INSIGHTS REPORT 12th lab of tomorrow - How might we increase trust in e-commerce in South-Eastern
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INSIGHTS REPORT 12th lab of tomorrow How might we increase trust in e-commerce in South- Eastern Europe in order to increase cross-border engagements?
Summary
This Insights Report provides a basis to enable you to co-create desirable, feasible and viable
business ideas in the 12th lab of tomorrow Innovation Sprint by giving you an understanding
of:
❏ General overview of the e-commerce market in the South- Eastern Europe (SEE)* and market potential
❏ Identified issues and market demand
❏ Secondary and primary research findings: facts and figures
❏ Boundaries and inspiration for the potential business solutions
*For the purposes of this project, the selected countries are the following: Albania, Kosovo, North Macedonia,
Serbia, Montenegro, Bosnia and Herzegovina and Moldova.
Page 2
DESKTOP RESEARCH
January- February 2021
The conducted desktop research helped us understand the broad challenge and
the potential sub-challenges of the 12th lab of tomorrow. The insights in this report were
gathered by Desktop and Primary
Research.
PRIMARY RESEARCH
March, 2021
USER RESEARCH in SEE STAKEHOLDER RESEARCH in SEE and EU
• User interviews • Interviews with experts, owners of e-
• User Surveys commerce businesses and other
stakeholders
• Challenge Framing Workshop (10 March
2021)
Page 3
12th lab of tomorrow overview
Challenge Definition Research and sub-challenge Innovation sprint Starting from June 2021
definition (25 May- 03 June 2021)
The cross- border share in the The research was conducted by GIZ 6- day session where participants The venture teams with most
European Union represents around 24 & local experts in order to find the with expertise in e-commerce, IT, promising business ideas receive
% of the total online sales, while the root causes and antecedents of the Fintech, business development, professional business development
potential of cross- border sales in defined challenge. delivery and related fields will coaching to test and refine their
South- Eastern Europe (SEE) remains The findings of the research are come up with business ideas that idea.
untapped. summarized in this Insights report. will tackle the complex challenge of
One of key challenges that the Four sub-challenges were identified trust in e-commerce in South-
e-commerce industry in SEE region in the research phase Eastern Europe.
faces is the lack of trust in (Read more about the sub-
e-commerce sellers. challenges here).
How might we increase trust in
e-commerce in South- Eastern Europe
in order to increase cross-border
engagements?
Page 4
This Insights report will help you find suitable business solutions for the following
identified 4 sub-challenges of the 12th lab of tomorrow process:
1 2
MAIN CHALLENGE:
How might we increase credibility How might we increase
transparency of e-Commerce How might we increase
and quality of the e-Commerce trust in e-commerce in
sellers? sellers in order to make them
more trustworthy? South- Eastern Europe
in order to increase cross-
border engagements?
3 4
How might we improve How might we increase
efficiency and reliability of consumers’ trust in online
last mile delivery service? payments?
More information on the challenge and each sub- challenge can be found here. Page 5
We are building sustainable business solutions
with Design Thinking and Rapid Prototyping
Page 6
RECOMMENDATIONS FOR THE POTENTIAL BUSINESS SOLUTIONS
Read the Frequently Asked
Questions about the lab of
tomorrow process here.
Innovative business Sustainable
Scalable solutions Legal boundaries
models business models
User- centric Implementable in at
Technological
solutions Aligned with SDGs least 3 countries in
boundaries
SEE region
Practicable for the
Strong growth Not aligned with the
companies
potential SDGs
Page 7
Table of contents
1. Regional E-commerce Market____________________________9
2. The Challenge: Increasing trust in South- Eastern Europe ____ 23
3. Target Market_______________________________________ 29
3,1 User Personas_____________________________________ 34
1. The Sub-challenges__________________________________ 42
4.1.Sub- challenge 1___________________________________ 44
4.2 Sub- challenge 2___________________________________ 50
4.3 Sub- challenge 3____________________________________55
4.4 Sub-challenge 4____________________________________ 60
Annex 1: Facts & Figures (by country)_________________________ 64
Annex 2: About the lab of tomorrow___________________________ 79
Page 8
REGIONAL E-COMMERCE
MARKET
COUNTRIES IN FOCUS of the 12th lab of tomorrow
The 12th lab of tomorrow focuses on the CEFTA is an integral part of the pre-accession
regional market of the Central European agenda of the Western Balkans to the EU.
Free Trade Agreement (CEFTA) parties
which are located in South- Eastern
Europe (SEE). >> The Regional Economic Area based on the free
The Central Free Trade Agreement is a movement of goods, services, capital and people
modern free trade agreement between the will, among others, facilitate e-commerce by
7 parties Albania, Bosnia and ensuring access to all markets in the region.
Herzegovina, Kosovo, Montenegro, >> In 2020, CEFTA along with other regional
Moldova, North Macedonia and Serbia). organizations introduced the Green Lanes for
the transport of goods, that let essential goods
benefit from priority passage.
Within the regional trade agenda, the
Action Plan 2020: The Action plan for Read more about CEFTA here.
regional activities are aimed at facilitating
establishing Common Regional Market based on the
trade in goods and services and establishing a
four freedoms enriched with digital, investment,
regional e-commerce market. >>
innovation & industry areas was endorsed in 2020
A roadmap was approved for removing the
by the regional leaders in CEFTA.
biggest barriers in the digital trade.
Page 10COUNTRIES IN FOCUS of the 12th lab of tomorrow
7 6 countries 6 languages 6 currencies
o Macedonian denar
o Macedonian
o Moldovan leu
o Moldovan
o Albanian lek
o Albanian
o Serbian dinar
o Serbian
o Kosovo: Euro
o Montenegrin
o Bosnian Mark
o Bosnian
o Montenegro Euro
Median age of total population Total population
1. Albania_______________________________________36.40
2.Republic of Moldova_____________________________37.60 21.4 million
3.Montenegro___________________________________38.80
4.North Macedonia_______________________________39.14 Total area
5.Serbia________________________________________ 41.58
6.Bosnia and Herzegovina_________________________ 43.11 253,000 km2
7. Kosovo_______________________________________30.05 (97,463 sq mi)
Page 11The rise of e-commerce in South- Eastern Europe (SEE)
Physical goods e-commerce market is
estimated at around 1 billion euros Electronic commerce or e-commerce
and is growing by double digit rate. refers to selling and buying goods
and services on the internet.
