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

1. Russian e-business in practice: lessons from experience Timur AITOV, CEO, GUM-Internet, Moscow

6. Association of Russian Departments Stores (ARU)