Where is the e-commerce market heading, how are the shares distributed between domestic and foreign players, are new names emerging, and how accessible are digital marketplaces to residents of the regions? TAJ.report studied the status quo and learned forecasts from experts and market participants. Financial consultant Rasul Rysmambetov notes the active entry of Russian marketplaces Ozon and Wildberries into the market.
“I believe they will continue to develop at the same pace for 2-3 years. It all depends on whether these platforms can not only import goods but also find interesting suppliers in Kazakhstan. The presence of these players in the market is a threat to our players. Choco has little money, and in e-commerce - like in taxi services - large investments are needed, warehouses (which are in short supply here), logistics. What to do? – Tax foreign marketplaces. Overall, there are many places for new players in the e-commerce market. Classic retail is developing supply channels through electronic platforms. However, in the regions, the niche is developing more slowly,” says the financial consultant.
Economist Askar Kysykov calls e-commerce one of the key drivers of the country's economy.
“Especially in the financial sector: many banks have created marketplaces that play a significant role in the sale of goods and services, including through installment tools. Large players from the Russian Federation have entered this market. To compete with them, we need similar giants made in Kazakhstan. Small projects, especially in the regions, are unlikely to compete with giants that have the necessary resources for development. This is more about the redistribution of the market among large participants. It is important to support the sector and local players. I know that there are attempts to regulate the industry by the government. This could seriously slow down the development of the local share of e-commerce,” notes Kysykov.
At the current stage, in his opinion, it is necessary to provide maximum freedom to Kazakh representatives of electronic commerce.
“Of course, within the framework of the law and consumer protection. E-commerce is more efficient than traditional offline trade, more economical and faster. The global trend is related to the further development of the industry, and many issues, including those related to social support, the government can develop through e-commerce. Social support tools can be integrated into the e-commerce ecosystem on a mutually beneficial basis with private platforms,” believes the economist.
About 'game changer' and prosthetics
Economist, head of the analytical center 'DESHT ITG' Kuanish Zhaikov notes: electronic commerce is a very large sphere that includes all possible financial and trade transactions in digital format.
“I have only heard figures regarding electronic trade (part of e-commerce). In November, the Ministry of Trade and Integration announced that the sector is growing rapidly. Electronic trade in goods was estimated at 2 trillion tenge or 12.5% for 2022. Moreover, the sector is very competitive, including the participation of foreign players. These are well-known Kaspi, Halyk market, Wildberries, Ozon, etc. Accordingly, a self-regulating market mechanism is in place that prevents anyone from getting too arrogant. Hence the various conveniences, speed, bonuses, services, and other tools for winning over customers,” says the economist.
If approached conceptually, e-commerce is the biggest 'game changer' for Kazakhstan.
“Here are just a few points for consideration. A huge saving of time and nerves for citizens. Searching for goods and services, comparing prices, evaluating suppliers, shopping trips, and trips to markets. Or weeks of agony to gather all the documents and get a loan from the bank. Or standing in the cold trying to catch a taxi with an unknown driver, especially if it’s not for yourself. It seems to me that many underestimate how many additional years of life e-commerce gives to citizens. And yes, it is precisely for this - saving time and safety - that we pay,” emphasizes Kuanish Zhaikov.
Photo: Kuanish Zhaikov, economist, head of the analytical center 'DESHT ITG'
Secondly - the change in the labor market, especially the effect is noticeable on the self-employed.
“In Kazakhstan, there is a large 'gray' sector. And even in the 'white' sector, incomes are not always good enough to avoid looking for new sources. Additionally, we need to consider the local culture - not everyone likes to work in the service sector, 'to work for someone else', etc. E-commerce has created many clear sources of income. For example, hundreds of thousands of citizens are engaged in transportation and delivery, including those who have official jobs. You can label it however you want, saying that this work does not require education and qualifications. But that’s not our concern - the main thing is that people feed their families and ask for nothing,” believes the economist.
