Georgian Currency Fall Impacts Online Shopping Business

Georgian Currency Fall Impacts Online Shopping Business

The FINANCIAL -- Georgian shipping companies have seen a 15% decrease in orders in recent times. The devaluation of the Georgian Lari towards the USD by 30% has impacted on the previously growing trend of online shopping among Georgians.

Meanwhile, the representatives of bricks and mortar shops are not optimistic that the segment of erstwhile online shoppers will increase their sales figures as the solvency of the population has declined in general.

According to official statistics of National Bank of Georgia, the number of internet transactions was 1,082,151 units, worth GEL 41,540,000 in February 2015, down from 1,116,463 units, or GEL 42,841,000, in January 2015.

Ann Tsereteli, 30, has been spending annually over GEL 1,500-2,000 on online shopping. Mostly she purchases clothing, shoes, accessories, books and technology. The top online shops for Tsereteli are: amazon.com, forever21, 6pm and jcpenny.com. Saving time and money were the main reasons why Tsereteli preferred online shopping to in-store. Meanwhile, since the depreciation of the GEL Tsereteli has switched to shopping on the high street. As she said, she can now purchase the same product at the same price here. 

“I am going to replace online shopping with shopping in local brand stores,” said Tsereteli.

Shipping company Bestex saw a 10-15% decrease of orders during the first two months of 2015, in comparison with the same period of the previous year. “Significant devaluation of the Georgian Lari against the USD was the only reason behind this reduction,” Irakli Bazadze, Director at Bestex, told The FINANCIAL.

According to Bazadze, the shipping of online order goods is directly linked with the strength of the national currency against the USD. Accordingly, the demand for their service will vary in line with currency appreciation or depreciation.

Clothes, consumer electronics and household items are the top products ordered online by Georgian shoppers via Bestex. Amazon.com leads the list of the most popular websites. It is followed by ebay, forever21 and zappos.com.

Like Bazadze, Eka Chorgolashvili, Express Line Services (ELS), said that the company has shipped less parcels during the first two months of 2015 in comparison with the previous year.

ELS shipped 1,730 parcels during January-February 2015. The number was 2,464 during the same period of the previous year.

As Chorgolashvili said, devaluation of the Georgian Lari has contributed to this reduction. Chorgolashvili does not expect appreciation of the GEL towards the USD in the nearest future. Accordingly, she expects that online shopping will decrease during 2015.

Mobile phones, computers, tablets, clothes and accessories were the bestselling products among the consumers of ELS. Ebay, amazon.com, forever21, yoxx.com and asos.com made the list of the most popular online shops.

While the number of online shoppers has slumped, representatives of locally presented stores do not expect that it will contribute to an increase in their sales. In addition, the sales of bricks and mortar shops have also declined recently.

“It is hard to predict whether the number of online shoppers will switch to the high street. Maybe a small share will switch to it. Only a little time has passed since the significant devaluation of the Georgian Lari against the USD however. So currently I cannot make any firm conclusions or predictions,” said Natia Shavishvili, Director at NAF NAF and Kookai.

“We present European brands. As a result, the GEL devaluation has not caused a price hike in our shops. If the situation does not change dramatically, we do not expect any price increase in the future,” said Shavishvili.

According to Shavishvili, in March 2015, sales at NAF NAF and Kookai slumped by over 10-15% in comparison with the prior-year period.

Adress Group, incorporating 5 brand stores, managed to maintain stable prices at its shops. At the moment the company does not plan to expand them. Like Shavishvili, Nutsa Kiria, Marketing Manager at Adress Group, found it difficult to predict whether the reduction of online shopping will encourage their sales. “It might happen, but currently I find it hard to make any exact forecasts,” she said.

Adress Group incorporates five brands: Celio, Etam, Promod, Orsay and Gerry Weber.

The taxation policy of the postal service was changed with the amendments of August 2009. According to the changes, instead of the previous GEL 1,500 limit, any postal parcels worth more than GEL 300 became the subject of taxation.

The reason for that new tax code was that the purchasing of goods from online shops and further realization in Georgia was a business for many citizens. Lawmakers wanted to provide equal conditions for all those who run businesses by importing from other countries.

Recently, representatives of international shipping companies demanded to increase the limit of taxation products for individuals. Companies believe that clearance should be made for products worth GEL 1,000 and less instead of the current limit of GEL 300. The company camex.ge has appealed to the Ministry of Finance to made changes to the Tax Code article number 199.

According to Giorgi Seturidze, Director at Camara Express, the cost of products purchased in USD and EUR has increased and is added to by a taxable amount.

So, whereas previously consumers could order products worth over USD 160 and not be taxed, presently the sum is USD 120-125. According to Seturidze, online subscriptions have declined by 25% due to the devaluation of the Georgian Lari.

 

Author: Madona Gasanova

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