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Virtual Possibilities of Jewellery Market

17 july 2017

dmitri_zamyshlyaev_xx.jpgOnline jewellery trading in Russia – since it started boosting and becoming more popular among the consumers - is of keen interest among the market players and is a topical issue. Dmitry Zamyshlyaev, Deputy Head of the Federal State Enterprise ‘Assay Chamber of Russia’ on financial monitoring and governmental control over imports and exports of precious metals and special registering, under the Ministry of Finance of the RF, answered the R&P questions.

How successfully is the jewellery online trading developing?

Today, there is rather a big number of online shops offering their jewellery, including that by major manufacturers. For example, as of Q1 2017, about one thousand individual entrepreneurs and legal entities involved in distance selling of jewellery are in the special registry, while entrepreneurs and legal entities doing their retail transactions in brick and mortar stores make about 20 000, and those having separate subdivisions (branches and representations, etc.) total 80 000.

Lately, the government has taken some steps to stimulate the development of the e-commerce, namely: new jewellery samples have been introduced, which allowed the beginning of the competition with the foreign manufacturers in new market segments both in the country and abroad; the mandatory requirement to have an armed guard during the jewellery transportation was cancelled, which enabled the entrepreneurs to optimize their costs based on their own understanding of their risks; the threshold level for the identification of retail jewellery customers was introduced, which facilitated the online trading in compliance with the legislation requirements.

At the same time, many jewellery manufacturers and sellers complain that some laws and regulations only restrict and hamper the Internet-trading.

This is true, we understand this, that is why we propose to use the Public Expert Council at the Federal Government institution ‘Chamber of Assay of Russia’ that is the second one on the law-related issues so that a unified position could be worked out on the measures to be taken for the promotion of the jewellery e-tail in our country.

Some experts believe that the bans imposed on the jewellery online trading turned out to be not very effective. What is the reason?

Probably, the reason is the imperfection of the existing legislation and the incomplete understanding of the possibilities and effects of the Internet-environment due to its insufficient maturity in Russia. Actually, the only tool to crackdown on the illegal entrepreneurship in the Internet is the blocking of online-shops by the Roskomnadzor (Federal Service for Supervision of Communications, Information Technology, and Mass Media) under the regional court decisions (the procurator's office sues at law). However, in most cases, the blocked online-shops just change their e-mail address and very soon they start their activity again to sell goods, including fake and counterfeit goods.

In early May, a meeting was held at the Ministry of Industrial Trade on this subject, and the strategy of the development of the electronic (distance) trading in Russia up to 2015 was discussed. The main target of the document under development is the promotion of the e-commerce. The identification of the online retailers with the help of state information resources is the possible mechanism to protect against the illegal online trading in the preliminary strategy. Another mechanism of the protection is the certification and licensing of the goods sold by foreign sellers in the Russian Federation.

Online selling of the counterfeit goods remains a big problem: it accounts for 5 to 30 per cent depending on the category. There are proposals to develop more efficient mechanisms for blocking those online shops selling counterfeit goods and their mirror sites and to simplify the notarization of the evidence in the respective cases.

At the same time, it is proposed to lift restrictions on distance selling of certain product categories. For example, now the online selling of alcohol is barred from sale, as well as medicines and dietary supplements. Also, due to legislative inconsistencies there exist problems in jewellery and food selling.

How are the jewellery sales via an online store governed?

These are governed by the goods distance selling regulations approved by Order of the RF Government No. 612 dated 27.09.2007. The goods distance selling is attractive for the entrepreneurs as it ensures saving the rental payments. The drivers for the development of the e-commerce, tele-trade, catalog sales and other means informing about the goods sold are as follows: an access of the population to the Internet and TV; a well-developed post- and courier delivery system (depending on the distance selling type); a well-developed, reliable and safe e-payment system.

Furthermore, one should pay attention that in case of jewellery distance selling the entrepreneurs should pay attention to some restrictions imposed by the effective legislation of the Russian Federation.

