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In Russia, the E-Commerce Future Has to Wait
May 30, 2000 11:20 AM
By Vladimir Teslenko
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By Vladimir Teslenko
Russia is the largest country in the world, covering seven time zones. According to a poll by the firm Komkon, as of the first quarter of 2000 there were about 26 million private and corporate users of the internet in Russia — that means about two percent of the population. Moscow led the nation, with about 10 percent of its citizens over ten years old claiming to use the internet.
According the Rose agency, about half of all Moscovites use the internet free of charge by exploiting office computers (for example, during the boss’ absence or dinner-time) and 30 percent of all users borrow the hardware of their friends. In reality, PCs and the internet are beyond the budget for a mass market.
Corporate Connections
In general, the main goals of internet use are information searches and e-mail communication. The most popular sites are educational, professional, world news and then chat and entertainment. The diamond and jewelry industries have about 50 sites of general interest.
The most advanced internet users are corporations, for example, ALROSA, which must stay connected to branches from Yakutsk in the East to New York in the West and from Archangelsk in the North to Luanda (Angola) in the South. For more information on the company’s site, see www.alrosa-msk.ru.
Active users also include diamond manufacturing joint ventures like Lev Leviev’s cutting factory Ruis Diamonds, which is a part of the parent firm L.L.D.
The general director of Ruis Diamonds (www.diamonds.ru), Valiry Morozov, said his firm uses the internet only for inside business. Russian cutting factory Smolensk Kristall is also developing a web presence, in order to tie together several offices in Moscow, Tel Aviv, New York, etc. (www.kristllsmolensk.com).
Jewelry firms also use corporate networks for communications between partners or within a group. For example Moscow holding company Grace uses the Yuvelir-2000 to connect with jewelry manufacturers and provincial shops from Vladivostok on the Pacific to Kalingrad in the Baltics. Yuvelir-2000 was developed by the Moscow firm Chester (www.chestermsk.ru). The system allows on-line information exchange about retail sales in every store. The head office can thereby control unit sales and plan inventory levels.
Information Resources
The second purpose for the Russian jewelry internet is information collection. The primary resources are foreign internet sources like Gemkey and www.diamonds.net as well as Russian news agencies (ITAR-TASS, Interfax) and Russian newspapers, both central and local.
More advanced is the Russian Jewelry Net, developed by
the Moscow Jewelry Group (www.jewellernet.ru). Partners are the Russian information agency Interfax and the U.S. internet server, GemKey. During Basel 2000, the president of the Moscow Jewelry Group, Igor Danilov, told RDR that he anticipates more interest from international business and trade publications.
Competing in that market is www.jeweller.ru. But this site seems to be having trouble providing fresh content, and is for now operating mainly as a chat room. An internet virtual jewelry exhibition, a private project of Moscow jeweler Andre Borodkin, is at www.juvelirnet.ru.
In the diamond field, the Diamond Chamber offers www.diamond-chamber.ru with special information from Yakutian local sources. De Beers and its Moscow partner Soglasiye are creating www.almaznimir.za, but details are unavailable.
Gemological information is presented at www.gemology.ru created by the Gemological Center at Moscow State University.
No B2B
The executive director of the Russian Association of Diamond Manufacturers, Ararat Evoian, said he had doubts about internet use for rough or polished diamond trading. Almazjuvelirexport has no current plans to use the internet, said the head of the information department, Margarita Pashina. Jewelry wholesaler Sergei Alkhasov, general director of Mosexpo, is generally skeptical about B2B (business to business) internet use in jewelry manufacturing. Some design or computer firms have offered to create B2B systems — for example Moscow firm Intureklamadesign offered such an idea to ALROSA — but this has not yet resulted in any real business.
Many Russian jewelers are aware of successful e-commerce ventures in the West, especially in the U.S. They see the Russian internet trade developing for goods like books, audio and video cassettes, CDs, and sport accessories, but no jewelry.
Moscow firms also still harbor some negative impressions due to their experience with TV commerce during 1995-1999. A few times, couriers delivering very expensive jewelry met with aggressive behavior from clients, who turned out to be representatives of the local mafia.
In general, Moscow experts are skeptical about B2C (business to consumer) business for several reasons. The first is that there are too few net users in Russia, and only a small percentage of them have credit cards. In general, the country’s banking service is not developed enough to support wide use of the internet. By far the most popular method of payment is cash. Then there are privacy fears. Russians prefer to visit a jewelry shop anonymously, try on the jewelry and then spend the cash.
Additionally, people know that for a year after purchase, shops will accept returns of defective pieces, and the customer knows where to find the shop.
Security is another big concern. Local newspapers often feature internet crime stories, the most recent of which was 22-year-old Mr. Levitin, who, with a few hacker friends, succeeded in exploiting 5,400 credit cards before his arrest. Another recent case described in the press was that of the American Mr. Kroll, who created a website in Moscow to sell knock-offs of branded jewelry.
Real internet enterprises have found it difficult to get off the ground. The Moscow firm Sapfir, assisted by the Online System Group, started an e-commerce site, which, according to software designer Andrei Milovanov, was receiving about 20 to 30 hits a month. The board of directors recently killed the project, perhaps because of financial problems. Then there was the www.mags.ru effort to create a jewelry department store; the parties have been as yet unable to come to an agreement.
Overall, Russia is a cold climate for the internet. Russian diamantaires accept it as a medium for information that they need to stay competitive, but they have yet to find a way to transform information into sales.
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Tags:
Alrosa, Angola, De Beers, Interfax, Jewelry, Leviev, Manufacturing, Russia
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