Thirdly - e-commerce is a 'prosthetic' that replaces our poor institutional environment.
“We have a scattered population across a large territory, ethnolinguistically and culturally divided. We have issues with basic institutions for the market - courts, law enforcement systems, legal support, adequate rules, etc. E-commerce substitutes much of this and also erases differences between people. You do not know the values and beliefs of the people from whom you bought the goods or who will deliver them to you. You do not know whose deposits your loan was issued from. You do not know the political views of your taxi driver. The economy begins to work 'seamlessly', which accelerates everything,” emphasizes the head of 'DESHT ITG'.
He also adds: his center particularly supports the Ministry of Trade and Integration, which has 'taken an adequate position regarding electronic commerce':
“The government agency is not inclined to tighten regulation (at least for now). They believe that it is necessary to first comprehensively study this new phenomenon and 'approach it delicately'. Moreover, there is no talk of any subsidies.”
A new window to Europe
Co-founder of the first unified e-commerce project - a marketplace for European goods for Kazakhstan 'Dede Shop' Aset Beysenov is confident: e-commerce in our country has a huge future.
“In November last year, we opened a store for European goods on Telegram, on March 1 we are launching on Instagram, and at the end of March we will launch the website in test mode. We are building a small Amazon and Farfetch in one - that is, trading in mass-market and premium category goods from Europe. Many residents of Almaty and Astana are already using the same Farfetch, paying money to a foreign company located in London and other foreign locations. We want to change the situation so that tax revenues remain in Kazakhstan and the money goes to pay Kazakh workers, creating new jobs,” emphasizes the interlocutor.
In two years, entrepreneurs intend to provide Kazakhs access to the largest global markets, with the ability to purchase goods including on installment and credit.
“On Wildberries, Ozon, Kaspi, and other platforms, local sellers mainly sell goods of Turkish, Chinese, Kyrgyz, and Russian production. The main principle of competition for customers on these platforms is dumping. And often the customer suffers in the process. Lamoda has a somewhat truncated format of product selection. European and American products are sold in boutiques or small online stores. The average consumer's access to these goods is complicated. There are buyers who help find websites in the West and then send the ordered items, but there has not been a single trading platform where goods from Europe and the USA are collected for Kazakhs,” says Aset.
Photo: Aset Beysenov - co-founder of the marketplace 'Dede Shop'
On the 'Dede' marketplace, the creators offer clothing, cosmetics, home goods, sports and hobby items from the EU and the USA.
“We also plan to supply goods from South Korea. Currently, our top-selling products are accessories and bags from Europe: bags, wallets, belts, watches, antique jewelry, as well as home goods: dishes, household appliances, kitchen interior items. In third place are sports and hobby items. Before the New Year, there were many orders for chocolate and souvenirs from Europe and original Disney toys,” shares the interlocutor.
As expected, demand for goods from Europe is highest in Almaty, followed by Astana, Shymkent, Aktobe, and Atyrau. If, according to the analysis of the retail e-commerce market, the average check in the first half of 2023 in Kazakhstan was 24,900 tenge, then according to 'Dede Shop', the figure last year was 75,000 tenge per one item.
“There are no changes in delivery times for goods from Europe due to geopolitics and complicated logistics by air. The only thing is that orders arriving in Almaty reach the customer's door faster. At the Almaty airport, customs processes packages on-site and then sends them to customers. In the capital, the situation is different: customs clearance takes place not at the airport but at another location. This results in a loss of 1-2 days. There are difficulties with ground transport - goods often get stuck at borders. And another important nuance: Air Astana has a very small volume of postal shipments between Europe and Kazakhstan. We send goods from Frankfurt am Main - one of the world's transport hubs. We could ship every day, but the domestic carrier is slowing us down in this regard. If this issue were resolved, e-commerce would develop faster,” notes Aset Beysenov.
Regarding competition with Russian marketplaces, he notes that this niche began to develop much earlier in neighboring countries.
