E-commerce in 2020 has seen an impressive surge as global online retail skyrocketed with sales reaching over US$ 4 trillion. The Baltics are no exception as recent reports show the trend continuing upward.
It has been reported that last year e-commerce sales in Lithuania already comprised 1.95% (in 2020 it made up 1.85%) of the Gross Domestic Product (GDP), in Latvia their share amounted to 1.14% (in 2020 – 1.03%), in Estonia – 7.92% (in 2020 – 6.78%) of GDP. Overall, Lithuania’s e-commerce revenue was projected to reach US$ 889 million in 2021, while Latvia and Estonia were expected to reach US$ 345 million and US$ 405 million respectively.
Having extensive knowledge of the local landscape will be key for businesses seeking to capitalize on the booming online retail scene in the Baltics, as each country’s shoppers have their own unique shopping preferences. For instance, using a smartphone to pay via a preferred bank account is one of the most preferred payment methods in Estonia and Lithuania (48% and 51% respectively), while Latvians prefer credit cards (43% market share). Being able to leverage long-standing consumer habits will help businesses to reduce friction in shopper experience and streamline market penetration.
The continuing e-commerce boom, however, brings back one of the key problems some regions still face—current LPM (Local Payment Method) options do not reflect the needs of global Merchants, this way limiting the access for them and potential consumers.
Nearly 50% of Baltic shoppers have a preference for paying through online banking, which has become the dominant payment method in the region. However, only around 20% of them have a credit card—roughly 17% of Lithuanians and Latvians, and 29% of Estonians—bringing limitations to consumers in terms of shopping on international e-commerce platforms, as well as restricting market access for international Merchants; well over 60% of Europeans tend to abandon their shopping cart if they cannot pay with their favorite payment method. In addition, global payment providers which service the Baltic states, are often unaware of the market needs, offering access only to a small traditional and challenger bank network.
The Baltics are one of the fastest-growing e-commerce markets in Europe, bringing a total of US$1.64 billion of e-commerce revenue for 2021 across the three countries. This growth is attracting a number of new businesses to the region, but the current Local Payment Methods are, unfortunately, not fit for international merchants and make it more difficult for them to access the market. We want to change that.