E-commerce helped the countries in the
region to weather the COVID-19 crisis. The
The electronic trade of services and digital
scope for future growth of the e-commerce
products is estimated at 84 million in the region is large. Building a regional e-
euros. commerce market would unlock the
benefits and potential of the region. Read
E-commerce is on the rise and the revenues more in the 2020 World Bank Report..
would amount to around 850 million euros
(original data is in USD 954 mil cca.) with 6,6
million e-commerce users.
Page 12SERBIA BOSNIA AND HERZEGOVINA
o Projected revenue in e-commerce market o Projected revenue in e-commerce market
US$490m in 2021. US$237m in 2021.
o Revenue is expected to show an annual growth o Revenue is expected to show an annual growth
rate (CAGR 2021-2025) of 5.59%, resulting in a rate (CAGR 2021-2025) of 6.47%, resulting in a
projected market volume of US$609m by 2025. projected market volume of US$304m by 2025.
o Market’s largest segment is Toys, Hobby & DIY with o Market’s largest segment Fashion with a projected
a projected market volume of US$131m in 2021. market volume of US$65m in 2021.
o User penetration will be 52.7% in 2021 and is o User penetration will be 39.1% in 2021 and is
expected to hit 61.4% by 2025. expected to hit 43.7% by 2025.
MOLDOVA NORTH MACEDONIA
o Revenue in the eCommerce market is projected to o Projected revenue in e-commerce market: US$152m
reach US$148m in 2021. in 2021.
o Revenue is expected to show an annual growth o Revenue is expected to show an annual growth rate
rate (CAGR 2021-2025) of 12.44%, resulting in a (CAGR 2021-2025) of 10.15%, resulting in a projected
projected market volume of US$237m by 2025. market volume of US$224m by 2025.
o Market’s largest segment is Fashion with a o Market’s largest segment is Electronics & Media with
projected market volume of US$47m in 2021. a projected market volume of US$43m in 2021.
o User penetration will be 34.2% in 2021 and is o User penetration will be 39.3% in 2021 and is
expected to hit 38.9% by 2025. expected to hit 44.6% by 2025.
Source: Statista Page 13KOSOVO ALBANIA
o Kosovo is the home of the fastest growing e-
o Revenue in the eCommerce market is projected to
commerce in the region- Gjirafa.com reach US$133m in 2021.
o more than 90 percent of Kosovo households o Revenue is expected to show an annual growth
regularly use the internet rate (CAGR 2021-2025) of 9.71%, resulting in a
o Payment methods for eCommerce transactions projected market volume of US$192m by 2025.
include e-banking, credit cards (Visa and
o Market’s largest segment is Fashion with a
Mastercard), and cash-on-delivery for the domestic projected market volume of US$37m in 2021.
market o User penetration will be 38.1% in 2021 and is
o the majority of online purchases in Kosovo are expected to hit 40.8% by 2025.
made with EU and U.S. retailers
MONTENEGRO
o Revenue in the eCommerce market is projected to
reach US$60m in 2021.
o Revenue is expected to show an annual growth
rate (CAGR 2021-2025) of 11.57%, resulting in a
projected market volume of US$94m by 2025.
o Market’s largest segment is Fashion with a
projected market volume of US$24m in 2021.
o User penetration will be 41.3% in 2021 and is
expected to hit 48.5% by 2025.
Source: Statista
Page 14The e-commerce ecosystem
Digital Connectivity Payment Services
Capability and quality of e-commerce Logistics & Delivery
sellers
Page 15Stakeholder Map
Private Sector Public Sector Associations and Stakeholder refers to “individual, group or
Entrepreneurs Government Organizations organisation who may affect or be
representatives affected by the solutions and outcomes of
E-commerce Associations
E-commerce sellers Customs the project.
Financial Institutions National post offices Consumer protection
organisations
Logistics and last-mile
delivery Chambers of Commerce
Users
ICT sector E-commerce consumers NGOs
Page 16Types of e-commerce in SEE
Pure Player Click & Mortar
Pure play ecommerce involves businesses that A type of business model that has both online and
only make sales via their online storefronts. Pure offline operations, which typically include a website
play e-commerce include: online platforms and and a physical store.
online marketplaces.
Dropshippers Social Commerce
1. EXISTING COMPANIES THAT ACCEPT PURCHASE
Dropshipping is a streamlined form of retail business, ORDERS VIA SOCIAL MEDIA PLATFORMS (FACEBOOK,
INSTAGRAM)
which is on the rise in the region (especially
2. UNREGISTERED COMPANIES/ PRIVATE PERSONS THAT
in Serba). Dropshipping sellers from the region are SELL GOODS ONLINE VIA SOCIAL MEDIA PLATFORMS
internationally oriented, use various different platforms o For example, 54% of the Montenegrin companies don’t have
(Shopify, WooCommerce, etc.) online retail store. Most of the online retail in Montenegro
The seller accepts customer orders but does not keep works over the Instagram platform.
goods sold in stock. Instead, in a form of supply chain
o Companies from Bosnia and Herzegovina that don’t have e-
shops cited as the main reason for the absence of an e-shop
management, it transfers the orders and their shipment the following: low volume of sales, lack of time and resources
details to either the manufacturer, a wholesaler, another for e-shop, the opinion that their product / service is not
retailer, or a fulfillment house, which then ships the suitable for online sales, and doubt about the viability of the
investment itself.
goods directly to the customer.
Page 17POPULAR E-COMMERCE BUSINESS MODELS IN SEE
❏ In the SEE region, multi- vendor e-
commerce marketplaces and
B2C C2C platforms are gaining popularity.
❏ B2B (Business- to- Business)
model is least popular and
underdeveloped business model
in the countries of the region.
Business-to-Consumer Consumer-to-Consumer
B2B and B2C digital markets have structural deficiencies on demand
and supply side. Read more here.
Page 18E-Commerce initiatives and promotion
❏ Two economies in the region have
Initiatives and projects for e-commerce E-commerce Associations in the
an established institution
growth: region:
responsible for e-commerce
Both associations offer web manuals and promotion.
educational material, as well as promote e- ❏ Four economies also have
eCommerce4all commerce in the respective countries. websites dedicated to providing
information on the opportunities
o The Macedonian e-Commerce Association
(MECA)- North Macedonia for and challenges of e-
Cooperation for growth project (CFG) o Serbian e-commerce Association- Serbia commerce.
o The European e-commerce Association does
not include associations or other
organizations from the region as members.
o E-commerce associations have two primary
E-commerce Academy- an educative online goals: exchange of experience between the e-
platform for upcoming entrepreneurs and commerce businesses and education of the
e-commerce enthusiasts business owners and consumers.
