3.

E – commerce in Albania

3.1. The evolution of e – commerce in Albania, expanding spaces and challenges

Albania is a relatively new country in adopting a market economy. Only after the fall of the
communist regime, did the first private businesses begin to open and develop. Having no
experience in the market economy, trade development has been slow.
According to the period from 1990 to 1997, it may be considered as the first stage of
economic development of albanian businesses. This period is characterized by a convulsive
development of financial and non-financial sector. The period from 1997 to 1999 is
considered like the second stage for Albanian economy and businesses. Differently from the
first stage, in this stage the economic growth rate declined sensitively. The inflation rate
grew-up, while the most of foreign investitors left Albania. The period from 1999 to 2008
was the third stage for Albanian business development. At this stage, the albanian business
recovered and started to grow again. From 2008 till today can be considered as the fourth
stage for Albanian business development. Even though in 2008 Albania adopted the law for
electronic commerce, it isn’t sufficient for the most of Albanian businesses to apply e-
commerce.
The growing trend in the last decade for the high use of smart technological equipments, is
encouraging albanians to use online platforms for shopping. At the same time with the
increase of the use of the internet, the utilization of the opportunities that it offers, is
increasing. More and more, albanians are not only using internet to be informed about the
latest news or to communicate, but also to make purchases of various products or services.
Online commerce is broad, as it encompasses many industries and many different markets.
Among the most significant progress, is the huge increase in online sales initiatives. There are
many new companies that want to sell and operate through the internet, both albanian and
foreign companies that want to expand in the albanian market. The e-commerce sector is new
in Albania, so companies that operate properly have no choice but to grow.
The online sales market will undoubtedly continue to grow for several reasons. Firstly, young
people are the ones who buy the most and consequently over time the market will grow.
Secondly, the trust in online shopping is growing and it makes people more confident when
placing an order online. As can be seen in all developed countries or emerging markets,
demand has been increasing and Albania has no way to have a different dynamic.
Furthermore the factors that influence the development of e-commerce, are the growth of the
base of loyal customers who return to buy online, but also the new customers who have more
and more confidence to test online purchases.
Quarantine promoted e-commerce globally and as everywhere in Albania, businesses tried to
adapt to the conditions they had towards an online trade, although truncated. It did not have
the original form of the concept that e-commerce represents but in the end the goal was
achieved and the business maintained the connection with the consumer. This wave swept
from supermarket chains to those of sports equipment or clothing. The World Bank published
the report “Diagnosis of E-commerce in Albania” and this report brings a complete overview
of the current state of online business and the need it has to be promoted.
In 2020, the COVID-19 crisis has led to a major impetus towards the digitalization of the
Albanian economy. The World Bank report shows that 20 percent of Albanian businesses
surveyed have either started or increased their online business activity during the COVID-19
pandemic. In a survey of consumers, the World Bank showed that 55 percent of respondents
had answered that they had increased the use of online shopping since the start of the
pandemic. 74% of these, believe they will continue to shop online more often, even when the
pandemic is over. Of the Albanian respondents who make online purchases, 67% state that
they use social networks to buy from local stores, while 61% state that they buy from
international markets.
According to the World Bank institution, there is a need for concrete action to support e-
entrepreneurs and this should be extended to several dimensions. The document underlines
that Albania's online entrepreneurs are already showing signs of dynamism and the
government can play a key role in enabling and allowing these businesses to their full
potential. This requires the introduction of an industrial code that governs this type of trade
and gives credibility as well.
One of the main obstacles to the growth of online commerce is the lack of trust in online
shopping, especially when the sellers are local. 83% of albanian respondents stated that the
risk of ordering a product that does not meet expectations is the main obstacle to online
shopping by local retailers, while 30% of them see as the main concern the risk of
identification and theft of payment. Among other things, respondents point out the high costs
of delivery and the high costs of customs duties.
On the other hand, expensive and slow logistics, including customs procedures, limit the
ability of businesses to grow their customers. An ambiguous and unfavorable tax treatment
keeps companies away from e-commerce. Many albanian clients are not yet ready to
participate in the digital economy. IT and e-commerce specialists who can help set up online
businesses remain limited in number.
To make online commerce easier, the World Bank recommends a range of interventions to
improve infrastructure, from customs, payment systems and postal services. For example,
PayPal payment service, although known for its wide international reach, so far has a limited
function in Albania. PayPal is not registered with the Bank of Albania to operate and provide
services in the country. Businesses registered in Albania can make payments through PayPal,
but they face high transaction fees.