Can you give an example of these restrictions?

As per the above mentioned Order of the RF Government order on the goods distance selling regulations, selling of goods against a retail purchase-and-sale agreement refers to these regulations: it is concluded on the basis of the customer’s knowledge about the goods that he/she obtained thanks to the product description in catalogues, leaflets, booklets, or thanks to the pictures or the information distributed by the Post network, telecommunications, including Internet and the TV networks and radio, or via any other ways that exclude the possibility of direct demonstration of the goods or their sample when making such an agreement.

The procedure of jewellery circulation in Russia is governed by the Federal Law of 1998 ‘On the precious metals and precious stones’ (Law No.41-F3). The provisions of this law do not stipulated the licensing of the jewellery online retailing. According to this law, the registration at the Assay Chamber of Russia is mandatory. The notification issued about this special registration is not limited in time. Based on the above, the precious metals and precious stones can be referred to the subjects of human rights, the turnover of these precious metals and precious stones is limited as permissions are required to sell them. The procedure for special registration of the legal entities and individual entrepreneurs making operations with precious metals and precious stones is governed by Order of the RF Government No. 1052 dated 01.10.2015.

And now, are these 1,000+ entities engaged in jewellery online trading in this special registry?

Yes, they are, and in spite of the challenging economic situation, according to the Rosstat data, this sector shows positive dynamics and has significant development prospects.

Is the foreign experience of the jewellery Internet-trading used?

A judicious use of the foreign experience in organizing the jewellery Internet-trading not only helps to avoid the most common mistakes but also enables to bring the domestic jewellery trade to the higher level; this can contribute to embracing a wider segment of customers, including the foreign ones, and also ensure greater popularity of the Russian jewellery.

How efficient was the establishment of the Public Expert Council and how useful are its recommendations?

Based on the results of the round table on this subject that was held, it is necessary to tell that at the end of the last year, the Public Expert Council recommended to introduce changes into Order No. 719 dated 22.02.1992 issued by the RF President with the purpose to withdraw jewellery from the List of industrial products and wastes that are not allowed for free sale. The experts of the ‘Assay Chamber of Russia’ took part in the discussions of the said changes, now this draft is still under coordination but as far as we know, the principal approval by all the ministries and administrations has already been achieved. These changes are expected to be finally approved and come into effect next year.

Also, the Council proposed to contact Rosfinmonitoring regarding the preparation of an information letter about the jewellery Internet-trading. But, to our opinion, this has sense only after the final version of the above changes are adopted and put into effect.

We also had a meeting with the participation of the representatives of the Ministry for Communications and the Media of Russia and the FSUE ‘Russian Post’ on the possibility of the delivery by the Post of the jewellery sold via Internet to the consumer. The possibility of the introduction of changes to the Federal Law ‘On the postal Communication’ dated July 17, 1999 was also discussed at this meeting. Again, the possibility of delivery of the goods (ordered by the customers) not only by specialized companies but also by the Post will enable to embrace a much wider number of buyers and to deliver goods all over the country, and will have a positive effect on the cost of the goods delivery. Many companies making operations with jewellery supported the introduction of the changes into the legislation aimed at permitting the delivery of jewellery, including the delivery by the ‘Russian Post’.

So, the Assay Chamber of Russia considers the development of the e-commerce promising and safe?

The jewellery internet-trading should be carried out within the framework of the effective normative legal documents. In particular, it should not be used to legalize unlawful income or finance terrorism. It is necessary to satisfy the requirements to identify a client when the threshold levels are exceeded, as well as the requirements to protect the human rights of the consumers and fair competition, the commerce legislation requirements, in particular, regarding the use of the cash-register equipment, and other conditions that are also important.

That said, we are sure that the mutual efforts of the fair entrepreneurs and the government will result in the further steady development of the jewellery online trading, it will not become a shady business or be used for illegal purposes.

Galina Semyonova for Rough&Polished

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