The Romanian Association of Online Stores, ARMO, contributes to the development of e-commerce in Romania, supports online stores and aims to elaborate a code of good practices for online stores. The association has 52 members, such as eMAG, Vivre, elefant.ro, Animax, Bonami, F64, FashionUP, evoMag and Romstal.
By Nicoleta Banila
Romania was among the EU member states with the largest annual increase in the value of online commerce in the last five years, according to Eurostat data. What are the reasons for this development and what is the estimated size of the the country’s online commerce market in 2021?
Online commerce has developed rapidly in recent years in Romania, both due to investments made by retailers in infrastructure and in simplifying the shopping experience, and due to the fact that people started to value personal time more and more and are looking for ways to use it most effectively. The factors that support the growing use of this sales channel are the simplification of online payment processes and the development of new shopping financing options, such as instantly approved online loans, quick access to a wide range of products, flexible options and speedy delivery, along with a simple return process.
Economic growth through the first six months of this year, as shown by National Institute of Statistics data, too was reflected in the digital shopping cart.
Moreover, last year, in the context of restrictions imposed by the authorities to prevent the spread of Covid-19, the number of users who made online purchases and paid by card increased, as this allowed them to avoid crowded areas. During the period when nonessential stores were closed, many Romanians bought online for the first time, and it is very likely that online sales will become a lasting habit for them.
Thus, last year online commerce registered an increase of over 30% compared to 2019, reaching a value of approximately 5.6 billion euro. Romania became the country with the highest growth of e-commerce in Europe. We expect this growth trend to continue and we estimate that total turnover in the sector will exceed 6.5 billion euro by the end of the year.
Is Romanians’ reluctance to make online payments preventing the local ecommerce segment from reaching its full potential?
The acceleration of ecommerce development in the last two years has led, implicitly, to a higher penetration of card payments. Of course, there is sufficient room for growth, but we can say that we have reached a good level of use, of almost 40% on average annually and over 50% during Black Friday and holidays.
Customers turn to online shopping if they can find what they want – solutions and products tailored to their needs and desires, and Romanians have become quite aware of the benefits of card payments. Payments by card offer more flexibility, as well as security and traceability, and in case of a return, the money reaches the customer back even without contact with a courier.
However, Romanians still want to make cash payments, although in many other countries this option practically does not exist. Cash payment delays certain flows, parcel couriers often have delays because, although they choose cash payment, some customers do not have the money ready and have to go to the ATM.
Do you think that online stores in Romania and courier services are ready to cope with a massive increase in orders in the coming years?
Any store or business owner wants to take their business to the next level, and this involves investing in developing better services, expanding their customer base, team and infrastructure. In 2020, there were many companies that had an offline business and decided to turn to omnichannel and, although there were many logistical challenges, they found solutions to ensure business continuity. Last year also put pressure on courier companies, which had much larger volumes than they were used to, but employees in the industry did all they could to deliver quickly and safely.
Both retailers and courier companies have adapted and found solutions to cope with this increased volume and to serve customers at a time when their services were almost indispensable. During this test period, customers understood that they can rely on the services of online retailers, and this is the main reason why I expect to see a favourable development of this segment in the coming years.
Do you see an international online retailer such as Amazon or other European similar companies entering the local market in the next five years?
The e-commerce sector in Romania is still developing and is attractive for retailers in other countries, especially in the context in which we have economic growth and a growing number of customers who choose to buy online. Local players have developed this sector a lot, offering customers options and services that international retailers do not have.
What are the specifics of online commerce in Southeast Europe (SEE)?
A 2020 RetailX report showed that 70% of all e-commerce in Europe is concentrated in Western Europe. In the West, income and purchasing power are higher, and people buy online a lot, including food. This is possible because, unlike SEE countries, the West is better developed in terms of road infrastructure, and products, including perishable, get quickly from warehouses to customers.
Unlike SEE, in the West there is a higher frequency of online shopping, more people choose this channel, and the value of purchased products is higher. For example, in the UK where this channel is very well developed, the value of the sector is estimated at 200 billion euro, but we must also take into account the fact that this country has a high economic level and we relate to a population that is three times bigger.
Another difference is that in the West the preferred method of payment is by card, and in the East, people still prefer to use cash.
However, in SEE countries, such as Romania or Bulgaria, this segment has grown steadily in recent years. There is great potential for development here, and the gaps are likely to narrow soon.
Over the last five years, the largest increases in online shopping among internet users were recorded in Romania (+27 percentage points (pp), Czechia and Croatia (both +25 pp) as well as Hungary (+23 pp).