Why City Insights Matter for Business Strategy: Digitalisation in Eastern European Cities

At a time when online shopping is booming and competition is intensifying, understanding the dynamics of household internet adoption are vital to executing a successful business strategy. The growth of internet shopping in Eastern Europe may not rival that of Asia-Pacific or Africa and the Middle East, but the region is still benefiting from rising incomes and improving standards of living. Just in the period 2011-2016, internet retailing in Eastern Europe more than doubled in constant value terms, adding USD14.6 billion and this is expected to reach USD19 billion over 2016-2021. The article builds on the strategy briefing: Why City Insights Matter for Business Strategy and seeks to set out some key facts regarding the uptake of broadband internet in Eastern Europe which will play a key role in the region’s prospective online retail market.

 

  • With 93% of households having access to broadband internet in 2016, Tallinn is the most digitalised city in Eastern Europe— significantly exceeding that of the neighbouring Riga (82%) and Vilnius (76%). Tallinn’s high internet possession rate can be likened to vastly developed cities such as London (93% of households with broadband internet access in 2016), Zurich (92%), Paris (89%) and Tokyo (88%).

 

  • Some of the lowest rates of broadband internet possession are found in Ukrainian and Bosnia-Herzegovina cities. Whilst this figure stood at 48% in Kiev in 2016, the smaller cities of Mariupol (26%), Odessa (19%) and Lvov (16%) show far less impressive results. In Bosnia-Herzegovina’s capital city, only 24% of households had access to broadband in 2016.

 

  • Some of the fastest rates of broadband internet adoption were seen across Russian and Serbian cities. Over 2011-2016, Izhevsk, Russia recorded a 34 percentage point rise in households with broadband internet access, followed by Novi Sad, (Serbia) and Volgograd (Russia), with both growing by 32 percentage points.

 

  • According to Euromonitor International forecasts, Kiev’s households will experience the most rapid growth of broadband internet in the next few years, growing by 14 percentage points over 2016-2021. Other cities that are expected to show swift adoption of broadband internet are: Nyíregyháza (Hungary), Panevežys (Lithuania), Šiauliai (Lithuania) and Miskolc (Hungary) which are all expected to record 11 percentage point rises each.

 

  • By 2021 only 28% of Eastern European cities analysed by Euromonitor International will exceed the European average broadband internet access rate of 79%. Thus, there is still potential for increasing the number of households with access to broadband internet in the region and in turn further developing internet shopping.