Technology & innovation | Retail, FMCG

Ready for ‘future shopping’ with Rusnano? Don’t leave your cell phone behind!

28 May '12
Oleg Kouzbit, Online News Managing Editor

National nanotech flagship Rusnano is bringing RFID technology into Russia’s cash-enamored retail. In its new $11m Store of the Future concept co-developed with one of this country’s largest retail firms, X5 Retail Group, and Sitronics, the CIS’ largest RFID card and tag maker, three pilot RFID-tagged outlets are slated for opening in 2014 in Moscow, the Tomsk region (Siberia) and Tatarstan (the Volga area). They will display virtual show windows, enable shoppers to pay with mobile gadgets instead of wallets, and are even expected to prevent petty larceny by a pay desk. Unlike the upbeat nano-giant, retailers and experts are not so sanguine about the project, citing current technological snags, the infancy of domestic mobile banking, and the Russians’ overall preference for cash.

To check out the concept of a technology-packed shop the Rusnano-led project consortium has announced plans to launch a test version of Store of the Future in X5 Retail Group’s Moscow-based office in the summer of 2013 already. According to plan, for a year, only employees and X5 clients will be able to enjoy the novelty, and in 2014 the outlet will be open for everybody.

What Rusnano and its partners are shooting for is enabling customers to shop all on their own, without having to rely on sales staff and cashiers, thus helping store managers reduce personnel and speeding up service along the way.

The new concept is built around an idea of creating a smart outlet all RFID-tagged for contactless data reading. The developers say the system will be ‘taught’ to monitor how goods are sold, and automatically replenish off-the-shelf supplies.

Traditional pay desk lines will be replaced by special frames reading chip data. According to the consortium, with a cost of $0.1 per chip plus other equipment the Store of the Future effort will require an estimated $11m.

For hard-to-tag goods, such as foil-wrapped vendibles or aluminum cans, Rusnano suggests that special vending machines be placed inside a sales area and behind the prospective ‘pay desk’ frames. These very machines will also insure against petty larceny currently widespread by pay desks, the project partners hope.

Some of the show windows in such ‘futuristic’ stores will be virtual and bearing QR (Quick Response) codes of goods to be read by shoppers’ mobile handsets. Brand new for Russia, the technology is already part of daily life in countries like Australia and enables purchases by simply pointing one’s cell phone at a QR code.

For their RFID-focused Store of the Future the project developers also reportedly envision an online version.

RFID (abbr. Radio Frequency IDentification) is a data transmission technique that uses radio waves. RFID tags, the core of any such system, contain information that identifies an object, pinpoints its whereabouts or describes its status. To retrieve this information special readers are used.

The partners in ‘retail of the future’

The main driver behind the endeavor, nanotech company Rusnano, was set up in 2007 and is now 100% owned by the Russian Federation. It has supported more than 130 nanoprojects with a total worth of $17.5bn over the past four years, Rusnano’s official website says.

X5 Retail Group N.V. has been in Russia’s vast retail FMCG business for six years now. It had sales of more than $11bn last year, according to the firm. As of September, 2011 the group ran a reported 2,785 outlets in Moscow, St. Petersburg and across the European part of Russia as well as 29 distribution hubs throughout this country. Its most known brands are Pyatyorochka, Perekrestok and Karusel.

The CIS’ largest RFID card and tag maker, Sitronics is also an Eastern European major in telecom solutions, IT, systems integration, microelectronics and business consulting. A company with a reported 3,500 corporate client base, Sitronics has rep offices in 30 countries and exports to 62 countries.

For Sitronics, Store of the Future is yet another in a series of RFID-related projects. Two months ago the company undertook to bring RFID technology into domestic agriculture in an effort to help federal authorities take stock of Russian cattle.

Probing into regions

According to Rusnano, the Store of the Future project will be also taken to the Republic of Tatarstan, the mid-Volga area, and Siberia’s Tomsk region. Exact locations will be reportedly negotiated by the end of this year, and the sophisticated outlets will be launched in 2014.

The regions have been primarily chosen for their proven technology innovation drive, Rusnano says. In Tatarstan alone, a reported 85% of the population has access to 3G mobile services—a factor that the Store of the Future developers believe will smooth the progress of the new RFID effort there.

Rusnano also notes that these regions’ administrations and local business partners are cooperative and willing to try.

The cart before the horse?

Russia’s nanotech giant is upbeat and airs confidence that in two years’ time using mobile phones as next gen ‘wallets’ will be standard for the Russians. Experts—and even X5 managers involved in the project—are less buoyant.

The retailers emphasize that goods wrapped in foil as well as aluminum cans are still hardly RFID-taggable and therefore provide a problem.

Bankers warn that fine-tuning technology is not enough to make the project successful. Changing the Russian populations’ entrenched habits is the much tougher challenge. Most people here still prefer cash even to bank cards, not to mention payment by gadgets like phones.

Mobile banking is still exotics in Russia. Marina Treshchova, the CEO of business accelerator Fast Lane Ventures, told Marchmont last week that Russian people “…cannot enjoy the lion’s share of services and products that have been par for the course in the West for years, such as banking, e-commence, delivery of goods, e-pays, etc.”

As Svyaznoy Bank vice-president Yevgeny Davydovich put it, “…there’s a certain segment of customers ready to embrace the new service, but it won’t be a business until millions of people want it.”
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