Let’s talk about ecommerce in the Baltics. The e-commerce took off really quickly in UK and Scandinavia but in the Baltic countries, which are otherwise digitally quite advanced, the e-commerce was somehow lagging behind. What’s the situation with ecommerce here at the moment?
Well, the e-commerce here is growing constantly. In Baltic countries we have an average growth of 15-20% per year. Except Estonia, which has shown even higher results in past few years. Estonians are used to everything digital and not afraid to buy online. If we compare the percentage of online buyers, then in Estonia this number is very big, even higher than EU average. Difference is only in spending amount per capita.
But there are probably several reasons why e-commerce in Baltics hasn’t reached the level of UK. One of the reasons is the confidence in buying online. Especially in Lithuania and Latvia we still need to convince people that buying online is safe way to shop, besides being very convenient and fast way. It’s also connected to the fact that people still want to see, touch and try on the product before they make the purchase.
This has led us to the conclusion that online and offline should become more like omni-channel to consumer. Online should also offer customers the possibility to pick up the item, to have the real contact with the seller and to see the product before he pays. We see that we are entering the period of mixed retail, because online and offline channels are solving different problems for customers. Offline helps with trust-related issues, e.g. it enables to see that the seller is real, and online is offering a really fast and convenient way to shop. So, I believe that the line between online and offline is diminishing and they will soon become one. For example, if you’re at work and buy something online, you can pick it up instantly on your way home.
Another thing that probably affects e-commerce in Baltics is the number of square meters of retail space per population and closeness of shopping centers. If nearest shopping center is hours away, then it’s completely understandable that people use e-commerce more, because it’s more convenient for them.
What about Alibaba, Amazon and other global e-commerce giants that are also increasingly popular here? Very often I hear people saying that the delivery from international e-shops is even quicker than from the local shops and some experts say that this is a major threat for local retailers. So how can you compete with Alibaba?
It’s a very good question and also a common question that I often get asked. Basically, you are totally right that the main competitive advantage of local shop must be speed. If we compare all the local leaders, we see that the leaders always have the fastest delivery. We recently made a comparison of several countries’ e-shops and from there you could clearly see that the local e-commerce leaders offer delivery within one day, or in the worst case the next day. In some cases you can even get the product from the pick-up point instantly. Order and collect it in 5 minutes. So the speed definitely is the main competitive advantage. The local shops that offer delivery in two weeks won’t simply survive.
The one and only reason why we became the leader in the Baltics, is that we have stock. We stock more than 200 000 units in our warehouses. And we plan to increase our warehouses more than three times in the coming years. So our main competitive advantage is the ability to offer products with good price and to deliver them on the same day. Good price and fast delivery are also what the customer needs. If you’re not able to offer this, you are not able to compete with global leaders.
My personal experience shows that the delivery time is not so critical when it comes to more expensive and specialized items, which are not impulse purchases.
Yes, you are right. I wasn’t talking about niche products and specialized shops as I myself represent absolutely different field – we are a department shop, we sell everything except food. In our case we see that the delivery time really makes the difference, because the conversion is couple of times higher if you have the item in stock. That’s why every big player is offering fastest delivery possible. When it comes to large product range, e.g. in case of department stores, then the advantage is speed and convenience.
Niche players have different rules. The main thing for the
niche players is the assortment. If you have the specific assortment that your
customer needs, and it’s not a consumer product which you need right now, the
delivery time isn’t so critical. Another thing is the service. Local players
with niche items have the personal service that the global player will never
offer you, because they are not able to be that diversified. This is the
difference. There are different reasons because there are different needs of
Authors: Hando Sinisalu and Maarja Laasu (Best Marketing International)