With a population of 77 million people across Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, Central Asia is on the cusp of a digital transformation which promises to reshape the region’s economy and digital sphere.
In recent years, Central Asia has seen significant growth in e-commerce and digitization, serving as a powerful tool contributing to business innovation, creating employment opportunities, and stimulating economic growth.
To put into perspective, according to a research report by IMARC group, the Central Asia e-commerce market size reached USD 8 billion in 2022. As the region continues to embrace digital transformations, businesses within the region will continue to take advantage of the benefits that come with digitization, including cost savings, and improving business efficiency, with customers being provided with safe and convenient access to online shopping. Central Asia is quickly becoming a global center for e-commerce and digitization innovation.
E-commerce Growth Factors in Central Asia
With a growing middle class and a stimulating startup ecosystem, Central Asia’s digital sphere is rapidly growing. Central Asia’s population is relatively young, with a median age of 26.5, and has seen a vigorous emergence of startups, with entrepreneurs, and investors’ efforts expanding the region’s economy. The Covid-19 pandemic also served as a major catalyst in accelerating e-commerce growth. As with many places in the world, due to lockdowns and social distancing measures, people turned to online shopping to purchase goods and services. As physical stores shut down, the demand for e-commerce shot up.
The rapid growth of e-commerce is also due to an increasing internet penetration within the region. Data shows Central Asia to have a relatively low level of internet penetration, but with access to smartphones and other devices steadily increasing, e-commerce and digitization are reaching more and more people. According to a statistic from the International Telecommunications Union, internet penetration from 2014 to 2020 increased from 70.5% to 86%, and according to the World Bank in 2021, 90.9% of the population in Central Asia were using the internet, seeing opportunities for local businesses to expand beyond their physical locations.
E-commerce in Kazakhstan
Kazakhstan is the largest country in Central Asia with a population of 19 million and leads with the largest e-commerce and digitization market in its region. According to PWC, the country’s e-commerce market grew by a whopping 75% in 2021, reaching roughly 37 million transactions. Similar to the causes of growth in Central Asia more broadly, the growth of e-commerce in Kazakhstan has been the result of several factors, including a low median age, a large and growing middle class, increased internet penetration, and governmental efforts to promote the digitization market. Although still developing, the e-commerce retail market has seen the construction of a competitive market in which businesses are forced to constantly expand and adapt.
Challenges
Despite the rapid growth of e-commerce and digitization in Central Asia, certain challenges need to be addressed to fully capitalize on its potential. First and foremost is the issue of payment methods and consumer trust. Many Kazakhstanis prefer paying in cash instead of conducting online payments. This is because of a lack of infrastructure in mobile banking, as well as a lack of cybersecurity infrastructure to allow customers to shop without security and fraud concerns. A system in which customers can safely conduct payments online is crucial for e-commerce online shopping to work and for the market to expand. Moving forward, an emphasis on developing mobile banking infrastructure will allow consumers a seamless and safe shopping experience, and in turn, will allow banks to provide dependable banking services while building strong customer trust.
Jusan Technologies Limited
A good example of a company addressing these challenges is Jusan Technologies Limited, a UK-based diversified holding company working on a range of initiatives to contribute to and promote digitization in Kazakhstan. With a diversified portfolio including banking, insurance, brokerage, telecom, and e-commerce, the company is well-equipped to create solutions in many different intersecting realms. According to its website, in the next two years, Jusan is projected to become the second largest player in the e-commerce space in Kazakhstan with an expected 40% market share in the country.
With an emphasis on the banking sphere in the Jusan Technologies family of companies, Jusan Bank is supporting the movements of money in a way that improves the quality of the digital sphere. Jusan Bank stands at the forefront as an industry leader in addressing challenges, with over 5 billion USD in assets. By developing a digital ecosystem in the form of a mobile app that brings its various products together, online shopping for Kazakh citizens is becoming more convenient. The app allows customers to open a deposit, get a loan/credit card, and purchase insurance all digitally and relatively instantly, providing digital solutions to a multitude of challenges, and specifically ensuring citizens have both the cash flow and wherewithal to spend.
Also recognized as a cybersecurity leader by KPMG’s Commercial Bank Website and Mobile Application Security Assessment, Jusan Bank ensures customers’ safety and security whilst shopping online, assuaging many of the concerns which newcomers to e-commerce have. By integrating digitization into its retail, business products, and the marketplace in which it operates (Jusan Mart), Jusan Technologies Limited grants access to sales channels, an extensive customer body, and the latest technology, ensuring efficiency and seamless integration all through its family of companies.
AliExpress
Another strong company of note is AliExpress, the Chinese e-commerce retail marketplace currently gaining significant traction in Central Asia. AliExpress offers a wide range of shopping products from electronics and technology to home goods and clothing. Established as a reliable source with attractive prices and reliable delivery options, the company also provides entrepreneurs with opportunities to expand outside of their physical regions and reach a global audience. As e-commerce continues to grow, AliExpress furthers the retail landscape within Central Asia’s digital sphere by granting convenient online access to consumers within the region and facilitating seamless payments as well through its Alipay platform. AliExpress’ limitation is in its not being a Kazakh company and its less firm grasp on what might appeal to local consumers, as well as the lack of trust some have towards Chinese companies.
The Future of E-commerce in Central Asia
The future of e-commerce and the digital sphere in Central Asia, and specifically Kazakhstan, looks promising considering the significant advancements which the region has seen in recent years. However, challenges like payment infrastructure, consumer trust, and cybersecurity must be addressed to enable a market environment where e-commerce will thrive. These obstacles require concerted efforts by businesses, consumers, and the government, to develop and maintain solutions for the challenges. Through improved mobile banking, consumer trust, and cybersecurity infrastructure, the future of e-commerce in Central Asia looks bright.