Page 19Cross border e-commerce in SEE:
Barriers to regional growth
Orders from abroad are rare and come
The most common reason for avoiding the
mainly from diaspora clients seeking In comparison, the cross-border e-
global market are high international delivery commerce in Europe was worth 143
specific domestic products that are not
costs and complicated export procedures. billion euros in 2019 without travel,
available abroad.
59% of this market (84 billion euros)
is generated by online marketplaces.
E-commerce businesses selling physical
Regional sales are managed through
goods and services in Albania, Bosnia and
regional partners and branch offices, while
Herzegovina and Kosovo are mainly serving
international sales through sister
specific needs of local customers and do not
companies abroad.
try to market their products abroad.
Research shows that mainly, the ecommerce providers in SEE region are oriented and sell in their
country of origin. Some of the e-shops sell to foreign customers in the region on demand, and there
are e-shops that are targeting foreign (worldwide) markets. The latter struggle with poor
infrastructure, high delivery costs and customs procedures.
Page 20KEY STAKEHOLDER INSIGHTS
The biggest barriers to the development of e-commerce in SEE according to e-commerce
sellers in the region:
STAKEHOLDERS RESEARCH
STAKEHOLDERS RESEARCH
Low level of CONSUMER AWARENESS for
Low level of CONSUMER AWARENESS for online shopping
UNFAIR competition and GREY ECONOMY
online shopping
STAKEH
Low level of DIGITAL SKILLS of the
consumers and LACK OF SKILLED LACK OF CONSUMER TRUST in e-commerce
WORKFORCE in e-commerce
Low level of DIGITAL SKILLS of the consumers
Companies that don’t have experience in
doing business through an e-store are The companies that already have their e-
more likelythat
Companies to cite
don’tpotential in doing businessshop
disadvantages
have experience see an
through bigger challenges
e-store are moreinlikely
product
to cite
or problems that may occur with payment
potential disadvantages or problems that may occur with payment systems (27%), order tracking,e-
delivery (16%) and the maintenance of and
systems (27%), order
warehouse management (20%). tracking, and shops (16%).
warehouse management (20%).
Page 21Cross border e-commerce in the European Union
Ten years ago, the issue of trust was considered to According the Cross-border Commerce Europe
be one of the most important barriers to (cross-
B2C online turnover from goods exploded with
border) e-commerce in the European Union. The top 10 global cross- border
24% over 2020 up to €573 billion. In 2020
This report describes the barriers both marketplaces operating in Europe are:
cross-border e-commerce revenues (excluding
Amazon (US), eBay (US), AliExpress
travel) reached €146 billion in Europe; a record (China), Etsy (US), Discogs (US), Wish
on the demand and the supply side, divided into: increase of 35% compared to 2019. Cross- (US), Vinted (Lituania), G2A (Poland),
❏ Operational barriers (language, lack of border online sales outperformed total online Farfetch (UK) and Bandcamp (US).
information, payment issues,etc.), sales.
❏ Legal barriers and
The TOP 500 Cross-Border Retail Europe
❏ Barriers to trust. The trust barriers include
fear of fraud, fear of non-delivery, lack of “made in Europe” generates €53,25 billion
trust in e-commerce and lack of trust in the within the EU16 representing a market share of
after-sales process. 61% of the total cross-border e-commerce
❏ Other instruments that can stimulate (cross- market in Europe.
border) e-Commerce could be: price
comparison website, new payment
methods, and consumer rating websites.
Page 22The Challenge:
Increasing consumer trust in
e-commerce in South- Eastern
EuropeWhat does trust mean?
According to buySAFE, 81% of
Trust is the customer’s judgment of the online shoppers feel concerned
e-commerce seller, influenced by his when shopping on a website with
behavioural, cultural and personal which they are not familiar.
traits. This impacts conversion and loss of
sales and customers in the long
In e-commerce, the e-commerce seller run.
has to be reliable, competent,
predictable, benevolent and integral in
order to be considered as trustworthy.
Page 24The concept of trust in e-commerce
➔ Consumer collaboration (encourage
The three dimensions of consumers’ trust:
customers to inform each other) ❏ Competence (the company is able
to fulfil promises)
➔ Differentiators: ❏ Benevolence (focus on user’s
interests)
1. Tone (secure sensitive information, privacy THE TRUST ❏ Integrity (consistency, reliability
PYRAMID and honesty)
statement, design and content)
2. Customer control (access to personal
information, ask permission to get personal
information)
➔ Basic building blocks:
1. Secure technology
2. Merchant legitimacy (the brand is crucial, familiar names can be helpful)
3. Robust order fulfilment (users want to receive orders efficiently with clearly defined costs)
Page 25Factors that influence consumers’ trust in e-commerce “eCommerce providers are
not aware that trust is one of
the major drivers for making
a purchase decision.”
“The biggest issues for
customers are delivery,
customer care, unreliable
stock because many e-
commerce providers don’t
have integrated systems.”
Page 26KEY STAKEHOLDER INSIGHTS ABOUT TRUST
“Trust arises from security. “Managing customer care is very “The biggest issues for customers
Consumers are asking whether important. Managing the reviews are delivery, customer care,
unreliable stock because many e- Private companies representatives
their personal data is secure while is also important- because bad
shopping online, whether leaving a commerce providers don’t have and representatives of e-commerce
reviews are as valuable as good
integrated systems.”
credit card to the website is safe, reviews because they show how associations and organizations were
etc. People are not aware which the e-shop handles things.”
signs of security should they look interviewed and participated to the
for when shopping online. On the
“The e-commerce providers are Challenge Framing Workshop in
other hand, e-commerce providers not aware that trust is one of the
don’t want to display logos of major drivers for making a March, 2021.
banks on their website, without purchase decision.”
knowing that those logos show
that a bank (important institution) “Both payment options and trust
stands behind this e-shop, and certificates need to raise awareness “The e-commerce providers are
inevitably, it increases trust in of their credibility in order to not offering sufficient
consumers.” increase e-commerce growth and information/ are not transparent
online payments.” so that the e-buyers could make
an informed purchase decision.