“In the mid-2000s, the population was already actively using online shopping. Given the territory and population size, Russia has a larger volume of goods, accordingly, the margin can be lower due to quantity. But again, due to volumes, they can win the battle for customers. Overall, I am in favor of developing competition. In developed countries, the percentage of citizens involved in e-commerce reaches 50%. In our case, it is still at the level of 10%. Many in Kazakhstan still prefer offline purchases, although transitioning to online markets can save you time, nerves, and up to 25% of your money. And the hours saved can be spent on communication with loved ones, hobbies, and sports,” reflects Aset.
From the Green Bazaar to a new level
Managing Director of the online supermarket 'Arbuz.kz' Valeria Reksha notes: the market for food delivery has only recently begun to develop in Kazakhstan. The dynamics of its growth were influenced by the emergence of large international players in 2019 and the COVID-19 pandemic, which changed consumer habits and operational decisions of companies. The brand's history began with a small store at the Green Bazaar delivering groceries with its own transport in Almaty in 2011. The project has grown to become number one in the e-grocery market, now number two.
“In 2018, a new team led by Alexey Li and Ruslan Pogorelkov relaunched the project and increased sales by more than 90 times. The domestic startup operates on a supermarket model with delivery of food, beverages, household chemicals, and home goods. The company has its own warehouses, assembly line, and courier service. As of 2018, the company, which operates in the mid and mid-plus segment, had rented warehouses of 30 square meters, now it has 9,000 square meters of warehouse space in Almaty and Astana,” says Reksha.
Photo: Valeria Reksha - managing director of the online supermarket Arbuz.kz
She notes the problem with warehouses for Kazakhstan, where large operators come in need of large distribution centers of 20-30 thousand square meters.
“Within the city, businesses, depending on the number of SKUs (stock keeping units), need relatively small warehouse spaces. Some can trade directly from the warehouses. We do not have our own offline presence, so we need warehouses within the city, and this is a big challenge in Almaty - all plots are allocated for residential complexes and shopping centers. Arbuz.kz has 22,000 product items, and we need a large warehouse near residential complexes, where there are people to whom we must deliver a wide range within an hour (15 minutes for order assembly, 40 minutes on average for delivery). So, out-of-town premises are initially unsuitable for us. In June 2023, we joined the Freedom Finance holding and opened a new warehouse in the upper part of Almaty in December,” continues the interlocutor.
The issue of having quality large warehouses is part of the company's strategies - where and how they will be built affects the investment demand, emphasizes the managing director of the online supermarket. For example, their warehouses are designed with several temperature regimes for frozen food, chilled goods, fruits, and vegetables. There are specific requirements for storing alcohol and red caviar. All these years, the online supermarket has operated in Almaty and Astana, and the company plans to enter regional markets no earlier than 2026-2027.
“Research shows that not everyone knows about us. So in the next couple of years, we have a lot to work on. We are ready to enter regional markets starting in 2026,” says Valeria.
Overall, the interlocutor notes a change in the structure of consumption and a decline in the average check, related to high inflation in 2023.
“Customers are looking for cheaper substitute products and are willing to use 3-4 stores, increasing the waiting time for goods. We observe unstable dynamics in the average check - a number of products have been ordered from other networks in recent years. For example, the 'Golden Apple' (a chain of perfumery stores from the Russian Federation) has entered the Kazakh market, actively developing online delivery now. It is clear that their stock of personal care and beauty products is larger than ours, which holds minimal stock of such products. But this is more a question of product niche,” emphasizes the managing director of Arbuz.kz.
What Almaty chooses, what Astana saves on
By the way, regarding the products chosen by Kazakhs. According to the interlocutor, buyers in Almaty and Astana have different preferences.
