E-commerce in Greece: The right side of the Styx?

JEFF BEZOS founded Amazon in 1994. Apostolos Apostolakis and his mates started e-shop.gr, Greece’s biggest online retailer, just four years later. The comparisons end there. The Seattle juggernaut’s annual sales grow at double-digit rates; e-shop’s have been savaged by Greece’s depression. Amazon made its name selling books. E-shop was stymied by regulated book prices and shifted early into electronics. The Americans have indulgent shareholders while the Greeks were nearly undone by skimpy equity.

Economic woes aside, Greece is tough terrain for online shopping. Less than half of Greeks are regular internet users compared with two-thirds of Europeans overall. More than 40% of Europeans shop online but fewer than 20% of Greeks do. Broadband connections are sparser and consumers are warier. Most refuse to submit credit-card details on line, preferring to pay cash on delivery. Islands make Greece an obstacle course for couriers.

E-shop found clever fixes. It has a fleet of 50 trucks to make deliveries and collect cash (Amazon relies mainly on outsiders for last-mile logistics). Unusually for an e-tailer, it has a network of 52 shops. These do not hold stock. They are another channel for accepting payment and avoid the cost of shipping to a customer’s house. They also serve to advertise the e-shop brand.

This ingenuity did not spare e-shop the ravages of Greece’s economic calamity, which struck just as the investment in the shop network was completed. Sales dropped from a peak of €128m ($169m) in 2009 to €46m in 2011. Unlike a typical Silicon Valley startup, e-shop was not nurtured by a venture-capital fund and passed up a chance to be bought when times were good. When the crisis hit, banks cut credit. Without the working capital needed to hold inventory, e-shop was forced to stretch out delivery times. Its sales dropped by more than those of competitors such as Kotsovolos, which is owned by Dixons, a British electronics merchant.

The worst may be over. E-shop filed for protection from its creditors, which has eased its working-capital squeeze. Now more than half of orders are delivered the next day. It has slashed costs, partly by paring back its bricks-and-mortar network. That is a prelude to a hoped-for debt reduction in 2013. Mr Apostolakis sees signs that Greeks are warming to internet shopping. Online air tickets are popular, and that is getting consumers used to using credit cards. Internet retailing is growing at double the European rate. In 2012 e-shop’s turnover recovered to €60m. Maybe someday the Amazon analogy will not seem far fetched.

http://www.economist.com/blogs/schumpeter/2012/12/e-commerce-greece?fsrc=rss