Online Shops in Serbia Still a Rarity – What are the most common obstacles and how to overcome them

Source: eKapija

Tuesday, 15.11.2022.

19:20

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(Photo: vasabii/shutterstock.com)

Price? This is the “question” most asked on various Instagram and Facebook accounts that sell a range of different products – from clothes to artworks. Five letters and a question mark reflect ill-manners or frustration, depending on who you ask.

While sellers complain about the lack of manners from potential customers who can`t be bothered to complete a sentence, buyers fire back that it`s insane that in the 21st century they have to text the sellers instead of simply finding everything they need about a product with just a click in an online store and finally, buy it.

The pandemic has accelerated online business and even though it seems as if every company has its own online store, the research of the Statistical Office of Serbia, published in March 2022, shows a different picture – 28% of companies replied that they sold goods and service online in the previous year, whereas only 0.2% of companies stated that 75% of their revenue came from online shopping.

What does this tells us? That companies in Serbia are not yet ready for e-commerce or that customers prefer going to physical stores? How hard it is to establish an online store? What are some of the things an entrepreneur has to think about? These are some of the topics we tried to explore after the world experts estimated that by 2040, up to 95% of all transactions would be online.

Buyers are ready, retailers are not

Management Board member of the eCommerce Association of Serbia, Mihailo Ponjavic, explains for eKapija that regarding online trends in shopping and advertising, Serbian market is at the minimum 5-7 years behind the more developed Western economies. According to him, buyers are more than ready for online shopping but very few retailers see the importance of this type of trade at the moment.

– Most local retailers don`t understand that their buyers are both local and global because more or less all of them have at some point reserved something on Booking.com, AirBnB, Amazon and Wizz Air sites. Meaning, our average online shopper has been familiar with the good user experience, which they learned from companies that have been, for a while now, engaged in a ruthless online competition on a hypercompetitive online market, Ponjavic says.

Serbs still like to visit stores (Photo: Pressmaster/shutterstock.com)

The pandemic did accelerate, but according to our collocutor, a great number of business entities that were begrudgingly pushed into this business model hasn`t entirely understood the challenges and rules of online shopping. After the natural increase of this type of shopping during the first pandemic year, the expectations for 2021 were higher, but there wasn`t any additional work on the basic metrics of success of online shopping or there were steps towards the digital transformation without the clear vision and structure, our collocutor explains.

– Also, our market hasn`t strategically mapped this “forced” behavior which resulted in buyers returning to their old shopping habits, even though offline and online shopping are identical activities and businesses only have to try to deliver a unique user experience. On the other hand, buyers who tried this type of shopping for the first time (22% percent compared to the pre-pandemic period) and had issues with payments, delivery, product return and other facets of the modern eCommerce, haven`t built that necessary trust that results in repeat customers and is a sign of success, says Ponjavic and explains that most online sales results returned to disappointing 5-15% of total purchases.

What must online shop owners know?

Among of the 28% of companies that sold their goods and services online during the previous year, most of them (25%) are medium-sized enterprises. Big enterprises are just a bit behind with 24.9% participating in online shopping and 21.8% are small enterprises. Most companies, 69.3%, earn less than 25% of their profits in this way, whereas 17.7% earns between 25% and 50% of profits. Further, there are 12.8 %of companies that earn more than 50% and less than 75% profits online and only 0.2% of companies has stated that they earn over 75% of their profits online.

People do shopping mainly through mobile phones (Photo: Georgejmclittle/shutterstock.com)

Those who are considering opening an online store must take the complexity of the environment into account above all, because an online store isn`t just another store and the competition is much bigger here, Ponjavic says. This means that a company has to have a clear business plan, USP offers, educated team which manages processes, background infrastructure that unifies data, adequate sales platform that supports all operative processes, advertising budget with precise performance indicators, secure payment methods, logistics and user support and many other factors that constantly change and upgrade because each of the mentioned items has subsegments that should be carefully implemented and upgraded.

– This is not a list that is designed to scare off potential new online shop owners, this is a sort of a “reality check” because competence dictates the rules of the game. Online shoppers change the store in three clicks and expect to get an experience at least as good as the one before. And competition isn`t just local but global too, Ponjavic reminds.

Secure payment and data protection

Security is also an important factor to have in mind. In online business, trust is hard to gain and quick to lose and that`s why secure payment methods and data protection is on top of the list of priorities. In this respect, Serbia is keeping up with the world. Per our collocutor, almost all global technological achievements that provide advanced security in this area are at the disposal to local entrepreneurs as well.

Data protection must be managed (Photo: ShutterPNPhotography/shutterstock.com)

– It should be emphasized that some of the popular CMS solutions at the moment are a great starting point for entrepreneurs when making a new website, they are quite affordable and easy to maintain, however.... It`s right there that small and medium-sized and some bigger companies as well fall into a trap because these solutions are not the safest option, not for owners nor buyers. I`d recommend that everyone who is considering new web solutions for their e-store first gets well-informed on both good and bad sides of CMS solutions, Ponjavic advises.

