Artur Waliszewski set up Google’s Poland office in 2006 and is now head of the CEE region. With 23 years experience in the industry, he’s known as a leader in the Polish online market.
When we think back 20 to 30 years ago, buying and selling overseas was almost as complicated as it was 200 to 300 years ago. Supply chains and products were offline and communication was probably by fax or phone. The Internet came along and the world shrunk. Then the first smartphone came along and it shrunk even further.
Tech disruption has meant that companies today can go global from the get-go — and not just large multinationals. Small and medium-sized enterprises (SMEs) are arguably the ones that benefit most.
Digital tools make it easier than ever for retailers to reach new customers in all corners of the world. And this even includes tiny companies with a handful of employees. “They now have access to communication services that only the largest multinationals could afford 20 years ago,” says Hal Varian, chief economist at Google.
Digitising the CEE economy
This is true for the digital challengers — 10 countries in Central and Eastern Europe (CEE) that demonstrate a strong potential for growth in the digital economy: Bulgaria, Croatia, the Czech Republic, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia.
The region is home to 100 million people and has one of the most impressive economic growth rates in the world. The average GDP per capita increased by 114% between 1996 and 2017, compared to only 27% in Europe’s Big 5 economies (France, Germany, Italy, Spain, and the United Kingdom)1. But their record-breaking growth is losing momentum.
McKinsey conducted a study in November 2018, with analytical inputs and insights from Google, to understand whether accelerated digitisation could be the next driver of sustained growth for the digital challengers. The answer was a resounding ‘yes’. In fact, the region stands to gain up to €200 billion in additional GDP by 2025 through developing their digital economy across all sectors.
This growth can be achieved by emulating the progress of another group of European countries, knowns as the digital frontrunners: Belgium, Denmark, Estonia, Finland, Ireland, Luxembourg, the Netherlands, Norway, and Sweden. This group of relatively small countries has the highest digitisation rates in the continent.
The digital challengers are well-positioned to capture this opportunity. Strong primary and secondary education, a large tech talent pool, and high quality, affordable digital infrastructure, are just some of the points in their favour. But are they fully tapping into the possibilities of digital?
The power of export
In CEE, where growth opportunities are limited by the scale of domestic markets, the export potential is especially relevant. Export accounts for 64% of CEE countries’ GDP2, but it is heavily focused on offline. Both large and small enterprises in CEE lag behind digital frontrunners in this respect: only one in seven SMEs in the CEE region sold their products or services online in 2017, compared to one in five SMEs in the case of digital frontrunners.3
In fact, e-commerce in general is relatively underdeveloped in Europe as a whole. People in the digital challenger countries have the lowest rate of spend per capita, while digital frontrunners are the biggest online spenders.4 However, consumers can save significantly by not limiting themselves to their home market. A study by the European Commission revealed that consumers could save up to €745 (16% of the total cost) for a basket of 100 goods if they purchased in different countries around the European Union.5
But there are barriers that stand in the way. Websites in foreign languages, longer delivery times, and higher shipping and return costs challenge both businesses and consumers. Companies also have to navigate unknown territory and the higher administrative costs that go along with it.
Unlocking the opportunities
Embracing digital technologies can go a long way towards overcoming those challenges. First, this can help companies understand their export potential. A good place to start is using website analytics to explore site and account insights. Businesses are then able to analyse general market and cultural trends to determine how much interest there is and where it’s focused.
Tools like Market Finder can help make the research process easier. It tells businesses where the demand for their products or services is highest, and then offers step-by-step guides to help them understand what local customers value the most.
Digitisation can help throughout the export journey. Using machine learning, for example, to optimise route planning and cross-border payment systems not only make things easier for businesses but also means significantly lower logistics and customs costs, making export accessible to companies of all sizes.
Localising keywords, ads, and landing pages is another crucial part of the export process, and Market Finder has country-specific localisation guides to help. Businesses can also make use of a variety of sales channels to reach new customers, from their own apps and websites to e-commerce platforms.
The digital challengers stand to gain a lot by taking measures to accelerate their digitisation. And now is the time — building on their strong growth momentum, they already have their foot in the door.
