For almost the entirety of 2022, the eyes of the world have been on the war in the heart of Europe – the Russian invasion of Ukraine. With millions of Ukrainians displaced, the conflict is a major humanitarian crisis.The conflict is also having wider ramifications on the global economy, which was expected to recover in 2022 after the coronavirus pandemic. Since 2020, the global economy has been severely disrupted, with global supply chain issues, the coronavirus pandemic and now the Russia-Ukraine crisis.
However, as a result of the continuing war, prices globally are skyrocketing, from commodities to food and energy, which is causing a spike in inflation rates and a cost-of-living crisis for millions of people around the world.
Whilst the Ukrainian and Russian economies are relatively small from a global economic perspective, both countries are strategically integral to the supply chain of countless products. Ukraine, for example, is one of the world’s biggest exporters of wheat, cooking oil, and neon and noble gasses, which are core components of computer chips. With Russia being one of the major main exporters of oil and natural gas.But, the biggest economic impact is being felt by the two nations involved in the war – Russia and Ukraine – which have experienced severe downturns, unlike any seen for generations.
Western sanctions and the pressure on brands to boycott the Russian economy have severely damaged trade with the country and reduced choice for its citizens. In Ukraine, as a result of the invasion and the mass migration to other countries in Europe, supply chains, and as a consequence the economy has imploded almost overnight.
The focus of this report is the impact that the conflict has had on online retail, as both Russia and Ukraine have sizable and fast-growing e-commerce industries. In Russia, e-commerce sales hit 2,7 trillion rubles (about $37 billion at the average annual exchange rate) in 2020, and had an expected annual growth of 7.5% before the invasion started. Ukraine by comparison is a more burgeoning e-commerce market, but has seen unprecedented growth.In 2020, partly due to the pandemic, Ukraine’s e-commerce market grew by a staggering 41% growth, reaching $4bn – approximately 2.6% of Ukraine’s GDP.
For this report, we have monitored more than 34.7 million e-commerce transactions in both Russia and Ukraine to present a picture of the state of e-commerce in both countries over a 90-day period.
We monitored a combined 34.7 million e-commerce transactions in Ukraine (3.5m) and Russia (31.2m) from our online data sources over a period that includes 90 days before February 24th 2022 – the day the conflict started – until one month after. Our data is comparing the previous 3 months mean data versus the current month’s mean.
In this report analyzing our data, we did not want to portray seasonal changes or trend deviations. The objective is to observe the direct impact on the day-to-day activity of the e-commerce market in Russia and Ukraine. The report is based purely on data from e-commerce transactions and sessions, and not physical store sales, so we cannot provide an indicator of the entirety of consumer spending trends. This means that there are limitations subject to the availability of the data provided, availability of relevant e-commerce data, meaning outliers may be present.
But, what our data can show is overall trends based on transactional data and e-commerce sessions.
As we are monitoring two countries at war, there will be some issues around the reliability of the data, events such as, network outages reported in Ukraine or economic sanctions in Russia, which might have an impact on the data that we are collecting.
To mitigate this, we are exploring trends on a macro level, and not drilling down into more in-depth trends and detail.
The Collapse of E-Commerce in Ukraine
The invasion of Ukraine, which began on 24 February 2022 has changed millions of people’s lives for generations, and decimated the country’s economy overnight.
With an estimated 5 million people fleeing the country to other countries throughout Europe, the humanitarian cost is huge, and will continue having far-reaching impacts socially and economically, both in Ukraine and beyond its borders.
As the conflict continues, the economic cost to Ukraine is also substantial. The World Bank has predicted that the Ukrainian economy will shrink by an estimated 45.1% this year, as the war and displacement crisis restricts imports and exports and investment into the country.
But, the full extent of economic damage will depend on the length of the war. Even when the conflict is over, poverty and the displacement of citizens will continue to have lasting economic and social consequences, making a full economic recovery many years away.
The war has already caused half of Ukrainian businesses to shut down completely, while the other half are forced to operate well below capacity. As a result of supply chains disappearing overnight, millions fleeing the country and the continued uncertainty that war brings, household spending has seen a sharp downturn in the country, particularly in e-commerce.
Our data shows that e-commerce in Ukraine has almost entirely disappeared. We monitored 3.5 million transactions in Ukraine over a 90-day period pre-invasion and one month post-invasion. We saw a decrease in e-commerce Sessions of 65%, Transactions falling by 73% and Revenues generated from digital sales collapsing by 87% across all categories.
Whilst there has been a slight increase in e-commerce Sessions, and some stability in certain industries. These are predominately for non-tangible digital services, such as entertainment, such as sports and streaming platforms, as buying tangible goods online is still extremely difficult or impossible, due to the collapse of supply chains.