“According to our measurements, different triggers operate for the audience of Astana and Almaty when choosing an online supermarket. In Almaty, the buyer is more oriented towards farm products and generally more conscious consumption. In this regard, our competitive advantage is the presence of a base of farmers who supply us with asparagus, watermelons, other berries, and various green products. Also, in the southern megacity, there is a higher demand for ready-to-cook and ready-to-eat culinary products. In Astana, they are more price-sensitive - despite the fact that it is the capital and the public sector should earn more. Secondly, not all Almaty suppliers deliver goods to Astana. In August 2023, we held the 'Arbuzhai' festival and brought our supplier partners (including cheese and meat delicacies) to the Astana market. The capital's audience is less sophisticated in terms of product selection compared to Almaty residents,” shares the results of the research Valeria.
Another stroke to the portrait of the capital's buyer: in Astana, more buyers respond to promotions with significant discounts of 30-40%. Overall, speaking about the forecasts for the e-commerce market, the interlocutor notes the following trends: global growth in e-commerce sales in the food and beverage sector is expected to rise from 426.6 billion US dollars in 2023 to 480.4 billion in 2024. That is, by 12.6%. Mainly, Kazakh companies from the categories 'food and beverages', 'agriculture', 'construction and real estate' are represented on this platform. There are significantly fewer in the 'clothing' category.
“Food delivery is the fastest-growing market in electronic commerce in Kazakhstan: more than 48% of users order food products online. 2.4% of total revenue in the food market. By 2028, we expect the e-grocery market to account for about 10% of all sales of food and essential goods in Almaty and Astana,” says Valeria.
There are enough places for new players in the market, the expert is confident.
“But it is necessary to increase the number of clients, taking into account local features and consumer habits. The volume of the e-grocery market in Kazakhstan in 2023 amounted to over 508 million dollars, the food delivery market grew by 24%. At the same time, the e-commerce market is not covered in the regions of Kazakhstan, mainly represented only in Almaty and Astana (like Arbuz.kz). In 2023, the number of users in the e-grocery market in the country was over 1.5 million. The number of users will increase annually by 0.2 million clients. According to analysts' forecasts, by 2027 the market will grow by 197% with a volume of 1.5 billion dollars,” emphasizes the interlocutor.
Among the trends in the market, she notes the increase in the frequency of online grocery purchases among Kazakhs.
“At the same time, the average check is decreasing - due to the fragmentation of orders and the growth of the share of marketplaces and e-grocery. The potential for reducing the average check remains. The business community is also forming certain needs - it needs services that will help optimize budgets for logistics,” continues Valeria Reksha.
Among the predicted trends is mono-specialization: meat shops will send their products, greenhouses - vegetables, and so on. Competition will grow, new operators for the delivery of the same vegetables will appear, and there will be many online stores, including on Instagram.
“Marketplaces will develop, and Russian players will compete for a place in the sun in Kazakhstan, mainly selling long shelf-life goods from the Russian Federation and China. Our competitive advantage is our 7-year experience with 'perishable goods'. Newcomers do not realize what a large percentage of spoilage we account for in our work to deliver fresh, fragrant goods to the customer. Ozon Fresh from Russia is not yet represented here, and we do not see other strong competitors in our price segment. In the coming year, we intend to develop supplies from European partners,” shares the managing director of the online supermarket.
Source of taxes and jobs
The press service of Ozon.kz, in turn, reports that since 2021 the company has been investing in infrastructure development in Kazakhstan and is among the top five socially significant companies in the internet trading sphere in the republic.
“Ozon.kz offers more than 250 million product items with fast and free delivery - from books and clothing to food and household appliances. More than 33 thousand Kazakh sellers are developing their businesses on the marketplace, selling almost 400 thousand products. The number of active buyers has exceeded 500 thousand citizens of the country, who ordered 6 million products on the marketplace in a year. Ozon's turnover in Kazakhstan for the 3rd quarter of 2023 increased 10 times compared to the results of the 3rd quarter of 2022. The frequency of orders reached 19.2 orders per year per active buyer compared to 11.7 orders as of September 30, 2022,” reports the press service.
