Understanding E-commerce: A Slow yet Steady Emergence in Georgia
There's no denying that e-commerce is yet to become a fully integral part of Georgian society, particularly among small enterprises that often find the costs associated with developing online platforms to be prohibitive. Mariam Chakhvashvili, a senior analyst at Galt & Taggart, shed light on this issue in a recent discussion with Business Partner.
"The adoption of e-commerce should ideally be more widespread among retailers, which are predominantly small businesses. However, these enterprises often lack the necessary funding to establish and maintain websites," Chakhvashvili explains.
In the traditional retail landscape, small entrepreneurs often shy away from investing in a website, which requires a significant budget for site setup, product listing, inventory management, and pricing updates. Moreover, e-commerce demands a dedicated team for administration, human resources, and technical support – assets often beyond the reach of smaller businesses.
Beyond financial constraints, Chakhvashvili identified the lack of experience in e-commerce as another hurdle for its expansion. "While the pandemic has fast-tracked the transition towards online platforms, it's apparent that Georgians are yet to fully embrace e-commerce," she observes.
The growth of food delivery services has also contributed to this situation. As these companies integrate various forms of e-commerce, including in-store and product-specific platforms, consumers find these comprehensive platforms to be more convenient and user-friendly. Consequently, the e-commerce efforts of other sectors are overshadowed.
Furthermore, Chakhvashvili noted an increase in the prevalence of black market transactions through platforms such as Facebook groups. These platforms are often not included in formal regulations or statistics. "Perhaps providing simplified regulations or incentives could encourage these individuals to transition into formal e-commerce," she suggested.
In Georgia, the basic digital intensity rate among small and medium-sized enterprises remains remarkably low. For instance, a mere 9% of these enterprises possess sophisticated websites compared to the 63% in the European Union.
However, significant progress is on the horizon. The USAID economic governance program is currently supporting a major e-commerce reform in Georgia, focused on introducing a new legal framework for e-commerce. This initiative is in full swing with the Georgian Parliament having already adopted a draft Law titled "On Electronic Commerce," defining the rights, duties, and rules for all parties involved in e-commerce.