Even more, they are preventing
information.”
Page 27KEY USERS’ thoughts & pain points
KEY INSIGHTS:
The local e-shops need improvements in: return policy, The main factors that influence my decision when
❏ Customers are skeptical
delivery speed, security and reputation, online buying online: Verified e-shop; brief explanation of the
about unknown to them e-
payment security and more options for payment, legit product; that my rights as a customer are guaranteed.
commerce stores
websites with reviews.
❏ Customers fear of non-
delivery, wrong orders or
being unable to return the
wrong purchase
❏ Customers are cautious
I buy from foreign online stores....the law there, regarding online payments
regulates this area much better. I read terms and conditions and where is the website and sharing personal & credit
registered and to whom I can complain if something goes card data
wrong. If everything is written clearly, it is easy to decide. ❏ Reviews and
recommendations are crucial
for making purchase
I often look if the website is secured. I check their decisions
social media profiles and look for reviews. If there are
reviews on the website it will make the process easier.
Also the design and the speed of the website is very
important. If the design looks cheap I will think that it
is a scam.
Page 28TARGET MARKET
Page 29USERS (CONSUMERS) RESEARCH
Our users or consumers are also known as e-consumers or e-customers.
The term consumer in this report is referring to the consumers who buy goods and services online
from the e-commerce sellers.
Why is user research important?
Great products and innovative approaches require deep understanding of the users’ needs and pain
points.
By using qualitative and quantitative methods (interviews and surveys), we identified the key pain
points or frustrations that consumers face when shopping online.
Disclaimer: the names and photos of the identified user personas are not realistic.
Page 30CONSUMERS' TRENDS
83% internet users across the region Shopping is considered as a leisure
69% use Internet as a communication activity, so customers are prone to do it
tool (Viber, Messenger and WhatsApp) in person.
40% online shoppers in N. Macedonia
15% online shoppers in Albania The COVID-19 crisis influenced
consumers’ shopping behaviors:
the
79% respondents in Kosovo use
❏ Increased shopping online
internet for entertainment ❏ 62% of the respondents increased
3%-32% online shoppers in the shopping online
❏ 85% of them will continue to shop online
region in comparison with 68% online after the pandemic
shoppers in EU
Page 31CONSUMERS' TRENDS
Consumers find ways to avoid
Most popular foreign websites (outside of SEE region) are: customs and delivery fees. They order
from foreign websites (e.g. Amazon)
to the addresses of friends and
relatives living in USA or EU, who will
later bring the parcel to the consumer
once they visit the region.
AliExpress Ebay International websites are
prefered, while main motivation
factors for shopping online are
THE LOWER PRICES and FREE
DELIVERY.
Consumers’ purchase orders
iHerb Amazon from foreign e-shops in value
less than the threshold for
import VAT and customs
clearance fees. In the countries
in the region, this threshold
varies from 22- 300 EUR.
Book Depository Wish
Page 32CONSUMERS' TRENDS: Most Shopped Categories
ONLINE FOOD
EVENT TICKETS APPS
DELIVERY
TOYS, HOBBY & MUSIC, FILM &
FASHION & BEAUTY
DIY BOOKS
ELECTRONIC, DEVICES & EQUIPMENT
Page 33USER PERSONAS
Page 34Price- driven buyers
Consumers that
(the lower the price, The most suitable customer
prefer foreign e-
the bigger possibility to persona for tackling the trust
purchase) shops issues is the
research & need- based customer
persona.
E-commerce
consumer
Consumers that Research & Need-
prefer local e-shops based buyer
Page 35Name: DINA
Sex: FEMALE
PERSONA 1: E-commerce USER Age: 31
KEY INSIGHTS FOR PERSONA 1:
Buys mainly from local e-commerce stores
in her country because:
❏ Has the option to pay cash on
delivery (CoD);
❏ Believes that it would be
easier to contact a local e-
shop in case things go wrong
with her purchase.
Biggest fears:
❏ Non- delivery or delivery of
damaged product
❏ Not being able to return the
purchased product or receive a
refund
❏ Paying online because of credit card
frauds
Page 36PERSONA 2: E-commerce USER Name: MAKS
Sex: MALE
Age: 24
The most suitable customer persona
KEY INSIGHTS FOR PERSONA 2:
Well informed buyer,
Prefers to buy from foreign online shops
Concerns when it comes to buying from local
e-shops:
❏ fraudulent behavior,
❏ lack of communication,
❏ inability to estimate delivery,
❏ slow & inefficient delivery
Appreciates smooth and easy customer
experience
Page 37CUSTOMER JOURNEY
Browsing for From purchase to
Browsing the e-commerce Critical touchpoint: delivery- critical Social proof and
products & first
store and moment of performing online touchpoint for sharing experiences
touchpoint with the
making purchase decision transaction maintaining trust
e-commerce seller
POST PURCHASE
CREDIBILITY & SAFE
CREDIBILITY TRANSPARENCY CHECKOUT AND PAYMENT
COMMUNICATION AND
RELIABLE PARCEL DELIVERY
Page 38B2B
Click & Mortar Pure Play E-
commerce
E-commerce seller
Nationally oriented Internationally
(sell goods locally) oriented (sell goods
locally and abroad)
B2C
Page 39PERSONA 1: E-commerce SELLER
CLICK & MORTAR
NEEDS: FRUSTRATIONS:
- Automatization of processes (supply, - Return of goods and refunds (30% to
stock, delivery, documentation) 50% return of goods online compared
- Reliable Last Mile Delivery to 10% returns in offline stores)
- Managing Cash-on-Delivery - Customer support
- Seamless integration of offline and - Customers don’t easily recognize their
online stores online stores
- Availability of multiple last mile
delivery options
These sellers believe they’re trustworthy because:
- They exist as legal entities and as brick & mortar stores which gives visibility of their
brand and proof of success
- They issue invoice or fiscal receipt upon delivery
- Experienced in retail (offline channel) and have loyal customers
Page 40PERSONA 2: E-commerce SELLER
PURE PLAY E-COMMERCE SELLER
NEEDS: FRUSTRATIONS:
- To be able to sell & ship goods cross- - Maintaining competitive advantage on
border from the country of origin the market
- Reliable Last Mile Delivery partners - Lack of skilled and experienced
- Managing Cash-on-Delivery employees
- To be recognized as legit online - Increasing customer segment and
sellers, different from the social media gaining trust
sellers and scam websites - Less credible than click & mortar
These sellers believe they’re trustworthy because:
- They exist as legal entities
- Good UX, customer support and brand awareness
- Focused on customers and customer experience
Page 41THE
SUB- CHALLENGES
Page 42The sub-challenges that need business solutions are:
1. Credibility & Quality 2. Transparency
The rapid rise of e-commerce encouraged many business The e-commerce website is the online shop of the
owners to shift from traditional sales channels to online eCommerce company. It is the point of sale where e- The complexity of the challenge required
channels and brought upon entrepreneurs huge customers browse for products, compare products and
challenges in an unknown territory of e-commerce. products’ prices. inform themselves of stock availability, defining a set of actionable sub-challenges.