Fashion brands are the fastest growing section of e-commerce in the world

The experts predict that by 2026, the global online sales would rise from the current five trillion dollars to eight trillion dollars. E-commerce will comprise over 25% of the total global trade by 2023 and it is expected that by 2024 up to 95% of all transactions are done online. The world leader in e-commerce is China, whereas Germany and Great Britain lead the European market.

When it comes to most common products sold online, fashion industry is ranked first. Not so long ago, we wouldn`t have guessed that we would ever buy clothes online, without being able to try it out but practice proves us wrong because clothing brands are the fastest growing section of e-commerce. Our collocutor notices that the fashion industry as well as beauty and wellness are having a major digital renaissance because of the wide and easy outreach to target groups.

We shop online for clothes easily (Photo: Sashkin/shutterstock.com)

– Modern fashion brands don`t even have to have a physical store (therefore directly impacting the supply chain), they communicate effectively with their target group, maintain the price-to-quality ratio and build loyalty with returning buyers. One of the latest examples is the Chinese retailer SHEIN, an ultra fast fashion brand that obligates suppliers, that is, associate vendors to implement identical infrastructural solutions that use almost similar Tik Tok algorithm for mapping fashion trends in online spaces and in real time, Ponjavic says.

The key to growth of online fashion brand are the profit rates which allow for investing in user experience, our collocutor explains.

– If they are “big`, modern online platforms either already have or they integrate marketing cloud solution and if they are “small”, they can choose between eShop solutions on Facebook, Shopify and other platforms which are simple to implement and enable easy onboarding, Ponjavic says.

Another fast-rising category, that modeled its business after Amazon and Aliexpress are the so-called drop shippers, where buyers can find everything and anything, our collocutor explains.

– That model of business rarely traps profits in stocked merchandise, it enables direct transaction between the supplier and the end buyer on the platform and maintains profit margins. However, in order to get a better purchase price (because, sadly, we still focus on the price to get buyer`s attention and not on service) some of these companies decide to stock merchandise, have their own PL and the like, Ponjavic says.

"Digital lookers" on the Serbian market

Even though in Serbia the price is still what motivates buying, service is what has mattered more around the world for a while now. Research shows that up to 70% of purchases aren`t completed for various reasons, such as the process being convoluted, additional tax and delivery costs, required registration when purchasing, slow delivery and lack of payment options.

QR code payment is expanding in Serbia (Photo: Pixabay / geralt)

Out of all online transactions in Serbia, the most dominant is online bill payment, primarily because IPS or QR code payment is seriously expanding, our collocutor states. Looking at the level of consumption, shoes and clothes, specifically sports equipment, are next, followed by homeware and electric appliances, then books, cosmetics and food delivery services.

– I think that as far as our market goes, the sensitivity to price is the deciding factor for making a purchase. I believe for the same reason that Aliexpress has benefited our market more than the pandemic “lockdown” situation because we no longer fear using our credit cards to buy some cheap gadget and even if it doesn`t arrive after a few weeks – no harm done. The more expensive the product, the harder we choose to make the transaction and that`s why our users overwhelmingly choose cash on delivery. On the whole, we as a market are - and I like to use this expression often - “digital lookers”. We explore a lot online but we still make our purchases offline especially when it comes to long-term and bigger investments, Ponjavic explains.

The future of e-shops

The current number of e-commerce users globally is 3.8 billion, so 48.1% of population makes purchases in this way. The most installed app in 2021 is Shopee which had 203 million downloads (Amazon is fourth with 148 million downloads and Aliexpress is sixth with 84 million downloads).
More than half of all users does their shopping through a mobile phone and that number is expected to rise in the future.

And what is the future of these stores in Serbia? Beautiful, as long there is electricity and internet. Our collocutor jokes.

– It is inevitable that trade will migrate to this channel. Pervasiveness of the internet is, from our local point of view, pretty high – 84% of homes has internet access, 99.5% of the populace owns a mobile phone, 58% is active on social networks every day and time we spend online is longer. Sooner or later, media consumption will transfer from TV to primarily digital, it is easier to control and optimize costs digitally... All in all, everything about eCommerce will come on its own and we won`t have to invent hot water, Ponjavic says.

Nevertheless, he adds that it`s confounding and inexplicable why Serbia, as a market with high-skilled personnel in this area can`t, at least somewhat follow the global trends set by some of the leading world companies with their online shops such as Amazon, MediaMarkt and others.

– If we want to be on the right course, I think we should first implement some of the options those e-shops have been offering for ages, namely,fast and secure delivery, fine, clear and precise product description, maximum tolerance for potential warranty claims, secure online payment and protection of user data, concludes Mihailo Ponjavic, Management Board member of the eCommerce Association of Serbia.

Marija Dedic

Companies:

E-commerce asocijacija Srbije

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