Consumers wary of e-commerce

Photo: SCANPIX

In Estonia, e-commerce percentage of total retailing is under half the European average.

Despite Estonia being known and advertised as an all-out e-state, in e-commerce figures we are lagging behind many a land.

While European average e-commerce turnover of 2010 made 3.5 per cent of retail business as a whole, Estonia only showed 1.5 per cent. The flagship being UK with as much as 7.9 percent, trailed by Denmark with 5.4, and Finland and Sweden with 4 per cent both. Europe’s e-commerce turnover increases almost yearly; even so, its percentage changes slowly and, at least in Estonia, 2013 is still on the 1.5 per cent course.

The poor e-commerce figures trouble even Estonian state itself. Last year, Government Office ordered a study Use of E-business and E-commerce in Estonia and Options for Expanding Use, revealing that 86 per cent of Estonians have never purchased goods or services via e-channels; the main emphasis being on services.

«Probably, the bulk of those [respondents] indicating use of services are those who use Internet to pay their electricity and gas bills, as well as buying tickets,» explained e-commerce association chief Merle Kangur.

Abounding orders from abroad

In Ms Kangur’s estimation, Estonia mainly falls behind Europe in purchases from local e-stores; loads of goods are ordered from abroad. Estonian e-stores are suffering from lack of trust, thanks to fraudsters active on the market.

«E-commerce being a simple trade, with low entry costs, it draws hordes of them [fraudsters],» acknowledged Ms Kangur. «They communicate with clients till the [money] transfer is done, then they disappear, will not answer mails and calls, evading being caught by Consumer Protection Board.»

To this day, e-merchants cause much headache to Consumer Protection Board; the decent local doers being upset at the board for the monthly press releases highlighting complaints at e-commerce related fraud.

According to people like voucher portal Cherry business manager Martin Kõiva, it is not fair to show e-commerce as a single unit next to products and services, in statistics related to complaints – footwear and e-commerce not being comparable categories.

As explained, however, by Consumer Protection Board’s public relations manager Hanna Turetski, e-commerce falls under services as it is with sales services that e-stores are having difficulty. According to her, e-commerce will be unable to decently grow in Estonia unless traders can improve trust. «As a rule, in ordinary retail one doesn’t open doors one day and wind up the next; e-traders, however, find it very easy to open shop today, collect money tomorrow, and be gone like the wind the day after that,» said she.

It is especially problematic with e-stores which look like real companies, yet are set forth by private persons not even registered as entrepreneurs. In addition to these people evading taxes, only courts can settle disputes between private persons.

Even so, the latter problem is now being dealt with. While in earlier years, Tax and Customs Board used random officials to carry out risk-based e-commerce inspections, from this July «special forces» are in charge.

«With e-commerce, the main problem has been people not acknowledging that this is enterprise, and that taxes have to be paid on income. Registered companies encounter problems trying to hide turnovers, as they think Internet commerce to be more anonymous and turnover therefore easier to hide,» explained Tax and Customs Board inspections head Kaido Lemendik.

Law amendment needed

According to e-traders association head Merle Kangur, Estonian law is not ready for a larger leap in e-commerce development either. For instance: currently, goods ordered from e-stores may be used, essentially, for 44 days and then returned. Now, e-traders have succeeded in inserting it into the new draft amendment for Law of Obligations Act and Consumer Protection Act, making its final rounds, that the return deadline be the traditional 14 days – on condition the product has not been used.

Still, the Cherry manager Martin Kõiva thinks the e-commerce situation is improving yearly and «breakthrough is happening or about to happen». He does not take the Statistical Office figures too seriously, as, under e-commerce, they only include companies stating e-commerce as their main activity; however, the majority of companies determine their areas of activity according to products or services. As with Cherry: it’s area of activity being «mediating advertisements in media».

Adding up turnovers by major e-retailers, Ms Kõiva reckons Estonia’s total e-commerce turnover for 2012 is at least €100m – considerably exceeding the Statistical Office’s €65m.