Can Croatian Retailers Compete with Cheap Chinese Products?

Author: Manuela Tašler

September 4, 2024

<p>Poslovna znanja 904 - 1 - Segmentacija kupaca</p>

Poslovna znanja 904 - 1 - Segmentacija kupaca / Image by: foto Shutterstock

With the last day of this year’s August, the website Abrakadabra.com, Fortenova’s online store for non-food products, was shut down. The project, launched in Agrokor in 2016, aimed to become one of the leading players in online retail in Southeast Europe. However, after Agrokor’s collapse in 2017, the development of online retail, a new business that had not yet properly stood on its feet, was the last priority for the commissioners dealing with preparations for reaching an agreement with Agrokor’s creditors, and a similar approach remained for Abrakadabra even after the formation of Fortenova.

Fortenova’s company A007 plus, through which Abrakadabra operated, never managed to come close to the revenue of around twenty million euros that was planned to be achieved in its first year of operation. In the last five years, however, its revenues steadily grew, reaching 5.3 million euros last year, but the losses in business also steadily increased, exceeding two million euros last year. With the explanation that the reason for Abrakadabra’s shutdown was ‘the result of strategic changes and a focus on core activities, based on the long-term business direction of the Fortenova group’, this story ended last summer. Despite everything, Abrakadabra was, according to the business data of A007 plus for the past year, until its shutdown, actually the fifth largest among pure online stores registered in Croatia, i.e., those that do not have their own physical store.

Market Still Below One Billion Euros

According to data from the German ECDB, a specialized company for analyzing e-commerce data, the global online retail market is currently worth around 4.2 trillion euros. Croatia, a ‘small drop’ in this, according to ECDB data, will reach around 825 million euros this year, about five percent more than last year, making it the seventieth largest e-commerce market in the world. They say that the share of online sales in the Croatian retail market now stands at 7.2 percent, and it is estimated that by 2028 it will rise to 10.1 percent, amounting to 964 million euros. The online share refers to the share of retail volume conducted via the internet. This includes purchases made via desktop computers, tablets, or smartphones, web-sites, or applications. Only the retail of physical goods is taken into account.

The latest ECDB data indicates that in July this year, the revenue of the Croatian e-commerce market was slightly above 61 million euros, which is a 1.4 percent increase compared to June this year (it seems that even during the seasonal price reductions, Temu’s aggressive advertising campaign is yielding results). In the last twelve months, German analysts say, the highest turnover in the Croatian e-commerce market was achieved last November, while the lowest was in February this year.

Statista, another global data and business intelligence platform, also from Germany, however, deals with significantly higher amounts when it comes to the Croatian e-commerce market. According to its data, it will achieve just over 1.3 billion euros this year, and by 2028 it could grow to 1.7 billion euros in revenue. The difference arises from the methodology of data processing, as ECDB calculates only B2C sales of physical products including VAT, while excluding B2B sales, C2C sales, returns, reimbursements for damaged or lost goods, and similar.

Combination of Physical and Online Sales

The Croatian Bureau of Statistics does not differentiate between physical and online retail, so we can only assume that ECDB’s calculation of the turnover that Croatian residents achieve online is more realistic than the figure provided by Statista. It is also important to note that most of this year’s, as well as the expected amount in the next four years, will be achieved in foreign e-commerce, among which are global giants like the Chinese platforms AliExpress and Temu, which have recently been literally eating competition for breakfast worldwide, and the American Amazon. To counter these online giants in e-commerce, Croatian online retailers do not have at their disposal their weapon, primarily the incredible supplier power that allows them to catch online customers with the bait of low prices while still making high profits. However, domestic online retailers also have several of their advantages, which you can read about in the printed or digital edition of the business weekly Lider.