Read more about the sub-challenge here. quality and origin of the products. The four identified sub-challenges that need
Read more about the sub-challenge here. to be tackled are listed on this page.
3. Reliable Last Mile Delivery 4. Trust in Online Payments
One of the major drawbacks and issues in e-commerce
Consumers from the SEE region feel safer to pay in cash
especially for cross-border trade remains to be delivery
upon delivery. Past experiences from card frauds, data
and shipping. Late deliveries, damaged goods, lack of
breaches and scams have an immense influence on
product tracking or even lost or missed deliveries are some
consumer trust. Consumers are reluctant to expose their
of the major frustrations and root causes for distrust for
personal and payment information online and are
the ecommerce consumers. Ecommerce companies want
seeking for more convenient and safer methods. The
to get things as quick as they can to customers, under the
need for security, safety and assurance are some of the
belief that they value speed above all else.
core measures for building trust.
Read more about the sub-challenge here.
Read more about the sub-challenge here.
Page 43SUB- CHALLENGE 1:
How might we increase credibility and
quality of e-commerce sellers?
Page 44KEY INSIGHT: Customers lack awareness of e-commerce
Customers are not well informed so Do customers make difference Sub-challenge 1
Credibility and quality of
they can differentiate the business between e-commerce websites and e-commerce sellers
models in e-commerce and the risks social media accounts?
that are connected with the
particular business model.
Few stakeholders pointed out that one of the The rise of companies and individuals that use
main reasons for lack of trust in e-commerce is Instagram and Facebook profiles for reaching
the fear of receiving “brick in a bag” instead of online customers, where the online transaction is
the purchased product- referring to a story that performed through messages and paid cash on
arises from P2P or C2C e-commerce where delivery, deepens the gap of confusement about
individuals sell to other individuals, and therefore (i) whether the e-commerce seller exists as a
the risk of frauds is greater (peer-to-peer). In B2C legal entity and performs legal business activity,
as well as in B2B e-commerce business models, and (ii) whether the rights of the customer will
these risks of frauds and selling “empty boxes” be protected in that type of online transaction.
are unlikely and consumers are protected by the
consumer laws.
Page 45KEY INSIGHT: Customers are sceptical about
domestic e-commerce stores
Customers engage in online shopping from foreign and local (regional) e-
commerce stores although they lack trust in e-commerce
Customers are more demanding and This USAID study for e-commerce in
cautious with local e-commerce stores. Serbia points out one interesting fact: lack of
One of the reasons might be that they trust in e-commerce exists among customers,
order non- essential products from although 85% of the online customers didn’t
foreign websites and have lower criteria have negative experience with e-commerce
for these e-stores. stores.
Page 46KEY INSIGHTS: Customers need assurance Sub-challenge 1
Credibility and quality of
e-commerce sellers
The findings from several performed When asked ”What do you do before you
interviews in February 2021 show make a purchase decision online?” the
that e-consumers don’t buy or majority of consumers stated that they
perform web search, read consumers’ “I am interested in purchasing
rarely buy and trust unknown e-
shops. reviews and testimonials online or they from a (local) website, there are
ask for recommendations from friends & cheap goods, but I am afraid to
family.
make a purchase because I don’t
know what will I end up with.”
Several forums were analyzed from N. Macedonia, Serbia,
Frequently, consumers consult Bosnia and Montenegro.
The most common issues mentioned by the e-commerce
online forums where they discuss consumers were unreliable and expensive delivery, lack of
about the e-sellers, the quality of trust regarding the quality of the products that local e-shops
their services and the origin and offer, and poor customer service.
Their testimonials show that consumers in the region
quality of the goods. regularly buy on foreign e-commerce platforms like
Aliexpress, Amazon, Ebay, iHerb, etc.
Page 47Sub-challenge 1
KEY CUSTOMER ISSUES Credibility and quality of
e-commerce sellers
>> Is the seller who it claims to be?
>> Does the seller provide quality service?
The consumer faces many uncertainties
>> Is the conduct of the seller based on when visiting an e-commerce website.
>> How would a customer know that this is a
sound business fundamentals? Building trust means predicting those
legit e-commerce seller?
uncertainties and preventing the
>> Is the seller capable to provide on- assumptions of the buyer with proactive
>> Is the website real or scam?
time delivery, product quality and after behavior and assurance by the e-commerce
purchase service? seller.
One research framework suggests that for
each individual transaction, the process of
buying and selling goods consists of few
phases such as: information (where the
trust is built),, agreement (confirmation of
The large and uncontrolled informal trust) and settlement (maintaining trust).
Research shows that more than 60% of the
economy is pointed out as a constraint on
consumers don’t shop from unknown
the development of the formal digital
websites.
economy. The negative experience with the
A key constraint for e-commerce growth is
informal companies translates into general
the lack of trust in e-commerce, particularly
negative attitude towards e-commerce and
in domestic e-commerce sellers.
lack of trust in e-commerce companies.
Page 48OPPORTUNITIES REQUIREMENTS Sub-challenge 1
Credibility and quality of
e-commerce sellers
>> Since there is a lack of web- specific rules >> Recognizable, transparent trust enhancing
that company needs to follow and the mechanism which would be clearly
consumers are not fully aware of it and how communicated with the customers and The following solutions are not
to protect themselves, the need for acceptable by the companies suitable for the 12th lab of
tomorrow:
assurance from an independent third party >> The potential solutions should be aligned with ❏ Awareness campaigns
emerges. national laws & regulations ❏ NGO or similar initiatives
>> The solutions should be potentially scalable in ❏ Solutions that require legal
framework or amendments
>> Seals, badges or labels are a common the SEE region to existing regulatives
mechanisms that aim to assure consumers >> The potential solutions should be innovative ❏ Solutions that can not be
implemented in at least 3
that a particular online seller has been and sustainable business models
countries in the SEE
validated by an independent third party and >> The requirements that e-commerce sellers region and scalable in the
is found to be safe. As such, these seals or have to fulfil should be based on national whole region
badges are a form of branding. Their use is legislations and preferably, aligned with EU
especially important for SMEs, as these are regulations and global code of conduct in e-
often not a well-known brand of their own. commerce.
