When I first heard the recent buzz around e-commerce in Russia, it sounded like a cruel joke, a modern version of Mary Antoinette's 'Let them eat cake'. Indeed, those of us who have worked in Russia often don't take kindly to newcomers. They don't understand how different Russia is. Yet experiences there can tell us a lot about how fundamental economics work under different conditions - in Russia and on the internet. This means that e-commerce is not just sugar-filled cake; it is commerce made more efficient. It's all about what Russia needs: openness, transparency, competition and communication.
I have just returned from a week following up on two companies I am advising and investing in. What is actually happening? Foreign groups have invested in a number of local portals and web start-ups and Russia's oil and media tycoons are also snooping around, some to raise money, others to invest now and sell later. But a web site or an e-commerce operation is just like an oil company: it won't generate profits unless it is well managed.
The best way that the oligarchs can use e-commerce is to run their existing businesses more efficiently.
Take Rambler, one of Russia's leading portals (www.rambler.ru), whose advisory board I've just joined. One of the first things we did was to talk with Moscow's Center for Business Skills Development, to make sure our people are trained for the challenges ahead. Our job is not to pick winners, but to build winners - especially in Russia, where the overall level of commercial expertise is low; no-one is going to succeed without lots of help from outside.
But not all western experience is relevant. For example, with Rambler I went to see a couple of advertising agencies about brand-building. Television seems the obvious answer, but one advised that trying to reach just 2 million regular users of Russia's net through a mass medium might not be the best use of resources. Indeed, the problem in Russia is not that consumers are poor but that producers are unproductive. Unproductive workers lead to low-salaried consumers. Whereas in the West the net empowers consumers to make better use of their easy money, in Russia its value is more basic.
Rambler and its competitors won't do well until they can help make Russian industry and employees more productive; that's why it will surround its consumer services with a set of more business-oriented projects.
In that respect, one of the current winners is an affiliate of my second investment, IBS, called depo.ru, which did about dollars 500,000 in sales in March - probably accounting for half of Russian e-commerce. This is not because it's the world's greatest web site but because it's a well-run business. It has the products it advertises in stock, knows how to configure and instal them and it can deliver within hours. Most orders generated from the site are accompanied by phone or fax enquiries, but repeat orders should start to come in electronically. Then, instead of printing catalogues that quickly date, depo.ru can update its web site in real-time. In short, it is a real business using the net to run its business better. The moral is clear, for Russia and elsewhere: the value of e-commerce is not in the 'e' but in the commerce.
Esther Dyson will be chairing the UK Internet Summit 2000, organised by Management Today, the New Statesman and WPP on Wednesday 11 October.
For details contact Hugo Tagholm: firstname.lastname@example.org.