The digital revolution has been rewiring retail for years. The Coronavirus (COVID-19) pandemic accelerated this transition as e-commerce became the default setting for many housebound consumers. The crisis-inspired surge in e-commerce is leading to a permanent shift in retail, creating both new challenges as well as new opportunities for retailers and consumer brands alike. This report explores these opportunities and challenges in Eastern Europe.
This report comes in PPT.
The rise of e-commerce, brought forth by the digital revolution, is not new for Eastern Europe, but the COVID-19 pandemic and the isolation of consumers accelerated the trend of switching to digital channels and e-commerce was used more frequently. This led to the arrival of new business models, commerce ecosystems and emerging channels for reaching and engaging with consumers.
Despite the extraordinary growth of e-commerce during 2020, Eastern Europe is still not mature, and the channel has further potential for development. Over the 2020-2025 forecast period, e-commerce in Eastern Europe is expected to account for 45% of all absolute retail value growth, reaching a 16% value share of total retail by 2025.
Despite the fact that grocery stores were less impacted by COVID-19 restrictions compared with stores selling other products, food and drink showed record high growth via e-commerce. Consumers, avoiding unnecessary contact, increasingly shifted to online channels, which encouraged retailers to react rapidly with new solutions to meet the increased demand.
Growth in e-commerce resulted in a growing number of retailers in Eastern Europe focusing on the development of omnichannel retailing. A significant number of players launched online stores, but at the same time, some e-commerce players opened physical stores to complement the online experience. In order to stay competitive, retailers need to focus on channel integration, providing a seamless experience for consumers considering different delivery and omnichannel service options.
Marketplaces are leaders in Eastern Europe’s e-commerce channel. Many brands turned to these platforms to reach shoppers during the lockdown. Much like the rest of the world, this model is growing significantly faster than the traditional wholesale model.
Retail is the sale of new and used goods to consumers from a business for personal or household consumption from retail outlets, kiosks, market stalls, vending, direct selling and e-commerce. Retail is the aggregation of Retail Offline and Retail E-Commerce. Excludes specialist retailers of motor vehicles, motorcycles, vehicle parts. Also excludes fuel sales, foodservice sales, rental transactions, and wholesale sales (e.g. Cash and Carry). Sales value excluding or including VAT/Sales Tax. Retail also excludes the informal retail sector. Informal retailing is retail trade which is not declared to the tax authorities. Informal retailing encompasses (a) sales generated by unregistered and unlicensed retailers, i.e. retailers operating illegally, and (b) any proportion of sales generated by a registered and licensed retailer that is not declared to the tax authorities. Unregistered and unlicensed retailers operate predominantly (although not exclusively) as street hawkers or operate open market stalls, as these channels are harder for the authorities to monitor than permanent outlets. Activities in the illegal market, which is usually understood to refer to trade in illegal, counterfeit or stolen merchandise, are included within our definition of informal retailing. Activities in the “grey market”, which is usually understood to refer to trade in legal merchandise that is sold through unauthorized channels – for example cigarettes bought legally in another country, legally imported, but sold at lower prices than in authorized channels – will be included as informal retailing if no tax is paid on sale by the retailer. However if the retailer pays tax – for example on cigarettes bought legally in another country but sold at a lower price than standard – the sale is included within formal retail.
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