Read more in the European Union report
here and more about third- party certification
here and here.
Page 49SUB-CHALLENGE 2:
How might we increase transparency of
e-commerce sellers in order to make
them more trustworthy?
Page 50KEY STAKEHOLDER INSIGHT
Trust is a complex issue.
One of the root causes is transparency and the
technology enabling that transparency is deeping
the gap of trust.
Ecommerce providers are not offering sufficient
information/ are not transparent so that the e-
buyers could have an informed decision. Even
more, they are preventing information.
Trust is not a loyalty program.
Page 51KEY CONSUMER ISSUES Sub-challenge 2
Transparency of e-commerce sellers
Transparency regarding data: how the
Lack of real, credible social proof
data is collected and used
“One of the root causes of lack of
trust is transparency, and the
Purchasing “out of stock” products is technology enabling that
Transparency regarding prices
very common transparency is deepening the
gap of trust.”
Transparency of the supply chain Online seller’s overall transparency
Page 52KEY INSIGHT:
Sub-challenge 2
Transparency of e-commerce sellers
There is growing market pressure in favor of transparency, and in e-
commerce- TRANSPARENCY IS CRUCIAL FOR SUCCESS.
“E-commerce providers are not
The transparency of information refers to clear Research shows that consumers are curious and
offering sufficient information &
and understandable presentation of the tend to make informed decisions about online are not transparent so that the
products placed on the website, prices including purchases. Consumers look for e-buyers could make an
shipping, delivery and other additional fees and recommendations and want to be informed of informed purchase decision.
taxes, clear and understandable description of other people experiences with the respective e- Even more, they are preventing
payment procedures, consumer rights and commerce seller or the products that are being information.”
obligations, etc. sold.
In 1995, Amazon introduced consumer reviews on its website, a
By being transparent, one e-commerce move that was largely viewed as brand suicide at the time.
company is building trust and driving Instead, e-commerce rating and reviews enabled Amazon to build
customer loyalty. a shopping empire based on brand experience, consumers’ trust,
and social proof.
Page 53OPPORTUNITIES REQUIREMENTS Sub-challenge 2
One of the ways for building trust in e-commerce with sense for Transparency of e-commerce sellers
transparency is social proof – reviews. As mentioned above,
>> The potential solutions should be
research shows that consumers are interested in reading
compliant with national laws & regulations The following solutions are not
reviews and tend to perform research before making an online suitable for the 12th lab of
(e.g. data privacy)
purchase. Therefore, building and maintaining online reputation tomorrow:
>> The potential solutions should be
is important for the e-commerce sellers.
>> Radical transparency is the future of customer experience in potentially scalable in the SEE region ❏ business solutions that
e-commerce. First step towards that radical transparency would >> The potential solutions should be require legal framework or
be data transparency. Customers are worried about giving out innovative and sustainable business models amendments to existing
personal details online- the data can be sold or misused by the regulatives
company. Transparency is of vital importance to the customers.
>> At the same time, personalized experiences that customers
require clash with the concept of data privacy, Personalized
customer experiences require data for finding useful patterns
that extend the existing business knowledge. In order to be
compliant with the regulations and to personalize customer
experiences, companies need an innovative data strategy that
demonstrates how data sharing is creating value to the
customers.
Page 54SUB- CHALLENGE 3:
How might we improve efficiency and
reliability of the last mile delivery
services?
Page 55KEY INSIGHT: E-commerce sellers consider last mile delivery Sub-challenge 3
to be their biggest “pain point” Efficiency and Reliability of Last
Mile Delivery
The main issues and barriers on the supply According to research, delivery issues
side are the following:
have influence on the consumers’
>> High transaction costs for delivery of physical
purchasing decision and negatively “One of the 2 main trust
products and payments affect the reputation of the e- components is reliable
commerce seller. Although these
>> Deliveries outside the local markets are too
delivery. If the e-seller
issues are not typical “trust barriers”
expensive or not available for the e-commerce but rather “operational barriers”, are can’t promise reliable
sellers highly important for e-commerce delivery, customers will
growth (especially for cross- border).
>> The cooperation among delivery services is be hesitant.”
weak on regional level, especially when it comes One of the few trust pillars is- delivery
to postal services (national postal service method, its reliability and efficiency.
providers)
Page 56KEY CONSUMER INSIGHTS:
Last mile delivery and CoD payments
Since e-commerce sellers outsource DELIVERY PROVIDERS
the last mile delivery, the CoD Local & national deliveries are performed
payments are collected by the by private local delivery companies, while
delivery partners, which causes international purchases are delivered by
inconveniences for the e-commerce the national posts. Door-to-door delivery is
seller. Delivery companies don’t offer not offered by the national posts, instead
credit card payment on POS terminal customers pick up their parcels in the post
upon delivery. offices.
Customers don’t have the option to PARCEL LOCKERS
choose the last mile delivery option or Parcel lockers are gaining reputation and
its cost. popularity in the region. Paketomat is a
One of the reasons for that is actually parcel locker system (Slovenia, Croatia,
the CoD payment: e-commerce Serbia) implemented by national posts and
sellers find inconvenient to partner private delivery companies. Customers can
with several delivery companies and pick-up their parcels 24/7 and can pay
manage CoD with each partner. cash or card via available POS or at the
gas station where the locker is placed.
Page 57Sub-challenge 3
KEY CONSUMER INSIGHTS: Lack of communication and Efficiency and Reliability of
information from purchase to parcel delivery Last Mile Delivery
Tracking orders is an overlooked feature Missing small parcels shipped from “About two weeks ago when I
and very often- not available foreign countries made a purchase from a local e-
shop, they said their delivery takes
two days max, but I still have not
RELIABILITY of last mile DELIVERY SPEED of DELIVERY received my package and it has
been 2 weeks. I also cannot get a
hold of them because they do not
answer their phone nor they
Low predictability of the last mile
QUALITY of the last mile delivery respond to my Facebook
delivery
messages .”