In two years of operation, the company has opened 6 logistics centers in Kazakhstan, 1300 pickup points, and courier delivery in 3 cities. Total investments in the construction, equipment, and IT systems of the two largest complexes exceeded 30 billion tenge, and the number of jobs at all six sites for citizens of the Republic of Kazakhstan will exceed 800 by the end of 2024. Last year, the company launched a local showcase Ozon.kz, adapted for local buyers. Here, only the available assortment is displayed, prices are indicated in tenge, and full customer support is organized in two languages. Notably, according to Ozon.kz, online trading is developing more actively in the regions.
“This positively affects the development of logistics infrastructure in the country. Large networks, delivery services, and marketplaces continue to invest in infrastructure across the country. Major players in the logistics market, such as Kazpost or SDEK, are developing fulfillment service offerings. Marketplaces and large networks are also investing in their own infrastructure to increase delivery speed - one of the key factors in the purchasing decision. Ozon already has two fulfillment centers - in Almaty (38 thousand square meters) and Astana (10 thousand square meters). In 2023, we announced the construction of another, the largest in Kazakhstan. Its area will be 42 thousand square meters and will create about 2000 jobs for local residents. “Over the past year, the turnover of Kazakh sellers on Ozon has almost tripled, both due to sales within Kazakhstan and due to purchases by our 42 million buyers in Armenia, Belarus, Kyrgyzstan, Russia, and Uzbekistan. With the opening of sorting and fulfillment centers, Ozon Kazakhstan allows local sellers to ship goods for sale faster, and we deliver them to buyers faster. As a result, in search results, products from Kazakh sellers are often ranked higher than competitors,” notes the press service.
The company also offers residents of Kazakhstan the opportunity to open an Ozon pickup point on a franchise basis.
“With the development of the network, we have noticed that our customers in Kazakhstan have changed their preferences and started visiting pickup points more often than parcel lockers. Today, 9 out of 10 of our clients choose this delivery method due to its wide availability, free delivery, and the ability to check the order, try on items, and return unsuitable products for free,” added the press service.
Market trends
The president of the Association of Kazakhstan Internet Business (AKIB), creator of Kazakh internet projects Ticketon.kz and Processing.kz Konstantin Gorozhankin highlights several trends in the country's e-commerce sector.
“After the coronavirus pandemic, the industry in Kazakhstan soared, giving a strong qualitative leap. If from the perspective of the Internet we have long caught up with global leaders, from the perspective of buyers we lagged significantly. Before the pandemic, Kazakhs mainly entertained themselves online, learned the news, used messengers, and bought tickets to a lesser extent. Ticketon.kz was used by a large part of Kazakhs as a billboard to later buy tickets through other means. Before the pandemic, 10% of Kazakhs used the Internet for purchases, after - already 40%. Currently, 12% of the total retail turnover in Kazakhstan comes from online purchases. In Western countries, this figure reaches 20%,” says the interlocutor.
For example, in 2023, the turnover of Ticketon.kz amounted to 25 billion tenge. In 2012, the company sold 14 thousand tickets in a year, in 2023 this same number was sold in half a day. The second point highlighted by the interlocutor is that during the pandemic, the losing side in Kazakhstan was Chinese online stores: the once leading player Aliexpress has dropped below the tenth position due to worsened logistics and increased delivery times.
“During this time, the market has strengthened - our product Kaspi, for example, and 2 large Russian marketplaces Wildberries and Ozon. Now the main competition is between these three online stores. This trend, in my estimation, will continue in the next 3 years. Each marketplace has its own strategy. Last year, Kaspi had 2 key advantages: brand popularity, described with epithets 'native, reliable, and simple', and a large number of goods available on installment. The Russians did not have this. But starting this year, Halyk is lending to users on Ozon, along with a couple of other banks,” notes Konstantin Gorozhankin.
As the president of AKIB, he participates in meetings of the EAEU, and according to him, Kaspi fears the arrival of foreign players.
