State of eCommerce
If we had to define the state of eCommerce in Bulgaria with three words, we would have no doubt in choosing the following:
WORK IN PROGRESS
To summarize such status, we will take in analysis elements heralding a double interpretation. Suggesting a “half full cup” or “half empty cup” overall sensation. It is up to the eCompreneur to decide if they are in front of an opportunity or a pitfall.
The truth is that Bulgaria in on its way to digitalisation and half way through the eCommerce revolution that pervaded all EU countries (and many more worldwide). There is still a lot to be done when compared to other eastern European countries, but the path is very clear.
If we immagine all countries down the same road, we can think of Bulgaria as the fellow all the way in the back, walking at a comfortable pace, waving every once in a while to make countries in the front know that “I’m ok, I’ll get there!”
YAY – Elements that testify ongoing growth
Digitalization has changed the consumption habits of user, the ways in which they learn about a product all the way to when they decide to make the purchase. It influenced post purchase expectations and most of all, the advent of DTC Branding has modifies the way consumers interact with enterprises.
The International Monetary Fund (IMF) observes that for 2022 the share of e-commerce will rise to 2.14% of GDP this year, up from 1.91% in 2021 and 1.54% in 2020.
In terms of turnover, this is expected to reach €1.64 billion by the end of 2022, which represents a growth of nearly 30% compared to 2021.
The role of the “Digital Entrepreneurship” is progressively gaining popularity, and DTC Brands as well as the way consumers interface with businesses are blossoming in a market that is progressively becoming more relevant in the EU scenario. According to forecasts, the market is expected to grow at CAGR of 4.8% during the period from 2022 to 2027.
The number of entrepreneurs working in direct-to-consumer (D2C) sales in Bulgaria has been fluctuating during the last years: in 2021, the amount counts approximately 197 thousand individuals, but the highest number of entrepreneurs was recorded in 2018: 207 thousand.
Currently Bulgaria counts about 772,000 online retailers, and the number continues to grow.
It is important to underline how 60% of online purchases come from international ecommerces.
About 41% of sellers are from the EU and 19% are from other countries.
Is the Bulgarian market ready for your Brand?
This is the moment for entrepreneurs that carry a long term vision to start building something and put in practice lessons that derive from the western European experience with eCommerce.
Never forget that the Bulgarian market is accessible from the sea and has an efficient domestic distribution network. Right now competition is moderate as there is no Amazon competition. Plus, the top three eCommerce sites have a combined market share of 15%.
In the Hungarian market there is plenty of room for other eCommerce businesses.
Also, digital marketing and advertising costs are relatively low and the high adoption of mobile devices and bringing out their effects now. From a strategical point of view this means the world for a retailer looking to scale in a new country.
NAY – Elements that testify that there’s a pretty long road ahead
Far be it from us to kill the positive mood set with the previous paragraph, but it’s time to present the other side of the coin. The less shiny one.
In fact, even if internet penetration and the adoption of online buying have made significant progress, Bulgarians aren’t completely sold on online shopping yet.
Only 44% of Bulgarian internet users make online purchases.
The country has the lowest percentage of online purchases in the EU so making profits at this stage may not be a piece of cake. This is largely due to shopping behaviour that still overall resists to eCommerce.
A survey from 2021 reveals that the first barrier to online purchases in burglary is the preference to shop in physical shops. The pleasure of holding the product added to the connection and loyalty to the store and to the habit of purchasing personally, makes many people still reluctant to online shopping.
As we previously mentioned, digital marketing and advertising costs are relatively low. But when analysing Bulgaria, the question should be: is my potential customer even online?
On the road to digitalization: let’s see where Bulgaria places itself exactly
Certainly the Sars COVID-19 pandemic has led to a significant amelioration of the digital landscape.
Despite this, to today, still one out of five people has never used the internet.
Trends predict how these numbers are destined to change in favour of an increased internet diffusion: the consumption of internet within the country has grown 12 points during the last four years reaching 84%.
However, when it comes to comparing Bulgaria’s digital progress to other European Member States, according to the Commission’s “Index for the penetration of digital technologies in the economy and society”, during the last eight years, Bulgaria (along with Romania) has always occupied the last places.
The position doesn’t get better in other rankings either: this year the country has dropped 4 positions in the UN Human Development index sinking all the way to 68th position. Bulgaria currently is not part of the Most Developed Countries group.
