Report: Barriers Remain for E-Commerce in Eastern Europe

While Internet use in Central and Eastern Europe is growing fast, the required technology remains too expensive for most consumers, posing “formidable barriers” to e-commerce, according to a report released Wednesday by the Yankee Group.

Yankee associate consultant Graham Finnie said that few people have the money to buy computers, and regulatory barriers are keeping telecommunications companies from upgrading their services.

“I was surprised by the relatively limited opportunity there is in Eastern Europe,” Finnie told the E-Commerce Times. “People forget these economiesare still quite small and undeveloped.”

At the same time, Finnie added that he “was quite surprised by how enthusiastic people are about the Internet. It has a positive image, particularly in cities and among the young.”

Coming Soon

In its report, Yankee predicted that 21 percent of households in the region will have Internet access by 2005, up from 5 percent currently. That growth, however, will continue to be spotty and will remain below levels for the rest of Europe, the research firm said.

“There is no doubting the enthusiasm for the Internet in Eastern Europe,” said Finnie, who wrote the report. “Eastern Europeans are generally well-educated and technically literate.”

Patchwork of Growth

Internet trends vary from country to country within Eastern Europe, as well as within a given country’s regions, according to the report. Finnie said Web use is growing fast in some cities, while rural communities remain far behind.

“There’s a world of difference between major cities like Budapest,Prague and Warsaw, and the rural hinterland,” Finnie said.

The Czech Republic, Estonia, Hungary, Poland and Slovenia — which have been accepted as members of the European Union — “offer the most fertile ground for entrepreneurs,” Yankee said, while Bulgaria and Romania have been lagging.

‘Embryonic’ E-Tail

Consumer e-commerce “remains largely embryonic” throughout the region, Yankee said. Low incomes, lack of trust in the Internet, and lack of access to credit cards and reliable courier services are among factors keeping growth at bay, the report found.

As far as business-to-business (B2B) e-commerce, “there’s definitely someactivity, particularly in the more advanced economies,” Finnie said. Local companies, he said, are beginning to set up industry-specific portals in some of the bigger and better-off countries.

Large, multinational companies, however, are for the most part staying out ofeastern Europe, seeing the opportunities for revenue as relatively limited,Finnie said. While e-commerce is poised for growth, he said, the region isstarting from a “relatively low base.”

Multinationals Wary

Businesses that set up shop in the region immediately after the collapse of Communist governments in the 1980s and 1990s “found things are going much tougher” than originally thought, said Finnie.

“There’s a greater realism now about what the opportunities are,” he said.

Yankee said that most countries are working on major regulatory reforms, which should help boost e-commerce in the years ahead. Money and expertise from abroad, high computer use in offices and a steady improvement in the telecommunications infrastrucure will also help move things along, the report said.

“I think we’re going to see a lot over development over thenext two or three years,” said Finnie.

1 Comment

  • I have some doubts regarding the conclusions in the article. It seems to me that personal opinions are presented instead of facts.

    There are surely some true basic facts (expensive technology, regulatory barriers – BTW, is e-commerce really driven by home users?). But lack of trust in the internet is a common problem that is not specific for Eastern Europe. Courier services are at the same level as in the rest of the world. There can surely arise logistic difficulties in e-commerce projects. But there is again no difference to the rest of the world.

    And the statement about large multinational companies is totally out of the box. There is e.g. a big increase of foreign investments, coming from these companies, in the Czech Republic. And this is surely not because of “limited opportunities”.

    However, e-commerce is surely not as developed as it is in the US, but I would really not describe it to be “embryonic”.

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