Customs Union boosts Kazakh e-commerce

By bne IntelliNews September 22, 2014

Naubet Bisenov in Almaty -


Kazakhstan's oil-based economy has struggled because of stagnation in the sector and falling demand for Kazakh goods in the country's major trade partners, Russia and China. However, there are new sectors of the economy such as e-commerce that have been helped by Kazakhstan's membership of the Customs Union (CU) with Russia and Belarus.

Kazakhstan's membership of the CU, which was set up in 2010, has led its trade deficit with Russia and Belarus to increase several fold. But there are a number of areas where Kazakhstan's membership of the free-trade bloc has spurred the development of new sectors. In addition to car-assembling (Kazakhstan is set to assemble up to 50,000 cars this year), one such area is e-commerce. 

Market players say that the free movement of goods between Russia and Kazakhstan has made it easier to bring goods imported to Russia on to Kazakhstan without needing to undergo customs clearance at the Kazakh border.

Konstantin Gorozhankin, chairman of the Association of E-Business of Kazakhstan, says that e-commerce began to take off after internet penetration exceeded 20% of the population. With 4.7m active internet users, the country passed this threshold in 2010 when the penetration rate reached 27%. 

Gorozhankin says  e-commerce is currently showing one of the highest rates of growth in Kazakhstan: the sector grew 80-90% a year on average in the past three years to reach sales of $600m in 2013. "An analysis of online cheques has shown that the sector has grown by 88% this year so far," he says. "Should we exclude online ticket sales of Air Astana, which has a large market share, the market grew by 286%." With sales totalling $80m a year, the national air carrier accounts for 12-15% of the e-commerce market. 

Lots of potential

Kazakhstan still has potential for e-commerce to double or triple every year over the next two to three years, after which the market will mature, Gorozhankin predicts. However, e-commerce still only constitutes a tiny share of total trade in goods and services in the country. According to the Kazakh Agency for Communications and Information, this share stood at 2% in 2013, but is expected to increase to 10% by 2020.

Gorozhankin believes the Kazakh population and businesses have not yet fully realised the potential of e-commerce. Even well-established players in this area such as Air Astana sells only 7% of its tickets online compared with Lufthansa's 90%. He explains that the population is not familiar with online purchases and a majority of customers do not trust online trade or simply is not aware of it. "Our people's attitude to shopping is still old fashioned when they have to feel and touch a good like at the bazaar before they buy it,” he says.

Out of $600m in online trade, Kazakh customers spent only 10% on purchases from local online traders, Gorozhankin says, blaming this on a sluggish local market that does not offer a choice of goods at cheap prices compared to well-developed foreign traders. US-based retailers account for two-thirds of total Kazakh online purchases, the EU and UK for 14%, and Russia for 8%, according to his figures. 

Local market players complain that purchases from US-based Amazon or China's Alibaba do not make a positive contribution to the Kazakh economy and only support jobs abroad. Kazakh citizens can now import goods from third countries tax free if the value of their orders does not exceed €1,000 or weigh no more than 31kg per month. 

Russian companies on the ground

Gorozhankin believes that the CU has paved the way for major Russian online retailers to enter the Kazakh market, where they operate as local companies.

One of such companies that seized the opportunity offered by the common market is the Russian Lamoda online fashion retailer, which arrived in Kazakhstan in 2010. The company ran its businesses in a trial mode in 2011 and 2012, and adopted its strategy for the Kazakh market in 2013, says's operations director, Dmitry Solomko. "In 2013 we studied the local consumer needs and adapted processes to offer high-quality services with quick deliveries. We realised that the market was ready to use the internet in new ways as a platform to buy our goods," he says.

Echoing Gorozhankin regarding Kazakhs' shopping attitudes, Solomko explains that his company started a service in which customers could cancel orders and return goods on the spot after seeing them. He also says different delivery options such as a 24-hour delivery have proven popular with Kazakh online shoppers. This helped the company pass a threshold of 1,000 orders per day at the beginning of 2014, with the average value of an order nearing $100. "The month-on-month growth was over 12% on average in 2013. It is a few percentage points smaller now but we can still see a good dynamic," Solomko boasts., which sells about 2m items of clothing from 900 mass-market brands, operates from its base in Moscow, with 24-hour delivery services in Kazakhstan's main cities  of Almaty and Astana. It now offers direct delivery services in the country's 17 cities and towns and uses the Kazpost national operator to deliver orders in towns and villages where it does not have presence, Solomko explains. The company now employs 200 people in Kazakhstan against 30 in 2012, and opened a collection point in Almaty this year where customers can try their purchases.

Citing the inconveniences that orders from Amazon or other foreign websites create for Kazakh shoppers in terms of consumer protection and delivery times, Solomko is upbeat about the development prospects for local e-commerce players in Kazakhstan. "In contrast to foreign websites, we treat our clients as the main source of information on how we should behave on the local market and since the client sets the rules we are ready to adapt to them," he concludes.

Related Articles

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

EU, US partly suspend Belarus sanctions for four months

bne IntelliNews - The Council of the European Union (EU) has suspended for four months the asset ... more

bne:Chart - CEE/CIS countries perform particularly well in World Bank's "Doing Business 2016" survey

Henry Kirby in London - Central and Eastern Europe and the Commonwealth of Independent States’ (CEE/CIS) countries performed particularly well in the World ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.