Latvia E-commerce Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Key Highlights

• The growing internet penetration paved the way for the E-commerce market in the region. As per the Official Statistics of Latvia, household internet access increased to 91.1% in 2021, compared to 86.2% in 2018 in the region. The growth is further supported by strong smartphone penetration in the region.
• As per the Central Statistical Bureau of Latvia, at the beginning of 2021 internet was used in almost all enterprises (99.97 %). The Central Statistical Bureau's annual survey on the use of information and communication technologies (ICT) and E-commerce in enterprises shows that 68 % of enterprises had their website. Furthermore, 95.5 % of large enterprises, 87.3 % of medium-sized enterprises, and 63.5 % of small enterprises had their own website. For work internet was used by 52.5 % of all employees of enterprises, which is 8.1 percentage points more than in 2020.
• Many enterprises in the region use social media platforms for digital advertising purposes. For instance, as per the Central Statistical Bureau of Latvia, in 2021, 57.7 % of enterprises used social media. In comparison to 2019, this indicator has risen by 16.8% points. The opportunities provided by social media were used by 90.1 % of large enterprises. In the group of medium-sized enterprises, it was used by 68.4 %, and in a group of small enterprises, it was used by 54.8 %.
• However, challenges related to EU applied Value Added Tax (VAT) to sales by non-EU-based companies of electronically supplied services (ESS) can hamper the growth of the market in the region. Furthermore, longer than indicated delivery period by E-commerce companies in the region can also affect the development of the E-commerce market.
• The COVID-19 pandemic accelerated the expansion of the E-commerce market towards new firms, consumers, and types of products in the region. It has provided consumers with access to a variety of products from the convenience and safety of their homes. E-commerce transactions in Latvia have partly shifted from luxury goods and services to everyday necessities such as groceries, relevant to a large number of individuals.

Key Market Trends

Growing Number of E-shoppers is Expected to Boost the E-commerce Market

• The rising number of E-shoppers in the region is expected to drive the E-commerce market in the region. As per Eurostat, the percentage of internet users that bought goods or services online in Latvia has grown, which can be attributed to the COVID-19 pandemic. Furthermore, the percentage of GDP comprised by E-commerce sales increased from 0.69% in 2018 to 1.14% in 2021, as reported by IMF.
• Moreover, the frequency of buying or ordering goods or services over the internet in the region is rapidly increasing. For instance, as reported by the Official Statistics of Latvia, the percentage of individuals who made purchases over the internet during the last three months 3-5 times was 30.4% in 2020, which increased to 33.2% in 2021. Furthermore, 14.7% of individuals ordered online 6-10 times in 2021, compared to 10.8% in 2020. Similarly, 17.8% of individuals ordered online more than 10 times in 2021, compared to 9.4% in 2020.
• Furthermore, as reported by the Official Statistics of Latvia, in 2021, individuals aged between 25 to 44, who made purchases more than ten times over the internet during the last three months, were 47.6%. Similarly, 32% of individuals aged between 25 to 44 made purchases 6-10 times over the internet. The frequency of ordering online indicates the rising popularity of E-commerce among the Latvian population aged between 25 to 44. This is further expected to increase the E-commerce market in the region over the forecast period.
• Moreover, the purchasing power of E-commerce consumers is gradually increasing in Latvia over the past few years. Consumers are spending more on online purchases compared to the past years. For instance, as reported by Official Statistics of Latvia, 25.1% of individuals spent EUR 100-299 on goods or services bought or ordered over the internet during the last three months of 2021, compared to 23.6% in 2020. Similarly, the percentage was 9.4% in 2021 and 8.4% in 2020 for the price range EUR 300-499. Furthermore, the percentage increased from 2% to 4.4% for a price of more than EUR 1,000.
• All of the aforementioned factors are expected to drive the E-commerce market in the region over the forecast period.

The Fashion and Apparel Segment Accounted for Largest Market Share

• The fashion and apparel products segment is the most popular product category in the Latvian E-commerce market and is further expected to grow in the near future. This is further driven by the offers provided by many Latvian companies, such as airBaltic and most of the local banks and insurance companies, which have offered incentives for customers to use their services exclusively through the internet.
• As reported by the Official Statistics of Latvia, clothes (including sports clothing), shoes, or accessories ( bags, jewelry, etc.) purchased over the internet by individuals during the last three months in 2021 was 61.1%, which was the largest category of goods purchased by individuals over the internet among all other goods in 2021.
• Online fashion market players such as H&M, Elkor.lv, and others are exploring alternatives to today’s standard materials, with key players focused on more sustainable substitutes that include recently rediscovered and re-engineered old favorites as well as high-tech materials that deliver on aesthetics and function.
• Furthermore, with high smartphone penetration and rising social commerce, the fashion segment is growing at a faster rate. Enterprises in the region use social media for digital advertising of their fashion-related products to influence the customers and increase the consumer base. This is further supported by the increasing use of social media such as Facebook and Instagram by the Latvian population.
• The factors mentioned above are further expected to boost the demand for the fashion and apparel segment in Latvia's E-commerce market over the forecast period.

Competitive Landscape

• March 2022 - FedEx Express announced its international, day-definite e-commerce service is now available to customers in 24 European countries with connections to 47 markets worldwide. After a successful market launch in 2021, FedEx International Connect Plus (FICP) is now available in an additional 14 countries: the Czech Republic, Denmark, Estonia, Finland, Greece, Hungary, Ireland, Latvia, Lithuania, Luxembourg, Norway, Romania, Slovenia, and Switzerland.
• April 2022 - Tallinn-based Montonio raised USD 12 million in a Series A funding round led by Index Ventures as it presses forward with its one-stop-shop checkout solution for e-commerce merchants and consumers' mission. In conjunction with the new lining of the coffers, the startup has announced the launch of its services in Poland, adding to the Estonian, Latvian, and Lithuanian collections. The new funds will be used, in part, to drive expansion efforts even further afield later this year.

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