These numbers shouldn’t be interpreted as discouraging but as evidence of the country’s significant growth potential.
Who is the Bulgarian consumer?
The Bulgarian consumer wins the award as the most concerned about security user of 2022.
If security is an element of importance in eastern Europe to the point to make it in the top 5 requisites for a sale to take place for every Eastern European country, when it comes to Bulgaria, for 50% of the populations security and product price are just as important.
There is still a very shallow level of trust in online transactions to the point that in 2021 50% of Bulgarians consumers worry about providing financial information when shopping online and fear falling victim to fraud.
But that’s not all, in fact 63% of Bulgarians believe that internet fraud is an inevitable risk when shopping online.
On a different note, according to the European Cosmetics industry, the cosmetics and personal care market is thriving in Bulgaria. DTC beauty brands are benefitting mostly of the westernalization through social media of the Bulgarian audiences. Moreover, exposure to beauty trends has determined an increment in demand. The industry grew over 6% during last year.
Not only beauty products: as reported by many surveys, Bulgarians also love to buy online items like clothing and footwear, mobile phones and sports equipment.
What will Q4 2022 look like in Bulgaria?
Black Friday and Cyber Monday are shopping events relatively new in the country, according to Radio Bulgaria the phenomenon entered the country around 2012/2013 and, despite growing in anticipation and deals every year, it is still working its way into the Country’s sales dynamics. Furthermore, a part of the population still feels skeptical about the whole shopping frenzy concept.
Interesting fact is that 95% of the population knows what BFCM is, but they primarily associate it to purchasing online.
With this said, we can observe how the sales festivity – during its development stages – is gaining its traditional traits.
A mechanism of sellers’ preparation for the upcoming events as well as expectations on the buyers part, regularly takes place and the two days event is starting earlier every year (in 2021 online sales started on the 19th of November with Black Friday falling on the 26th of November).
Similarly to what is happening in Hungary, there is the tendency for some retailers to promote fake discounts. They do so by rising the prices right before a sale in order to apply a discount that seems convenient, but isn’t.
Sellers misleading buyers can be fined up to 3,000 BGN (approx. €1.500).
Logistics and operations
Selling online to Bulgaria presents the almost mandatory requirement of Cash On Delivery which remains the most chosen solution. The reasons are numerous and go far beyond consumer habits.
In fact, Cash On Delivery for online purchases is the condition needed for the government and authorities to trace the flow of goods from sellers to buyers for taxation purposes. Until 2021, it was the government’s practice to gather from couriers all the data related to cash on delivery transactions in order to have an understanding of a given activity’s turnover.
The taxation for the sale of goods is 10% to 15% depending to the kind of business the entrepreneur has. The eCommerce landscape is right now witnessing a situation in which merchants trying to avoid paying taxes are accepting bank transfers. According to local news, shady systems on the edge of legality have ben put in place by merchants seeking to hide sales from tax authorities.
However, the authorities are acting towards the situation by developing alternative procedures to distinguish when they are in front of a commercial transaction or a personal transaction.
Another reason why Cash On Delivery is a die hard transaction and delivery option is related to the very low trust in the Internet’s security.
As indicated in the previous paragraph, over half of the consumers in Bulgaria (53%) say they don’t feel comfortable entering their financial data online to pay for goods and services and this influences the adoption of other payment methods.
Prepaid transactions take place at a pace dependant by the diffusion of online banking. The share of internet banking users has doubled from 2018 to 2021, reaching 15% of all internet users for personal purposes.
This explains why even if prepaid checkouts are slowly getting more popular, Cash On Delivery remains the main condition for an eCommerce to operate.
Addressing the opportunity represented by the state of eCommerce in Bulgaria, means accessing a fertile scenario at a very primitive stage therefore to benefit of the strategic advantages timing-related. Being early also means dealing with a new set of challenges and having at one’s disposal less services for business development.
Lucky, making digital entrepreneurs able to sell to all European countries without experiencing frontiers is Borderless’ mission.
If you want to embrace ecommerce in Bulgaria we can deliver your products to any destination in Bulgaria – as well as in other European countries – and allow you to enter a market that, without any doubts, holds one of the most interesting futures and growth perspectives in Europe. Learn more about how Borderl3ss will allow you to offer Cash on Delivery or prepaid checkouts HERE.