RUSNANO, SITRONICS, and X5 Retail Group Kick Off Project for Store of the Future

17 June 2011

SPIE 2011
SPIE 2011

The St. Petersburg International Economic Forum hosted the signing of the investment agreement for a project RUSNANO, SITRONICS, and X5 Retail Group will launch-the Store of the Future.

With RUSNANO CEO Anatoly Chubais and Sistema Chairman of the Board Vladimir Evtushenkov looking on, RUSNANO Deputy CEO Andrey Malyshev, SITRONICS President and CEO Sergey Aslanian, and X5 Retail Group CEO Andrei Gusev signed the investment agreement.

The project will create nano-enabled solutions for introducing and exploiting RFID technology in Russia’s retail industry. If successful in its development work, the project will establish a company-integrator to introduce RFID technology to domestic retail trade.

Radio frequency identification is a great boon to retail: RFID tags reduce expenses throughout the distribution and sale of goods. They effectively control merchandise turnover in the supply chain. The tags, electronic certificates for consumer goods, protect the buyer from falsified items, improve product surveillance, and prevent inadvertent sale of expired products, particularly drugs and foodstuffs.

RUSNANO, SITRONICS, and X5 Retail Group Kick Off Project for Store of the Future

The project has a budget totaling 350 million rubles. Investment will be divided equally among the three participants over two years.

In 2013, assuming successful development of the RFID technology, the project will open Russia’s first model grocery store for the future. X5 Retail Group will provide the platform. The project will also develop sector standards, which are prerequisites for changing the regulatory and legal framework for retail production and trade.

“Cost of the RFID tags is the greatest barrier to their broad use. Once RFID in retail trade begins on a large scale, the cost of the tags will decline and RFID will be extended to other economic sectors. With project success, Russia will become another large market for RFID tags, and that will give Russian microelectronics producers the opportunity to enter an arena where sales are forecast at up to 50 billion tags per year,” Andrey Malyshev explained. “We expect this project to foster demand for nano-enabled products and other RUSNANO projects related to RFID technologies.”

“RFID technology could help our customers avoid unnecessary hassles when shopping,” said Andrei Gusev. “We are pleased to have joined the project as expert and practitioner. As such, we’ll be taking a hard look over the next years at the viability and value of using RFID technology in retail supermarkets.”

“The project will create an experimental site where we can apply our expertise and build competencies in systemic integration of RFID solutions,” said Sergey Aslanian. “There will be interesting technical challenges to resolve; there will be new technology and know-how with promising avenues for commercialization in retail, medicine, and industry. The technology for radio frequency identification is in a period of growth that may lead to an excellent market.”

Technical Information

RFID (Radio Frequency Identification) is a method of automatically identifying an object marked with a special microchip, a tag. The tag is able to convey information, which has been written on its unique code, through a radiosignal to a reading device. Some types of tags can store additional data, write information that they accept from a wireless link to their internal memory, and carry out various operations with the data they have stored. The size of the chip used in the tags is 90 nm to 180 nm. The technology is taking the place of bar codes, and in the future, because of its many advantages, RFID tags may fully supplant bar codes.

The market for RFID technology includes sale of tags, reading equipment, components for production of the tags, software, and consulting services from vendors of ready-made RFID solution. In 2008 the global RFID market was valued at $5.3 billion compared with $4.9 billion in 2007. In 2018 the market for RFID systems is expected to rise more than fivefold to $27 billion, and the number of tags sold will increase 300-fold-thanks to lower product and service prices and better RFID infrastructure.

RFID technology is only beginning to be used in retail networks. Currently its implementation concerns a limited number of goods streams and involves only a handful of companies worldwide. Companies that have already recognized the potential and effectiveness of the technology in retail application include Wal-Mart, METRO, and Home Depot. They are requiring some of their largest vendors to attach RFID tags. Transnational food producers Coca-Cola, PepsiCo, Unilever, and others are supporting and developing the technology.

Additional information

Reference

RUSNANO was established in March 2011 as an open joint-stock company through reorganization of state corporation Russian Corporation of Nanotechnologies. RUSNANO’s mission is to develop the Russian nanotechnology industry through co-investment in nanotechnology projects with substantial economic potential or social benefit. The Government of the Russian Federation owns 100 percent of the shares in RUSNANO. Anatoly Chubais is CEO and chairman of the Executive Board of RUSNANO.

Work to establish nanotechnology infrastructure and training for nanotechnology specialists, formerly conducted by the Russian Corporation of Nanotechnologies, has been entrusted to the Fund for Infrastructure and Educational Programs, a non-commercial fund also established through reorganization of the Russian Corporation of Nanotechnologies.

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X5 Retail Group N. V. (London Stock Exchange: FIVE; Moody’s, B2; S&P,В+) is the largest retail company in Russia by sales volume. It works under the brands Pyaterochka, Perekrestok, and Karusel. On May 18, 2006, Pyaterochka and Perekrestok merged their operations to establish the leading retail food company in Russia. On June 26, 2008, X5 acquired the Karusel chain of hypermarkets, significantly strengthening its position in that area. In 2010 the company acquired the Kopeika discount chain. As of March 31, 2011, X5 had 2,545 stores in Moscow, St. Petersburg, and other regions of European Russia, the Urals, and Ukraine. The mulitformat network of the company includes 1,472 Pyaterochka soft discount stores, 303 Perekrestok supermarkets, 71 Karusel hypermarkets , 47 U Doma stores, and 652 Kopeika stores (including 45 stores rebranded as Pyaterochka). X5 had 690 franchised stores in Russia on March 31, 2011.
In 2010 X5 Retail Group N.V had net sales of the $11.28 billion with EBITDA of $844 million and net profit of $271 million. In the first quarter of 2011, the company had net sales of $3.845 billion with EBITDA of $281 million and net profit of $97 million.

Shareholders of X5 Retail Group N.V are Alfa Group Consortium—47.9%, Founders of Pyaterochka—19.9%, X5 management—1.8%, and treasury shares—0.1%; 30.3% of the company’s shares are in free float.

For more information, please visit www.x5.ru/en

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Joint-stock company SITRONICS (London Stock Exchange: SITR) is one of the leading suppliers of solutions for telecommunications, IT, and microelectronics in Russia and countries of the Commonwealth of Independent States. The company provides services to more than 3,500 clients. It has representative offices and branches in 32 countries and exports to more than 60 countries. It employs over 8,000 individuals. SITRONICS’s main businesses are located in Prague and Athens (telecommunications solutions), in Kiev (IT), and in Zelenograd, an administrative subdivision of Moscow (microelectronic solutions).

For more information, please visit www.sitronics.com