ECommerce Goes To Jail

While having “something for everyone” is certainly a noble goal, most sensible merchants know that there are some segments of “everyone” that can’t be sold to.

The consumer electronics makers of the world are not actively pursuing the Amish, prescription drug makers don’t market to Christian Scientists and luxury goods merchants don’t build boutiques in bad neighborhoods unless gentrification is well underway. The last decade has seen bacon marketed to pretty much everyone — except Jews and Muslims, because even bacon’s most avid proponents aren’t willing to seriously argue that it tastes good enough to knowingly defy God.

While brands spend lots of time trying to convert new believers, smart merchants also understand both their own limits and the limitations of their consumer base. Some people just won’t buy what you’re selling, either because they strongly don’t want to, or because they are unable to — and running after those folks is a waste of time.

Unless you are one up and coming innovator in Russia who simply doesn’t buy into the notion that everyone isn’t a customer for commerce.

Even if that person happens to be imprisoned.

In a Russian Gulag.

Konstantin Antsiferov is the CEO of St. Petersburg (Russia, not Florida) based Special Electronic Systems. For most of the late ’90s and early 2000s, that work involved creating Internet services systems in Russia and working abroad to develop digital systems for prisons.

Basic systems, like enabling email correspondence between friends and families and the incarcerated – which is a lot harder than it sounds.

However, the connection between these two separate businesses — Internet services and digital systems for prisons — was not entirely obvious to him, he told MPD CEO Karen Webster in a recent interview, until vodka stepped into the picture.

“The story of commerce is prison is absolutely simple,” Antsiferov said. “I am sitting with a friend who is absolutely not a tech guy and we were drinking vodka and discussing my Internet company and he asked me why not organize digital services for prison.”

A simple (and perhaps even innocent) question with a mind-numbing answer that would involve navigating the tricky territory between prison officials, regulatory authorities, and the various other players in the large and complicated Russian prison system.

Except that Antsiferov had already spent time building those relationships — and navigating the tricky waters of that systems.

“I knew a lot of the problems; it is absolutely a gulag system now in Russia and there were not enough people who wanted to be the good guy here,” he told Webster.

Or ones clever enough to figure out how to give prisoners access to the Internet without giving them access to the Internet.

Which started with a simple first step: building a digital portal that made sending emails to prisoners and enabling them to reply possible. Two problems persisted.

The first — and most obvious — is that prisoners are in prison for a reason, and their presence there indicates the state’s strong suspicions they might not use unrestricted access to email in a socially positive way.

Solving for the first — screening the email before distributing to the prisoners — created the second, collating all those emails and distributing them is difficult, given the volume of messages coming through.

“The main problem is not sending emails, it is managing emails. In the prison there are 1,000 emails a day and that volume is hard to manage.”

But nothing that a clever business process and business model couldn’t solve.

The firm and the prisons with whom Antsiferov’s partners with are in a generous profit sharing agreement, one that incentivizes them to print out and deliver paper emails to prisoners in their jail cells and to collect and then scan their handwritten responses back to the sender. Prison officials become surrogate postal workers. Even with that profit-sharing arrangement, the business has been profitable enough, Antsiferov noted, that so far they have not needed any investors. “If we talk about profit or business, all I can say is that when we connect one prison, it’s like drilling for oil and finding a gusher.”

Step two was then connecting prisoners to commerce, allowing prisoners better and easier access to purchase goods.

“Every Russian prison has a small shop with some goods. All we do is just create an order list and accept money from clients and send this money (minus our commission) to the prison bank account.”

This is run, Antsiferov explained, as a private business apart from the state, so as to relieve consumer fears about corruption.

It is also built to be particularly well suited for the Russian marketplace, which is largely cash based by allowing users to add funds to the system by the cash-in kiosks managed QIWI.

“My goal is to create prison Google,”Antsiferov told Webster, noting that there is a lot of room for growth in his business — largely because he exists without competition in his space. Most people don’t look at prison populations as reachable – or attractive.

But Konstantin Antsiferov is proving that, given the right set of structures and connections, there is a way to tap any market — if you’re willing to think very creatively about just how to get there. And willing to recognize that friction is often in the eye of the beholder and a matter of perspective. For some it is about using mobile phones and one-clicking for checkout. For others, it’s just about being able to buy things any way that they can.

For prisoners, that bar isn’t all that high.

Konstantin Antsiferov is one of the featured speakers at Innovation Project 2016, being held March 16-17, 2016, at Harvard University. He’ll share more insights on Special Electronic Systems’ vision. Click here for more information.