Monday, December 3, 2007

Romania: E-Commerce Shines

Oxford Business Group Latest Briefing

Romanian e-commerce has begun to eclipse more traditional retail sales as skyrocketing salaries and increasing levels of disposable income have facilitated record growth in the retail sector. Online businesses are boasting their sales have more than doubled in the past year, with margins up on key products such as laptop computers, digital cameras, mobile phones and home appliances.

In fact, the e-commerce industry is claiming the domestic market will grow to 275m euros ($408.5m) in 2008, double the 125m euros ($185.7m) expected for this year's sales. Some online retailers have even gone so far as to predict sales of 1bn euros by 2010.

In comparison, traditional retail sales increased by an average of 34% this past year, according to data from the National Statistics Institute released in October.

Part of the above-average performance of the e-commerce sector is explained by rising internet penetration and credit card use throughout the country. As online access has grown, more shoppers, including those in small rural towns, have been able to shop online. Combined with historically high computer literacy and strong efforts by credit card companies to reduce usage fraud, online shopping has quickly caught on. This has translated into a banner year for the e-commerce industry.

With the Christmas holiday, December is considered the most lucrative month for IT and home appliance sales and this year is no different.

"We are expecting total fourth quarter sales of 35m euros [$52m] from online commerce," estimated Florin Pravai, manager at eMAG, the largest online store in Romania. "The increase against the similar period of last year is of above 100% and is due both to the expansion of the online market and to the introduction of new brands and product categories."

eMAG is not the only online retailer experiencing such growth. PCfun, which sells home electronics, is expecting record growth in turnover of over 400% this year.

E-retailers can boast that their business has had a positive effect on the economy as a whole. Unlike traditional retail, e-commerce requires additional services to get the product to the consumer. Domestic curriers such as Fan Courier Express, TCE Logistica and Curiero have seen strong growth due to increased demand in the e-commerce shipments.

Adrian Mihai, manager of Fan Courier, told local media the domestic courier market has seen deliveries rise by 400% to 500% over the past two years due to e-commerce. At the moment, deliveries related to these sales account for only 7.5% of the company's total turnover - a figure Mihai said he believes could double in the coming years.

International courier companies such as Netherlands-based TNT, which have traditionally focused on business-to-business services, have shifted their strategy in Romania to take advantage of the growing market. In the past year they have introduced services geared towards the needs of online customers and e-retailers.

The country's retailers, offline and online, can rejoice this holiday season over their successes. Online retailers will be particularly glad to know that most analysts see the success of 2007 continuing in the years to come.

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