E-commerce sellers rarely offer in-store pick-up (in case they have offline stores).
Returns of products as well are rarely accepted in-store, instead are performed
by the delivery partners.
Page 58OPPORTUNITIES LIMITATIONS
Last mile delivery refers to the shipping of products between a Sub-challenge 3
warehouse, store or restaurant and the customer. Last mile Efficiency and Reliability of Last
❏ Low LPI scores in the countries
delivery is a struggle, and even global gigants like Walmart are Mile Delivery
of the region
looking for new technologies to help them in the last mile ❏ Some of the countries in the
delivery. region don’t have an advanced
❏ Building personal connections with the customers address system
❏ Offer real- time information about a package’s delivery ❏ The potential solutions should
status be acceptable by the e-
Companies can take cue from ride hailing services and offer commerce providers and the
receivers mobile apps that provide information about the driver delivery services and in
who delivers the package accordance with the legislation
❏ Customers might pay additional fee for delivery in certain in the respective countries in
period of time (predictable delivery)
the region
❏ New ways to increase sustainability- deliver orders from
multiple senders at the same time
❏ Deliver orders to drop- off location in the neighborhood
(especially for countries with assigned street addresses)
Parcel companies can team up with eCommerce companies and
tech startups for increasing their digital capabilities and
international partners for solving cross- border issues.
❏ Parcel lockers and pick-up stations are gaining more
popularity in developing countries as well in the region
Page 59SUB-CHALLENGE 4:
How might we increase consumers’
trust in online payments?
Page 60KEY INSIGHT: Cash- on- Delivery is the preferred payment
method Sub-challenge 4
Trust in online payments
Legal frameworks for e-payments and >> Offering CoD payment assures customers that
as a brand, you’re focused on first fulfilling their “The only local website I buy
consumer protection in e-commerce are in
order and then on getting paid for it. from are auction sites and
place across all economies in the region,
>> In some countries in the region, the e- pay in cash on delivery, or
though not fully aligned with EU
commerce sellers offer the option of opening on group- buying website,
frameworks. For more information, read
the package before paying for the purchase. while I order the rest from
Appendix 9 of the World Bank Report here.
abroad.”
>> Lack of financial literacy on the demand side
>> Lack of trust in financial services
Since e-commerce sellers outsource
the last mile delivery, the CoD >> Most of the consumers in the region use
payments are collected by the delivery credit card payments at foreign e-commerce
stores, but locally prefer cash on delivery.
partners, which causes
inconveniences for the e-commerce
>>For example, in Bosnia only 38% of the buyers
seller.
are comfortable with paying online with credit
cards.
Page 61KEY CONSUMER ISSUES
Sub-challenge 4
Trust in online payments
Lack of trust in financial services is common Around 60 % of the customers in the region
on regional level. have concerns regarding online payments
"I bought something from a
local online shop. It turned out
Online payments are not perceived as safe to be a fake e-shop, so around
by the consumers. MISUSE OF PERSONAL DATA & Data privacy 100 EUR were withdrawn from
my account without my
consent."
Payment in advance without being sure
whether the purchased goods are in stock Identity and payment theft
An Albanian online marketplace had over 25%
of sales via bank cards in the beginning as Customers are not sure whether (and how)
they were perceived as a foreign shop. When they are protected from scams and credit
it became known that it was a domestic card frauds.
company, electronic payment sales dropped
to less than 1%.
Page 62OPPORTUNITIES LIMITATIONS Sub-challenge 4
Trust in online payments
❏ Lack of specialized online payment ❏ Even though regulatory environment for
service providers payments is developed, it is still not According to the World Bank Report, the
❏ Lack of innovative payment systems for aligned with the relevant EU regulation barriers to finance that include:
e-commerce ❏ Low levels of account ownership
❏ Competing with local & regional banks
❏ PayPal offers limited services in the and use of digital financial
region (e.g. in North Macedonia ❏ Key regional challenges also include the
services;
consumers can only use PayPal to send ❏ Banks’ risk aversion;
difficulty for firms and regulators to ❏ High cash-use levels;
funds coordinate operations across small and ❏ Reduced levels of trust in financial
❏ Payments in credit cards are rare in
fragmented markets, within the services;
Albania and Bosnia and Herzegovina constraints of complex foreign exchange ❏ Comparatively low financial
❏ Ease of setting up a company and doing rules. literacy rates,
business ❏ Comparatively high cost of core
financial services e.g. payments
and credit,
❏ Comparatively low levels of
accessibility to financial and capital
Safety Payment Find more inspiration: markets,
Digital Wallets present challenges but also opportunities
Badges & Seals ❏ CoD management to regional fintech providers seeking to
❏ Mobile money service increase access for both consumers and
❏ Digital Wallet SMEs.
Advanced Cash-on-Delivery
Page 63ANNEX 1:
Facts & Figures
Page 64Ease of Doing Business Index
Country Index >> With increased government support and no
capital fee for registering business, KOSOVO is
North Macedonia 17 developing into potential location for starting
business in technology.
Albania 82
>> MONTENEGRO ranks as the second country
Kosovo 57 to have maximum number of entrepreneurs in
Serbia 44 Europe behind Estonia.
Montenegro 50 >> SERBIA emerged as a leader in the region
Moldova 48 and is one of the top 5 countries in the world
in number of blockchain developers.
Bosnia and 90
Herzegovina
Source: The World Bank 2019. Available here .
Page 65Small and medium- sized
>> The COVID-19 crisis has harshly affected SMEs in enterprises (SMEs) form
99% South Eastern Europe.
of all companies in the the “backbone of the
region are SMEs >> The countries in the region are encouraged to intensify
SMEs digitalization which would help with remote regional economies”.
working, digital payments and increased Read more about the
cybersecurity.
65% SMEs assessment in the
of total business sector value
is generated by SMEs >> The crisis forces SMEs to diversify their customer OECD SME Policy Index
base and enter new e-commerce market.
here.
>> E-commerce is an opportunity for SMEs to catalyse
10% their access to new international markets and enhance
SMEs sell online in several
competitiveness.
economies in the region
Read more in the COVID-19 CRISIS RESPONSE IN SOUTH EAST EUROPEAN ECONOMIES report here.