3.2. Why do customers buy online? What is mostly traded, how and who are the
most potential buyers?

In the last decade, online shopping has experienced an explosive growth due to the fact that it
represents a more economic and convenient approach to purchasing in comparison to
traditional shopping. Nevertheless, in the beginning, the transition from one to another, more
modern purchase method, created a sense of concern among customers with respect to the
following: leak of personal information, online fraud, inconsistency between the ordered
product quality and the desired quality, unsuccessful shipping, etc. Today, these concerns are
at a much lower level, as people recognized the advantages offered by online shopping. There
are a number of reasons that have led customers to turn to online shopping from purchases in
physical stores. Different people have different priorities and different requirements on
shopping. So we are summarizing some of the main reasons that push people to buy online.

 Consumers can buy anything at any time without actually going to the store.

 Consumers want to avoid pressure felt when communicating face-to-face with the retailer.

 Consumers want to avoid traffic jams that can occur on the way to the store.

 Personal shop for everyone. Imagine how much time from your life you have to spend
finding your favorite products. Today online sales can offer everything. Personalized
online stores that are just a click away can help we find the products that you want easily.
The most prestigious articles can now be found very simply just by our phone. All the
fatigue and toil can no longer be compared to a simple internet navigation from our
smartphone.
 Time is money. Traditional sales require a day off to meet all the requirements you have.
It requires you to spend energy, time and many other resources which equate to cost.
With online shopping the costs are minimal, the costs are non-existent and the product is
definitely delivered to you wherever you want as desired. One of the main factors in the
confrontation between traditional and online sales is time, which is always converted into
money and is one of the biggest economic costs.

 Online shopping provides consumers with more information and opportunities to compare
products and prices, with greater product selection, with convenience and ease of finding
desired products online. It offers the opportunity for someone to compare prices in record
time and decide on the price that suits them best by buying the product they want right
away. Goods can be compared through all their specifics and in real time, highlighting all
the advantages and disadvantages of one product from another. Such a thing does not
happen simply with sales that we have been accustomed to for years by buying what is
offered to us first. Consumers can stumble on the same product at a lower price by
comparing different websites simultaneously.

 Get to know your vendor. Through the review system you have the opportunity to know
better the business that is selling you the product. Whether he is reliable or not, whether
he offers reliable merchandise and products. If in the past you had no opportunity to know
your seller. Nowdays, online sales give you the opportunity to have a transparency that
would be the envy of any service offered. You have a clear idea of where to spend your
money.
 It has been argued that online commerce offers more satisfaction to modern consumers
who seek convenience and speed. In online communication, when a consumer sees a
banner ad or online promotion, it can attract their attention and stimulate their interest for
these specific products from advertisements. Before deciding for purchase, the customer
may seek additional information for help. If there is not enough information, they will
browse for them through online channels, using online catalogs, websites or search
engines.

Retaining the online consumers has attracted a lot of attention, since it serves as a means of
gaining competitive advantage. When the consumers are satisfied with a particular online
retail shop, they will purchase there more. Hence, both concepts, retaining and satisfying the
customer, are becoming increasingly important for both online and offline business. It is
therefore important to understand the factors that drive customer satisfaction and their choice
of online stores. The purchasing process consists of the following steps: problem/need
recognition, information search, evaluation of alternatives, purchase decision and post-buying
behavior. Customer satisfaction is the result of consumer experience throughout the different
stages of purchase. Since the experience of online consumers, due to the inability of physical
contact with the product, is solely based on information offered by online stores , it is clear
that the information provided can affect consumer satisfaction, both in the information search
stage and during the purchase decision phases.

Online commerce is broad, as it encompasses many industries and many different markets.
Various products and services are offered, in accordance with customer requirements. The
most popular categories are clothing for adults and children, accessories, electronics, scin
care and cosmetics, books, sport equipment, home appliances etc. Also, many large
companies offer their services online. When it comes to businesses offering services, travel
agencies and event organizers operate mostly online. The main cities where e-commerce
takes place are mainly Tirana, Durrës, Elbasan, Korçë, Shkodër, Fier and Mat.
Facebook and Instagram provide the tools needed for businesses to advertise their products in
a wider market than physical stores. This trend has spread in Albania for some time, where
every store already has an online site where it advertises the products it sells, without the
need to have an online trading site.
In general, online commerce in Albania operates through business web pages or business
addresses on social medias which are very widespread in use by young people. Customers
place the order online and the product goes to them through an intermediary, which can be a
well-known posts or individual couriers with whom the merchants are connected. A general
trend of these companies is that they operate mainly with field payments, as opposed to
online credit and debit card payments, in order to respond to the market majority. The large
spread of physical payments related to the online market is not necessarily positive, but at
least it is a big step towards expanding the market in general.
The main difficulties continue to be the big problem of the purchasing infrastructure itself. As
mentioned from above, many new companies are moving towards the tendency to delegate
payments through physical services, such as courier payment, despite their presence is online.
One other model that has found quite a positive approach is that of ordering online and
getting the product at a certain point of sale or otherwise labeled as "Click and Collect in
Store". This way of buying has brought an increased convenience for the consumer, who has
the opportunity to carefully choose the item he is interested in and then to pull that item to a
nearby store. This type of model has also changed the logistical side of the whole sale-
purchase process.

