 In this proportion, 0.5 would mean a 0.5% rise in trade turnover of the off-line company that controls the Internet shop, 5 mean a small amount of orders in the shop per day. Customers of traditional shops do not like purchasing things without trying them on, therefore the trade volume of online clothes shops is not high. 50 means the total number of employees in the offline company who are working on the Internet project. The above proportion, which characterizes multi-channel shops in Russia, seems to be more preferable for Internet trade. Therefore, if a company has a brand name and a necessary infrastructure typical for a traditional shop, the risk of suffering losses while opening an Internet shop is much smaller. E-commerce projects for such Russian companies will face a rapid development in the near future. The Internet project of GUM, a famous Russian mall located in front of the Kremlin, is an example of a successful online shop Not long ago we announced that 15 large Russian department stores from different Russian cities made a decision to join the GUM Internet project. The solution for GUM, elaborated on by RosBusinessConsulting, will be applied to other department stores. A special department will be engaged in managing the new GUM-ARU project, and LOVELLS is working on necessary formation documents. They will be ready by the beginning of December. A few words about ARU. In every big Russian city there is department store # 1. The shop #1 usually is the best. All shops #1 are members of the Association of Russian Department Stores (see the map). Apart from the common goals of an Internet portal, the founders of the new structure will raise the efficiency of offline enterprises through better interaction with the suppliers, novel information technologies, and additional who
Citation preview
Lovells/RBCC Seminar London, 7, November, 2000
1
Russian e-business in practice:lessons from experience
Timur AITOV, CEO, GUM-Internet, Moscow
Lovells/RBCC Seminar London, 7, November, 2000
2
Contents
Pure online shops Multi-channel (“click-and-mortar”)
shops Common problems and perspectives Applications for online shops Conclusions
Lovells/RBCC Seminar London, 7, November, 2000
3
Pure online shops : 50x5x0,5
Here : 50K – maintaining a shop per a month 5K – monthly turnover 0,5K – revenues per month
Variant for “Russian Amazon”:
150:15:1,5
Lovells/RBCC Seminar London, 7, November, 2000
4
Click-and-mortar : 0,5x5x50
Here : 0,5% - means rise in turnover of
“mother” company 5 – number of orders per day 50 - employees working on project
Lovells/RBCC Seminar London, 7, November, 2000
5
New! GUM-ARU Project
GUM-Internet and 15 Best Russian Department Stores,
members of ARU, with a help from Lovells (as a law firm) and Terra MediaLink Company …
Setting up New Company!
Lovells/RBCC Seminar London, 7, November, 2000
6
Association of Russian Departments Stores (ARU)
Lovells/RBCC Seminar London, 7, November, 2000
7
Net can support existing Brick-and-mortar business:
Presenting information on goods and on possibilities to reserve them
Presenting information on location of the shop and parking near it
Support special marketing programs Raising efficiency and quality of services
for online kiosks Using new methods of deliveries, etc.
To rise the capitalization!
Lovells/RBCC Seminar London, 7, November, 2000
8
Poor, pure Internet shop…
REVENUES must .GT. EXPENDITURES, so PURCHASES should go up 100 times!
There are 500-1000 online shops,
In a year this number drops to 10!
Russian Market will have a correlation:
3:70%
Lovells/RBCC Seminar London, 7, November, 2000
9
I don’t believe in …
Russians still believe well-known western brands !
Lovells/RBCC Seminar London, 7, November, 2000
10
Important problems:
Quality of goods:Internet shop is not so strictly controlled by fiscal agencies
The legislation base concerning Internet shops is underdeveloped.
Non-cash payments: in the existing system, both a client and a merchant are not secured enough.
The R-department: all banks-acquirers for e-commerce should create their own departments on e-security as soon as possible.
Lovells/RBCC Seminar London, 7, November, 2000
11
Applications for online shops
We have entry-level web-storefronts or
single Store Solutions Applications do not support 10 000 purchases per day We need customized, integrated Solutions with open
architecture INTERSHOP, FirePond, IBM WebSphere are good,
but:
Localization ?Implementation service?Education?Support , etc.
Lovells/RBCC Seminar London, 7, November, 2000
12
Conclusion #1
The Russian Internet is developing as a source of mass media and entertainment. There are several successful projects on selling information on the Internet, such as RosBusinessConsulting. However, there are few successful projects.
E-commerce in Russia is in an embryo stage so far.
Lovells/RBCC Seminar London, 7, November, 2000
13
Conclusion #2
Multi-channel Internet shops will continue their development. However, no competition should be expected among them, as the volume of trade will remain low on average.
Lovells/RBCC Seminar London, 7, November, 2000
14
Conclusion #3
Multi-channel Internet shops are not a good target for investments as all profits go to the company which controls the shop. At the same time, promising trading sites like B2B will be created on the basis of large unions of multi-channel Internet shops
Lovells/RBCC Seminar London, 7, November, 2000
15
Conclusion #4
Pure Internet shops are still ineffective. In a about year or a year and a half there will be only about ten of them left on the market. These strongest Internet shops will control the market and make profits.
The task of pure Internet shops right now is to survive during a necessary period of time.
Lovells/RBCC Seminar London, 7, November, 2000
16
Conclusion # 5
A struggle between software developers for B2B projects will start on the Russian market soon
Lovells/RBCC Seminar London, 7, November, 2000
17
About the author: Timur AITOV, PhD, (Physics and Mathematics), CEO
GUM-Internet, LLC. Prior to joining GUMinternet.com Timur has
developed and managed Computer Technology Center (an IT-department of Trade House GUM). He was responsible for hardware and software in the largest trade center of Russia during 7 years (from 1993 till 1999). Before 1993 he was a head of the “Securities Department of JSC TD GUM”.
