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Kazakhstan's e-commerce sector leads in Central Asia

Kazakhstan 09.11.2023
Source: forbes.kz
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The volume of the e-commerce market in 2022 exceeded $5.9 trillion, occupying 18.9% of the structure of global retail trade. According to Statista forecasts, by 2026 this figure will exceed 22.2%.
Kazakhstan's e-commerce sector leads in Central Asia

The key growth drivers were mobile commerce (m-commerce), cross-border e-commerce, integration of online and offline retail (omnichannel), as well as the integration of shopping functions in social platforms. However, the sector faces challenges related to competition, logistics, regulation and the need to maintain consumer confidence.

central Asia

The Central Asian region, which includes countries such as Kazakhstan, Uzbekistan, Turkmenistan, Kyrgyzstan and Tajikistan, represents a diverse economic landscape historically known for its strategic location along the Silk Road trade routes. Since gaining independence from the Soviet Union, these countries have experienced varying degrees of economic development. Rich in natural resources, particularly oil and gas, the region is experiencing growth in exports of raw materials and energy. However, the region continues to experience political instability, infrastructure deficits and insufficient economic diversification.

Due to the high level of traditional retail represented on the Central Asian market, as well as the low level of digitalization in the region, the share of online retail remains quite low. However, despite the regional lag, Kazakhstan’s indicators correspond to the world ones.

Kazakhstan's potential

Due to its strategic location in the heart of Eurasia, Kazakhstan is a bridge between East and West. This intermediation makes the country attractive to companies seeking access to the region's large consumer base. High levels of digital payments development, a growing middle class, high internet penetration (89.2% in 2022) and smartphone penetration have created an enabling environment for online shopping and contributed to a vibrant market ecosystem. In addition, Kazakhstan's influence extends beyond the country's borders, facilitating the development of cross-border e-commerce and providing international companies with access to the wider Eurasian region.

In recent years, the e-commerce sector in Kazakhstan has shown impressive growth, strengthening its position as a leader in the region, demonstrating a high level of adaptation to external factors. At the end of 2022, the volume of the e-commerce market in the country approached 2 trillion tenge ($4.2 million).

According to Baker Tilly forecasts, based on the growth rates of major market players for the first half of 2023 and trends in recent years, the size of the e-com market in 2023 could reach 2.4 trillion tenge ($5 billion). Marketplaces remain the main driver of growth: a wide selection of products and the availability of the possibility of purchasing in installments makes this segment more relevant from year to year.

Significant growth is predicted in the e-grocery segment (food delivery), since purchasing essential goods via the Internet increases the level of comfort for residents of megacities. The growth of classifieds is limited due to the development of social commerce. While the country's major cities are experiencing an e-commerce boom, remote regions continue to suffer from underdevelopment and limited access to resources.

With the beginning of the active growth of e-commerce, there is a trend of increasing the share of marketplaces (60% in 2022), which correlates with changes in the global market and also affects the decline in the shares of other segments. For example, the volume of tickets sold online was significantly impacted by pandemic restrictions followed by an unstable geopolitical situation in the region. Classifieds, in turn, showed a decrease in growth rates against the backdrop of SME activity on social networks.

Drivers of the future e-com

The e-com market in Kazakhstan was formed in non-standard conditions: the key players in the market were second-tier banks, which offered a combined ecosystem of financial and non-financial e-commerce services, simplifying consumer access to different needs in one place.

To address unique geographic challenges, Kazakhstan's e-com sector is implementing innovative logistics solutions, focusing on route optimization technologies, real-time tracking, improving warehouse efficiency, and expanding E2E logistics and delivery points.

Some players are starting the process of localizing processes in Kazakhstan. International companies are actively opening warehouses, fulfillment centers and delivery points, which not only contributes to the development of e-commerce through the logistics segment, but also opens up employment opportunities for the population,” notes Wildberries partner in Kazakhstan Rauan Karabay.

A particularly noticeable trend in the market is the development of e-grocery (food) and dark stores. Recent years have seen significant growth in online food ordering. In parallel with e-grocery, q-commerce is also growing: players with a focus on delivery within 15-30 minutes are gaining momentum due to increased demand.

Along with the general development of the market, consumer behavior is also changing.

In the near future, there will be changes in consumer behavior towards quality of service, which will lead to a change in the focus of market players,” says Tair Nurlybek, managing director of Jusan Store.

The growing omnichannel trend is changing how companies interact with customers, meeting consumer demands for a seamless experience across physical and digital channels while enhancing convenience and delivering a personalized shopping experience.

A look into the future

The future of e-commerce in Kazakhstan is promising, with the potential integration of artificial intelligence, VR/AR technologies, advanced logistics and omnichannel retail creating a more dynamic, consumer-centric and accessible landscape. Moreover, as the market develops, Kazakh players are expected to enter the Central Asian markets and become regional pioneers in cross-border e-commerce and trade, promoting economic integration of the entire Eurasian region.

This review is part of the “TOP-45 KZ Retail e-commerce” ranking, compiled annually by Baker Tilly Qazaqstan Advisory and the Forbes team for seven years, which coincided with seven years of Baker Tilly’s practice in Kazakhstan. During this period, the Baker Tilly team has grown eightfold, with more than half of the employees having national and international certificates such as CPA, ACCA, CFA, MRICS, etc. The main service lines include transaction support (M&A) and market research, valuation and cost consulting, tax and accounting outsourcing, legal consulting, audit and agreed procedures.
Dr. Sylvain Charlebois
Dr. Sylvain Charlebois
senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.
European politics are notoriously intricate, and the recent EU elections have highlighted a growing fatigue in the West towards socialist and urban-centric policies that impact agriculture and the agri-food sectors.
John Williams
John Williams
The Australian Dairy Products Federation (ADPF) Chair
This is probably one of the most significant numbers I have seen in the global dairy industry stats for a long time.