Young people are the ones who buy the most online and consequently over time the market
will grow. This is logical for the very reason that young people are more obsessed with
electronic devices and the internet. They are also more up to date with the latest trends
around the world and are looking for the latest products in Albania as well. And in online
stores these products are more easily found.

3.3. Registered and unregistered traders and distributors. What does the law
specify for e – commerce?

Despite the fact that the law specifies the same for all businesses as for those who operate
online and those who operate physically, it seems that in its implementation there are many
violations. Both types of businesses complain about irregularities, one as a regular taxpayer
and one as a business that operates without paying any taxes but considers them high if they
have to pay them one day. Informality in this type of market creates many problems that
seem to take time to be avoided or eliminated as long as the state finds it impossible to be
100% functional.
The only legislation that exists in Albania for this whole market is the tax threshold for
packages exceeding 22 euros for online purchases and 45 euros for personal mail deliveries.
Anyone making an online purchase worth more than 22 euros will have to pay 20% value
added tax as well as a customs fee depending on the origin of the goods.
The biggest problem of companies operating in the online sales segment is unfair
competition. The unregistered online traders who do not pay any obligations to the state,
remain the main problem. Another concern for the sector brought by informal sellers is the
tarnishing of the image of albanian companies operating in this sector.
Informality prevents the reflection of the reality of online sales in the country. Informality is
also high among online sales operators, who say that due to the opportunities created by
online operation, many individuals avoid fiscal obligations. The same situation appears in the
postal services sector. Most remittance businesses within Tirana employ unlicensed
individuals for these services. As for deliveries in the districts, but also abroad, there is still
the delivery of packages through individual transport operators, who in return for payments
also send packages to the district. Almost over 90% of online sales are made in cash (cash-
on-delivery). All market participants claim that if they only operated online payments, none
of them would survive in the market. Even though the chances of becoming part of the online
sales market are high, as entry barriers may be considered low, current operators estimate the
chances of new competitors surviving in the low market.
Unregistered businesses are a serious problem and in addition to controls by the
administration, buyers also need to put pressure on online sellers to obtain a tax coupon.
Undoubtedly, sales made by unregistered operators violate market rules, distort and promote
informality. In this regard, their obligation to issue tax coupons for each cash sale also
remains in the spotlight. It is very difficult for the fiscal administration to supervise the
process, therefore in this aspect it is worth investing in terms of increasing the interest of
buyers to always ask for a tax coupon on their purchases, so that they understand that the
obligation to the word is the same as if they were bought in a physically present store. Online
businesses are often unidentifiable, so controlling them is almost impossible.
The tax controls are currently performed according to a risk analysis based on self-declared
data in the system by taxpayers and that the expansion of the database is one of the priorities
of the DPT for the future will provide the opportunity for more in-depth analysis including
taxpayers conducting online sales.
The Law "For tax procedures in the Republic of Albania - amended" in Article 55 provides
"Taxpayers who carry out the circulation of goods and services, for which payments are not
made through the bank, or electronic money financial institutions, licensed by the Bank of
Albania, are obliged to install and use the fiscal system, through the use of equipment fiscal,
for the registration of cash payments and for the mandatory issuance of the tax coupon”.
In addition to the Albanian law setting the main condition mentioned above, it is further
interrupted in both interpretation and application. Online sales, being another form of
delivery of goods, without a physical sales unit, without the seller directly confronting the
buyer, without a concrete way of payment, seek to be supported by extended texts both legal
and sub-legal acts drafted by the Ministry of Finance.
The simplification of cross-border tax procedures, in particular for small deliveries and the
harmonization of the regional regulatory framework are highlighted by the World Bank as a
key element to be considered while also encouraging foreign direct investment that can be
catalysts for the ecosystem of e -commerce in Albania.
Online commerce has turned into a competition for physical businesses. Although it happens
from the activities as he exercises them to unite the phenomenon of informality. For online
commerce technologies informality and informal websites the biggest hurdle is for the sector
services. Meanwhile in Albania the only input that exists for online sales and purchases is the
level of taxes when they are imported.
Online transactions need to be supported by a strong regulatory framework to provide
protection for all parties involved, building, first and foremost, trust in the digital economy.
3.4. Determinants of customer satisfaction and consequences of informal online
sales to customers