“At the last meeting two weeks ago, Kaspi asked to protect the market from the arrival of Russian competitors, to which they received the response: how can this be done in a free market without monopoly. Although, I note, in terms of mobile transfers, it indeed has a monopoly. I will explain: Kaspi was created based on the example of Tinkoff Bank. But in Russia, mobile transfers are not tied to a bank - only to a phone number. This breaks the monopoly. So when buying vegetables at a stall near your home, you do not think whether the seller has an account in some Sberbank - you easily transfer money to any bank account. In Kazakhstan, the National Bank is trying to break the monopoly of Kaspi, as well as Halyk, and transfers by phone number have already been implemented, but so far only small banks are participating. But I think the situation will change,” believes the expert.
Another trend is the emergence of more and more pickup points for Wildberries and Ozon.
“This is an interesting model, convenient for the consumer. There are likely several points of these marketplaces near your home. And there will be even more. Moreover, one of these players pays money if the owner of the pickup point does not break even within 10 months. In Kazakhstan, due to the large territory, delivering goods from Almaty to Uralsk is comparable to delivering from Istanbul to London. E-commerce services have developed well here, such as ticket sales, but e-commerce for goods has struggled due to logistics. Kazpost is not the fastest and most reliable service. So with the arrival of new players, the market is becoming more vibrant,” says the interlocutor.
He provides another example of the negative consequences of monopoly.
“For my dad's birthday, I wanted to send a basket of fruits and meat delicacies to Shymkent, I chose it on Kaspi and only then found out that delivery to the million-plus city was not available… In the end, I chose an Alice speaker on Ozon and sent it to my dad. Living in Almaty and Astana, we tend to think that delivery is available throughout Kazakhstan. But this was not the case until the arrival of new players. And thanks to the market expansion, people in the regions are gaining access to the benefits of digitalization. And I am sure that soon residents of villages will also be able to receive them,” predicts Gorozhankin.
By the way, he himself also actively uses marketplaces, and recently ordered a mobile phone, the price of which was twice lower than that offered by traditional stores.
“The next trend is that marketplaces provide a platform for goods and generate traffic. And in this context, there is no need to fear the presence of foreign players, as domestic entrepreneurs gain a larger infrastructure for their goods with delivery points across the country. Plus, the Russian, Armenian, Belarusian, and Uzbek markets are opening up - all where Russian marketplaces are represented,” emphasizes the expert.
He notes that if in 2011 only 1 transaction out of 10 in e-commerce remained in Kazakhstan, now it is already 9 out of 10.
“Russian market participants have opened their representations in Kazakhstan. When buying from them, you are essentially purchasing on Kazakh processing in tenge, taxes, and jobs remain with us - this is an important point. Western players have not done this yet,” concludes the interlocutor.
In conclusion, the president of AKIB gave recommendations to those who are just thinking about going online.
“In 2000, I launched an online bookstore in Shymkent. The business did not take off, and when I analyzed the reasons, I realized that the level of Internet penetration was too low. We only reached 20% in 2008. All projects opened before that time died. Only Flip.kz and Intim.kz survived. By the way, at that time, apart from Almaty, Astana, and Karaganda, very few online stores appeared in other cities that reached at least a country level. Now a customer from anywhere in the world can become your buyer with just one click. When we were just creating our Association, there were no platforms, now marketplaces already exist. And I recommend all Kazakhs who have goods and services to start going global. You can occupy a niche by selling an interesting product. Be the first - in conditions of absolute competition online, this is your main advantage,” urges compatriots Konstantin Gorozhankin.
As an illustration, he shared the story of acquaintances who have been selling computer speakers for 10 years.
“They became exclusive suppliers of Chinese products in Kazakhstan and have been millionaires for 10 years, even though they no longer actively use computers. So it’s a matter of how much you can make a small segment large. Look for opportunities, launch, and marketplaces will help you with this,” says Konstantin Gorozhankin.