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Regional Focus: The Escalating Eastern European E-Commerce Craze

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Regional Focus: The Escalating Eastern European E-Commerce Craze

By Pavel Marceux, Technology, Communications and Media Analyst at Euromonitor International

Rapid growth in Internet usage and consumer demand has seen the Eastern European Internet retailing market, whose value expanded by 107% in real terms over 2007-2012, enter the mainstream. Stronger supply links between e-commerce businesses and cheap manufacturing markets, such as China, and a more tech-savvy consumer base have been factors driving this trend. However, a lack of electronic banking integration and high competition in some segments are proving challenges to e-tailers.

Largest Internet Retailing Markets in Eastern Europe: 2012


US$ million


Source: Euromonitor International from trade sources/national statistics

Note: Retail value RSP excluding sales tax

  • The increasingly low start-up costs of running an online retailing business, due to technological breakthroughs in cloud computing and bandwidth affordability, have encouraged private enterprises to mushroom across Eastern Europe. Willing consumers looking to make savings in an environment of a global economic slowdown have boosted the segment. Russia is home to the largest Internet retailing market in the region, with a value of almost US$10.5 billion in 2012;


  • Nonetheless, the emerging nature of regional economies means that some aspects of e-commerce remain underdeveloped, with electronic payments still underutilised and the sector generally unregulated. A lack of consumer trust therefore still exists, and segments such as digital communications, which tend to offer proven brands, often perform better than others. Consumer electronics and video games hardware made up the largest share of Eastern European Internet retailing in 2012, excluding other Internet retailing, at 23.7%.


The popularity of e-commerce has helped spawn offshoot business opportunities in the region, even though a cash economy continues to dominate in the sector:

  • The integration of the post-communist Eastern bloc into the global economy has seen Internet retailers reach out to cheap manufacturers abroad, especially China, in a bid to increase profit margins. The inflow of cheaply produced goods in segments such as communications, clothing and accessories has flooded the regional e-commerce segment and provided consumers with significant savings compared to in-store retailers. Imports from China to the region amounted to over US$100 billion in 2012;
  • The twin impacts of growing disposable incomes and greater telecom penetration have driven the Internet retailing boom. The take-up of social and digital media, which have provided the necessary marketing platforms, has also increased traffic to retailers. Eastern European per capita disposable income expanded by 20.6% in real terms over 2007-2012, while the percentage of the populace using the web almost doubled from 28.4% to 52.1% over the same period;


Eastern European Per Capita Annual Disposable Income and % of Population Using the Internet: 2007-2012

US$ '000 / %


Source: Euromonitor International from national statistics/trade sources

  • However, low-level electronic banking penetration means most consumers prefer to pay by cash, limiting the efficiency of operations for retailers. Nonetheless, a burgeoning number of payment gateways, such as Visa's Qiwi in Russia and PayLane in Poland, are offering consumers alternative methods of payment, which is attracting a greater number of willing shoppers;


  • The region's less saturated Internet retail markets are seeing the most rapid expansion in e-commerce, as Internet penetration catches up with the commercial potential. Opportunities are extensive for e-tailers to tap into urban markets in countries such as Albania, Macedonia and Lithuania and benefit from a growing middle class, which is becoming increasingly accepting of online transactions. Albania saw the fastest rise in Internet retailing value in 2012, at 23.6% in annual real terms;
  • More advanced markets in Eastern Europe, such as Poland, Russia and the Czech Republic, are already extremely competitive, especially in in-demand segments such as communications. This is benefitting consumers on the ground as discount wars between established online retail brands, such as Oldi and Video-Shoper, are driving down prices.



  • The Internet retailing boom is set to continue in the region going forward, boosted by rising web usage via mobile wireless devices, the continued substitution effect of e-commerce goods and services for bricks and mortar stores, and progress in technology allowing for server costs to decline. Serbia is set to see the fastest expansion in Internet retailing value in 2013, rising by 21.8% in annual real terms, while Russia will continue to be the largest market by virtue of its massive population size;
  • The ability of online operators to minimise the payments of bribes or protection money to corrupt officials is set to be a big driver behind the e-commerce movement. The lack of a physical storefront makes it significantly harder to be exploited by shadow economies, which are still in operation across many Eastern European markets. Ukraine, for example, ranked 144th in 2012 in the Transparency International's Corruption Perceptions Index;


  • However, the primary consumer group utilising online retailing services remains the under-30 section of the population, partly a result of low-level Internet usage among the older demographic. Online businesses that can market their products to older brackets, which are expanding due to rapid population ageing, and get them using the web can unlock considerable opportunities among this sleeping giant. By 2020, only around 55.0% of Eastern European households are expected to possess a broadband Internet enabled PC.
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