The segment of retail sales is growing rapidly in the world’s e-commerce market. In 2017, its volume amounted to $2.3 trillion, or 10.2% of the total retail sales index. Experts predict that the e-commerce share will be 17.5%, which is more than $4.8 trillion, by the end of 2021. In Ukraine, this index is lower – 3.2%, which the e-commerce market volume in 50 billion UAH demonstrated in 2017. At the same time, the country has the second fastest e-commerce growth rate* in Europe (about 31%), demonstrating the significant market potential. The main market players are online stores, marketplaces, classifieds, price comparison websites, logistic companies, etc.
The further market development depends on a number of factors: GDP per capita, the penetration level of banking services, the Internet and smartphones, the development of logistics infrastructure, the delivery reliability and the business environment. Ukraine is still lagging behind in most of them: it has the second lowest GDP in Europe (8.7 thousand per capita) and ranks the lowest in terms of the Internet penetration level (66%), even despite the significant growth in recent years. By the way, the average in Europe is 83%, and in Sweden – 99.7%. Similarly, we are lagging 10-20% behind our neighbors by the penetration level of bank cards, demonstrating just 63%. However, Ukraine is up there in terms of the penetration of smartphones and the level of urbanization.
The government, business, public and expert community representatives discussed the market problems during the Roundtable “E-commerce: Smart Regulation for a Progressive Market” on December 5. The event was organized by the BRDO Office with the support of EU4Business/FORBIZ as part of the Public Dialogue #PRODialogue. BRDO experts conducted a systematic e-commerce market analysis and identified a number of additional barriers hindering the market development.
“A significant problem for the market is the seller’s obligation to provide a fiscal sales receipt in print upon crediting of funds for the goods. This virtually eliminates Internet acquiring services with the amount of payments over 7.5 billion UAH per year and the possibility to pay on delivery more than 12 billion UAH per year. The solution may be to permit providing fiscal sales receipts in electronic form,” the BRDO IT&Telecom sector head Oleksandr Kubrakov said.
For example, the Law “On the Use of Payment Transaction Recorders in Trade, Catering and Services” obliges buyers to provide a fiscal sales receipt upon crediting of funds. However, this is a problem when a buyer receives the goods from a delivery service and then pays on delivery, while a seller can not provide a printed sales receipt at this point of time. The same is to Internet acquiring services, when payments are received, say, outside working hours, or a warehouse with the goods and a cash register are in different places. In Europe, this is done with the help of electronic receipts, which are already used in Hungary, Croatia, Spain and Slovenia. In Ukraine, it is possible to resolve this issue by making amendments to the said Law, which will allow the use of electronic sales receipts.
Another problem is the protection of consumer rights, when some sellers do not specify the details of a business entity when trading online. Basically, this applies to marketplaces and classifieds, since owners of such web resources often do not have any information about the persons who sell on their websites. In case when such sellers provide poor quality goods, it is impossible to identify the entity, verify the proof of purchase and, accordingly, protect the consumer rights. The problem can be solved by introducing requirements for marketplaces regarding placing information that identifies sellers or providing electronic receipts with all the necessary details.
Another essential aspect for online trading is the need to determine the principle of exhaustion of copyright rights. In accordance with the international principle, the rights are exhausted after selling goods in any country, while the commercial goods movement between countries is almost not restricted. In such a way, making the relevant amendments to the Law “On Protection of Rights to Trademarks for Goods and Services” and introducing the international principle of exhaustion of intellectual property rights will establish the grounds for legal activities on the market of official distributors representing owners of a certain trademark in Ukraine as well as opportunities for parallel import by other suppliers on the market.
In general, according to BRDO experts, Ukrainian legislation should be improved to move the cash circulation out of the shadow economy, reduce smuggling volumes and protect consumer rights. This will be facilitated by the implementation of Directive 2006/112/EU, which provides for bringing the invoice concept, the invoice issue procedure, the use and keeping procedures for electronic accounts into conformity with the EU provisions by Ukraine by 31/10/2019.
At the same time, it is also necessary to resolve the issue of introducing modern technologies for registration of payment transactions as well as simplifying legal requirements on the administration and use of cash registers. Let us recall that the Verkhovna Rada adopted in the first reading a draft law No.4117, which stipulates the possibility of using smartphones, laptops and tablets as cash registers and providing electronic receipts that will enable entrepreneurs to simplify conducting payments and create preconditions for demonopolization of the PTRs market.
The event was also attended by the EUD representative Daniel Kramer, the Rozetka online store founder Vladislav Chechotkin, the president of the Internet Invest holding company Oleksandr Olshansky, the Hotline CEO Serhiy Arabadzhi, the Deputy Chairman of the Board of the Consumers Union of Ukraine Oleh Tsilvik, representatives of the Ministry of Finance, Ukrposhta, the European Business Association, the Internet Association of Ukraine, business and expert communities. More information – at www.brdo.com.ua and www.regulation.gov.ua.
*considered as retail sale of material goods to Ukrainian residents via the Internet.