Page 66Digitalization and Innovation
There has been significant
progress in the past couple of
56% of the companies in KOSOVO
years in digital transformation in
claim their innovations were new to
3 out of 10 companies in the
their market, while 7% of the
the SEE region.
region introduced new or improved companies in Kosovo introduced Digital transformation could be
products and/ or services in 2019 innovation on the global scale.
used as an important element
in boosting productivity and
employment in the region.
Executives in BOSNIA AND
40 % of the companies in BOSNIA HERZEGOVINA are reporting an
and HERZEGOVINA and MONTENEGRO above-average level of
introduced new or significantly innovative activity across all markets
improved products and/ or services in relative to the region.
2019
Read more in the OECD report here.
Page 67Digital Skills
The European Commission estimates that
Companies are underprepared for
in the near future, 90% of the jobs will
digital security challenges: on average,
require some level of digital skills.
only 12% of firms in the regional
economies defined or revised their
The economies in the region are behind
the EU 28 member states in advanced security policy in 2019.
digital skills.
The majority of individuals in the
economies in the region lack basic digital
skills.
SERBIA is the only one economy has a
dedicated digital skill strategy.
2/3 of the individuals lack skills required to
navigate digital spaces.
Page 68Digital in SEE (by country)
Broadband mobile Account in
South- Eastern Internet Online purchases/ or Mobile phone Active social
Population connections financial
Europe (SEE) penetration pays bills online connection media users
(3g-5g) institution
Albania 2.88 m 72% 7.3% 4.12 m 1.40 m 58% 39%
Kosovo 1.91 m 89% 15% 1,67m 1.10m 78% 52%
(93% ) (61%)
Serbia 8.75 m 75% 23% 8.59 m 3.70 m 82% 71%
(98%) (42%)
N.Macedonia 2.09 m 81% 20% 2.24 m 1.10 m 66% 77%
(107%) (53%)
Moldova 4.04 m 2.88 m 37% 4.32 m 1.20 m 71% 44%
(71%) (30%)
Montenegro 629.300 465.700 15% 1.24 m 380.000 56% 68%
(74%) (60%)
Bosnia and 3.50 m 3 mil 15% 3.4m 1.7 m 57% 59%
Herzegovina (86%) (97%) (49%)
Page 69SERBIA
CURRENT MARKET TRENDS RELEVANT LEGISLATION:
>> Growth in consumer spending is projected to ❏ Law on Electronic Documents, Electronic ❏ Projected revenue in e-commerce
continue at above EU-average levels through the Identification, and Trusted Services in market US$490m in 2021.
end of 2022. Electronic Business ❏ Revenue is expected to show an annual
>> Most popular products purchased online are ❏ Law on Postal Service growth rate (CAGR 2021-2025) of 5.59%,
clothing and sporting goods (58.2%); household ❏ Law on Trade and amendments to the Law resulting in a projected market volume
goods (27.1%); electronic equipment (20.1%); on E-commerce of US$609m by 2025.
while least popular are books, newspapers, ❏ Market’s largest segment is Toys, Hobby
magazines (2%). & DIY with a projected market volume of
US$131m in 2021.
❏ User penetration will be 52.7% in 2021
CROSS-BORDER E-COMMERCE and is expected to hit 61.4% by 2025.
>> 75% of all transactions go to non-Serbian CONSUMER PROTECTION
online vendors, largely from Germany, Italy, >> The following platforms set up by the Ministry
Russia, China, and Hungary. of Trade, Tourism, and Telecommunications are
>> Serbia is a member of the World Intellectual intended to educate consumers and include legal
Property Organization (WIPO) and has some advice and important information for consumers:
effective enforcement instruments in the field of www.pametnoibezbedno.gov.rs
IPR protection. www.zastitapotrosaca.gov.rs
Source:https://www.trade.gov/
Page 70❏ Projected revenue in e-
NORTH MACEDONIA commerce market: US$152m in
2021.
❏ Revenue is expected to show an
>> Due to the COVID-19 outbreak, North >> About 80% of online purchases in 2019 in North
annual growth rate (CAGR 2021-
Macedonia has seen online sales growth Macedonia were made via AliExpress retail service or 2025) of 10.15%, resulting in a
increasing in recent months, though almost other foreign websites, mostly in the EU and US projected market volume of
exclusively for grocery shopping. >> Most ordered consumer goods are clothes and US$224m by 2025.
>> 13 banks are acquiring banks, three of them sports equipment. For specific needs, eBay is used, ❏ Market’s largest segment is
(Komercijalna, Stopanska and Uni bank) use Electronics & Media with a
although on a much smaller scale. Shopping through
Casys/ Cpay. Provisions for online transactions projected market volume of
vary from 2.4% up to 6%. mobile devices still lags
US$43m in 2021.
>>Consumers are extremely price sensitive, and
❏ User penetration will be 39.3%
price is usually the decisive factor in purchase in 2021 and is expected to hit
RELEVANT E-COMMERCE LEGISLATION
❏ Law on electronic trade,
decisions. 44.6% by 2025.
❏ Law on trade, >> B2B eCommerce is under-developed in North
❏ Law on Consumers Protection, Macedonia.B2B iis most common in the Information
❏ Law on personal data protection,
Communications and Technology (ICT) sector.
❏ Law on electronic communications,
❏ Criminal Code
Source:https://www.trade.gov/
Page 71BOSNIA AND HERZEGOVINA
❏ Projected revenue in e-commerce
The financial sector in Bosnia leads the way with many commercial banks offering e-banking market US$237m in 2021.
to their clients. ❏ Revenue is expected to show an
annual growth rate (CAGR 2021-2025)
There are 1.3 million people doing shopping online, which means user penetration may
of 6.47%, resulting in a projected
reach around 44% in four years.. market volume of US$304m by 2025.
❏ Market’s largest segment Fashion
>> The most significant segment is Fashion, its market volume is expected to be US$65m in
with a projected market volume of
2021. US$65m in 2021.
Although only 9.7% of Bosnians own credit cards, 17% of online payments are credit card ❏ User penetration will be 39.1% in
payments 2021 and is expected to hit 43.7% by
2025.
The most popular payment method is paying by mobile. Other ways like prepaid cards, bank
transfers, or e-wallets have a marginal share.
Around 600 online stores, 300 active
E-commerce sellers from rural areas that sell artisan and home- made products or services
on local and foreign markets.
Source: https://www.trade.gov/
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