Consumer satisfaction is the result of comparing the expectations and the experience. In other
words, the consumer is pleased when the delivery meets or exceeds their expectations.
Satisfaction and loyalty are the key elements determining the success of the market concept
implementation. Satisfied customers are the ones that will repeat the purchase if the service
provider reached or exceeded their expectations. It is significant to identify the variables of
consumer satisfaction, since they present the business benchmark and serve as a guide to
future improvements.
There are eight determinants identified as important for customer satisfaction. Those are the
following: web design, security, information quality, payment methods, e-quality of the
service, product quality, product range, and service provision. On the other hand, argues the
following to be the determinants of consumer satisfaction: consumer interface quality,
information quality, perceived quality, and privacy.
Security is defined as the ability of the website to protect consumer’s personal data from any
unauthorized disclosure of information during electronic transactions. Security is considered
to be an important factor perceived seriously by online purchase consumers. It is due to the
fact that the issues of security and privacy play a crucial role in creating trust during online
transactions. Since online shopping usually implies payment by debit or credit card,
consumers sometimes direct their attention towards the information about the retailer as a
means of protection. The willingness of consumers to visit online stores and purchase there is
directly related to the consumers’ confidence in providing personal information and credit
card payments . Consumers tend to buy a product from a vendor whom they trust or a brand
product they are familiar with.

Shoppers expect online retailers to provide all relevant and accurate information about the
product. Since online shoppers rarely have the opportunity to touch and feel the products
before making a decision on a purchase, online retailers have to provide information
regarding that. Consumers appreciate information that will meet their demands. The quantity
and credibility of information are key elements in ensuring the quality of service in e-
shopping. The quantity of information refers to the ability of accessing the adequate
information during online shopping, while the credibility refers to the degree of consumers
confidence in information provided by online vendors. The information availability has a
positive impact on customer satisfaction.

Shipping is a link in the supply chain that directly affects the consumer and triggers their
satisfaction. Shipping presents a key activity in every process, and especially in online
shopping. The product delivery service is a prerequisite for customer’s satisfaction. It implies
that the customer will receive the ordered product, which is well packed, and whose amount,
quality and specification are in accordance with the order, as well as the set delivery time and
place. The customer expects from the retailer to deliver the promised product in a trustworthy
and appropriate manner. The delayed delivery can make the customer feel dissatisfied.
Timely and reliable product delivery encourages new online sales. The quality of the delivery
service influences the confidence in online shopping as well.

The quality of products and services in online commerce has a positive impact on customer
satisfaction. The perceived product quality is defined as the consumer’s judgment about a
product’s overall excellence or superiority. Conversely, a number of studies dealing with
online commerce argue that the service quality has a positive influence on customer
satisfaction. Online retailers that offer excellent service quality meet the expectations of their
customers and thus improve their satisfaction. By providing and sending information either
via formal or informal platforms, online vendors increase the expectations of their customers
and add value to their services.

Pricing is an important factor in customer satisfaction, due to the fact that consumers always
direct their attention to pricing when assessing the product and service value. From the
consumer’s perspective, price is what is given up or scarified to obtain a product. Pricing
directly affects the perception on the transaction’s delivered value and usability, and,
consequently, customer satisfaction. Negative perception on pricing makes customers feel
dissatisfied and disloyal. Due to better purchase conditions, consumers use the Internet to buy
the same product at a lower price than in the store. Many customers expect online stores to
offer their products and services at the lower price in comparison to traditional stores.

Saving time is one of the most influential factors in online shopping. Time is the main
resource that consumers spend when they purchase online or in traditional stores. Browsing
the online catalog during online shopping saves time and reduces stress compared to
traditional shopping. Online consumers are concerned with purchase benefits, time saving
and choice, while offline consumers are anxious about security, privacy, and delivery on
time.

As this type of industry is growing by leaps and bounds, so is the skepticism of customers,
given that there are hundreds of informal sites operating in Albania and this is to the
detriment of this ecosystem. If businesses are unregistered then the risk of them not being
held accountable for the products and services they provide is higher. In many cases
businesses are very irresponsible in sending orders and very often behave fraudulently. They
deliver products that are different from what they advertise and promise to their customers.
They can send other models from what they are ordered, colors or other masses or a
completely different product.
Customers start to get frustrated because these sites are somehow cheating, they do not have
customer exchange, return and tutoring policies. It is one of the challenges we face since the
genesis of this business.

The World Bank is urging the government to launch an information campaign on the
formalization of online retailers and that their web stores meet legal requirements. Also
implement a consumer protection framework, appropriate for the digital age, including
through an online dispute resolution mechanism and an information campaign dedicated to
online commerce. A simplified e-commerce package return service may also be introduced
that online stores can offer their customers if the products do not meet expectations.