As e-commerce markets in economically more advanced European countries are showing signs of slowing down, in less developed markets — mainly in the Central and Southeast Europe (CSE) — e-commerce is on the rise.
According to a 2019 Global Payments Trends Report published by JP Morgan, Czech Republic has the highest projected growth in e-commerce in Europe. Authors of the report wrote that the United Kingdom has by far the largest e-commerce market in Europe (worth EUR178.5bn). It is followed by France (EUR81.7bn), and Germany (EUR73bn).
All these countries are also expecting to see growth in the size of their respective e-commerce markets in the years to come. The compound annual growth rate (2017-2021) in the size of UK’s e-commerce market is 9 per cent. France is expecting to see a 10.5 per cent growth and Germany’s e-commerce market will grow by 7.3 per cent. However, all indicators show that the western European markets have reached a point of maturity, and a slowdown is forth-coming.
“The rapid, double-digit growth witnessed over the past decade in these countries is stabilizing to a more sustainable pace. E-commerce sales growth in the UK is set to decline to a compound annual growth rate of nine percent out to 2021,” JP Morgan wrote.
Conversely, less developed European e-commerce markets are expected to boom over the next few years. “Other countries are emerging as compelling opportunities. Of the 18 countries we surveyed, 10 are set to enjoy double-digit e-commerce market expansion between now and 2021, with the Czech Republic (16 per cent), Italy (14 per cent) and Spain (13.5 per cent) ranking highest for predicted growth,” the report said.
Potential for growth
There are several reasons why the Czech e-commerce market has been identified as the one with the highest potential for growth in Europe. One is that, in many ways, the e-commerce market in the Czech Republic is still quite underdeveloped. For example, many people in the Czech Republic still prefer paying in cash over using a credit card. “At 81 per cent, the Czech Republic has lower bank account penetration than the other countries examined,” according to the report.
The average annual basket worth EUR737 spent by online-shoppers in the Czech Republic is way less than the European average of EUR2,186. Considering the fact that the Czech economy is one of the fastest growing in Europe, it is reasonable to expect that this number will increase significantly over the next few years.
Another crucial factor to consider is the demographic aspect. Unlike in some western European countries, there are enormous differences among different Czech age groups with regards to their e-shopping proclivities.
“For instance, 96.5 per cent of the Czech population within the age group 16 to 24 used the internet on a daily basis in 2017, compared with 19.4 per cent for the age group 65 or over,” the report reads.
“Unlike more established markets like the UK and Germany, where keen online shoppers are found across all adult demographics, in the Czech Republic, online spending is largely the preserve of the young. An estimated 67 per cent of 25 to 34-year-olds shops online, compared with just 8 per cent of those aged 65 or over,” the report highlights.
Domestic internet infrastructure
Another thing that clearly distinguishes the Czech Republic from the rest of Europe is the popularity of domestic sites in the country. “The top five e-commerce merchants are dominated by local brands with a .cz URL address. General merchandise shopping site Heureka.cz is the number one, followed by online marketplace Bazos.cz and another general shopping site, Alza.cz. The only international player in the top five is Chinese platform AliExpress,” the report says.
Besides e-commerce platforms, many Czechs also favor to use a domestic search engine Seznam.cz over the globally dominant Google.
“Czech Republic is a very specific market. In comparison to western Europe, the most popular e-commerce websites and search engines in the country are home-grown,” Jan Vetyska, President of the Czech Republic’s Association for e-commerce, said the Czech online daily e15.
Another key factor in the Czech Republic’s projected e-commerce market growth is the high amount of online stores in the country. “Czech Republic has one of the highest numbers of online stores per capita in Europe. In 2017 alone, the number of Czech online shops increased by 3,900 to reach 40,100,” the report says.
The Czech Republic has also the highest percentage of online purchases completed on a mobile device out of all analyzed European countries. “Mobile commerce is already well-established in the Czech Republic, and now accounts for the majority — 54 per cent — of all e-commerce transactions,” the report says.
Considering the relatively low smartphone penetration in the country (67.3 per cent), it is reasonable to expect that online purchases made from a smartphone will continue to increase in number.
Filip Brokeš is an analyst and a journalist specializing in international relations.