The difficulties faced by the Croatian economy have also reflected in e-commerce: disruption of supply chains, rising prices, expensive advertising, lack of workers, stockpiling, preparation for the introduction of the euro, inflation… After a sharp rise in 2020 and the opening of hundreds of online stores, today many owners do not know what to do with them. The Croatian market is small, and the crisis is knocking on the door, making it hardest for small online retailers to cope. Large companies like, for example, Hrvatska pošta are successfully dealing with all the challenges, while smaller ones could take advantage of Croatia’s entry into the eurozone and try to expand their business into new markets.
HP is not worried
The CEO of Hrvatska pošta Mladen Puzak explains that all disruptions in e-commerce are primarily caused by the pandemic, and then by the war in Ukraine. Numerous changes have occurred in transport flows, which has also affected the extension of transport deadlines. The direct consequence of this is that we are moving from so-called just-in-time global concepts back to just-in-time local ones, which simultaneously puts pressure on and revitalizes the market for storage capacities.—
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– We are successfully coping with these changes due to a five-year investment cycle that has ensured the logistics infrastructure for Hrvatska pošta. At the same time, we have strongly positioned ourselves internationally as a member of important international organizations (IPC, PostEurop, UPU), as well as through partnerships with companies like DHL and quality international networks like Parcel Connect. We are also available to local large e-commerce players who need support not only in terms of delivery but also in storage and product development. Here, our network of modern sorting centers in Osijek, Zadar, and Kukuljanovo, with the new sorting center in Velika Gorica as the main sorting location with high-bay storage capacities and an automatic package processing machine, a modern fleet, and delivery points where parcel machines play an increasingly important role as last mile – lists Puzak.
The biggest challenge in this business, as well as in the rest of the market, is the workforce. According to him, automation and digitalization have further opened the e-commerce market and expanded the expectations of end users. Hrvatska pošta is following all European and global delivery trends by introducing same-day delivery, time-defined delivery, afternoon delivery, and parcel machines. In addition, with stable incomes and a variable part of the salary, it tries to offer workers long-term stability and perspective.
– We try to anticipate the challenges we have, which we cannot influence, by using advanced analytical systems that we develop ourselves and in collaboration with our partners. On the other hand, we solve the challenges we can influence through open communication with key stakeholders in the e-commerce process: customers, suppliers, and workers – notes Puzak, emphasizing that despite the existing challenges, e-commerce has a very potent future.
Market Competition
Entrepreneur and co-owner of wow-junkie.com, voted by customers as the best beauty web shop in Croatia, and lecturer at Algebra University Claudio Kramarić, highlights a number of e-commerce problems, one of which is competitiveness, or competition in the market. According to Kramarić, the number of e-stores is increasing, and congestion is growing. Few expected that e-commerce would grow so rapidly in just a few months in 2020. Before the pandemic, in the spring of that year, digital channels accounted for 16 percent of retail in the US, and from March to April of the same year, that share grew to 27 percent. We do not have such data for Croatia, but the growth is enormous. —
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– E-stores have opened numerous companies, of which few know what to do with them today. We have a shortage of workforce, or experts who could quickly step into the work processes in e-commerce and manage them effectively. There are enough young people, but there is no one to teach them in practice. Croatia is a relatively small market, where in the last year, hundreds of web stores have opened, and many of them do not have the volume and revenue that would allow them to hire designers, developers, digital marketing experts… This is most often done on their behalf by freelancers and, rarely, agencies. The result is inconsistency in the quality of offerings, technology, and marketing…. Customers feel this; they like security, that everything works quickly, and that everything is ‘simple’. Visibility of e-commerce is also a problem, which users will only find if there are ads included in the Google search. If you are not on the search engine – you do not exist – emphasizes Kramarić.
Rising Prices
Another problem is more expensive advertising because a larger number of e-stores are competing for the same number of customers, resulting in rising advertising costs. For example, advertising on Facebook is nearly 50 percent more expensive than a year ago, as are Google Ads. According to Kramarić, the third problem is privacy. Thanks to Apple’s upgrade of its system to version iOS 14.5, stricter control of user tracking by applications has been introduced, which directly affects advertising on Facebook, Instagram, and similar platforms, where it is no longer as effective as before.
– The solution is – says Kramarić – in turning to new channels, TikTok, for example, is experiencing strong growth and becoming an extremely interesting platform, as is Snapchat. The good news is also the entry into the eurozone, as it is an opportunity for expansion. Those who have not expanded so far should do so now if possible – Kramarić advises, emphasizing that small niche, specialized stores with unique offerings can be a great response to existing problems. —
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According to Davora Španića, CEO of Shipshape, after the huge surge in online sales during the pandemic in 2020, growth has slowed, customers are more educated and demanding, and retailers are under pressure to justify the investments made in e-commerce. Along with logistical problems in supplying goods from eastern countries, increased demand for delivery, and rising prices for services, it is not easy at all. Especially considering the rising prices, inflation, and recession on the horizon.
– New legal regulations regarding consumer protection and price display in Croatia are spiced with the upcoming dual price display due to the transition to the euro, which is an additional item that online retailers need to worry about.
Possible Solutions
Španić also highlights logistical problems in supplying goods and delivering to end customers; for example, the cost of transporting goods from China has increased several times compared to the pre-pandemic period, significantly reducing margins for retailers and increasing the risk of inventory management. In addition to prices, delivery times have also significantly increased, so the planning period for inventory has been extended to six to nine months, which is very long for online sales and brings financial burdens in terms of inventory. On the other hand, delivery prices for packages to customers have also risen, so retailers have taken on part of the cost. For example, the delivery price for a package worth 150 to 200 kuna is 30 – 35 kuna.
– A mitigating circumstance for our industry is that the challenges are not of a technological nature, but quite the opposite – with certain technological solutions, we can at least partially alleviate them for retailers. For example, connecting (integrating) the web shop with suppliers allows real-time information about the availability and price of each individual product – notes Španić, adding that this allows retailers to order goods from suppliers only after the customer makes a purchase, thus reducing their own inventory.