In the immediate aftermath of the invasion, the Ukrainian economy went from one of relative prosperity, growing 3.8% in 2021 to a war economy. Overnight, demand for non-essential items almost ceasedto exist, with the citizens remaining in Ukraine focusing on visiting physical stores to buy essentials, such as food, gas and medicines, before potential shortages.
The shift to a war economy explains the collapse of e-commerce in Ukraine, coupled with internetoutages and the breakdown of supply chains, the tangible side of e-commerce will only recover once certainty has been restored.
With e-commerce metrics dropping in nearly every industry during the time that we monitored transactions in Ukraine, there was one industry, where sessions actually grew (Arts & Entertainment), and a few categories where the drops in demand were less substantial than others.
Across our Sessions metric in Ukraine during the period that we monitored, we have seen a sustained or slightly less than average drop in demand for entertainment services.
In the Arts & Entertainment category, which includes TV, Movies and Streaming and Music, we saw the only increase in demand during the period of any e-commerce category in Ukraine, with Sessions growing by 4%.
After an initial drop in Sessions, we also saw some stabilization in demand in two other categories, which might be classified by some as entertainment – the Adult category, which includes adult-orientated content and the Sports category, which can include products with a more practical use, such as flashlights, backpacks and helmets.
Sessions for the Adult category saw a small decrease, but was ultimately the third highest industry in terms of Sessions that we monitored during this time. The Sports category saw an initial 56% drop in Sessions, but we saw demand stabilize after the initial drop, as the period we monitored continued.
On the day that Russia began military action in Ukraine on the 24th of February, Ukraine closed its airspace to civilian flights. Despite this, Air Travel and Tickets have been two of the top three categories for the Transaction Revenue metric during the time period that we measured.
With more than 5 million Ukrainians fleeing the country, the reason for sustained demand 30 days later might be due to additional and onward journeys of those who fled the country.
If we look a bit further afield to bordering countries of Ukraine, notably Poland and Romania, we see data to support the above point, there was a clear rise in demand for Tickets and Travel. During the same period of when we monitored e-commerce data in Ukraine and Russia, we saw a 24% increase in Sessions for Tickets in Poland and a 31% increase in Sessions for Tickets in Romania.
Despite the overall decrease trend in key e-commerce metrics, such as Sessions, Average Order Value and Transaction Revenue, there has been one area which has incurred a smaller percentage impact – the Computer and Electronic categories, which may be explained by consumers buying products, such as drones to support the Ukrainian army.
The categories, which include Computer Security, Web Hosting and Telecommunications decreased by 32%, a smaller drop when compared with the average.
With millions of Ukrainians fleeing the country, combined with frequent network outages, and the fear of cyberattacks, it has been imperative for the Ukrainians who have stayed behind to keep in touch with their family and friends, whilst also protecting their data. This may account for the lower than average drop for Computer and Electronic categories, with companies like Zoom, lifting their free 40 minute limit for Ukrainian citizens to make it unlimited.
Sanctions Hit E-Commerce in Russia
Following the Russian invasion of Ukraine, governments from the West imposed unprecedented sanctions that have affected its financial institutions, numerous millionaires and billionaires and caused many brands, such as Ikea, H&M and Apple to cease operating in the country.
The economic impact to the country is different to the one faced in Ukraine, but still damaging. The World Bank predicts that the Russian economy has already entered recession, with it expected to contract by 11.2% in 2022, not to mention inflation in March hitting 7.6%, the highest rate since1999.
Russia relies heavily on imports, particularly around technology and consumer goods, and our data has shown a significant drop in key e-commerce metrics (Sessions, Average Order Value and Transactions) during the 30 day period post-invasion that we monitored e-commerce in the country.
Initially, there was a spike around a week after the invasion around Sessions, Pageviews and Session Duration. This trend quickly subsided as brands began to boycott the country – Sessions dropped by 22% compared to the mean average, Transactions fell by 13.6% and the Average Order Value declined by 14.5%.
With many household brands choosing to cease operations in Russia, consumer choice has decreased massively, particularly around high-ticket items, such as in the Consumer Electronics category, which includes Cameras and Computer Hardware.
Sessions in Consumer Electronics, which encompasses many of the above brands, dropped by 34% over the period that we monitored, marking a dramatic drop in demand. We also saw a drop in Music spending of 40% over the same period, which might be explained by the boycott of major Western brands who have local imprints.
Most of the popular brands for the category are headquartered in Western countries that have imposed the toughest sanctions on Russia, such as Apple, Samsung, Microsoft, Nikon and Canon who have now ceased operations in the country.
While it pales in comparison to the estimated 5 million Ukrainians who have left the country, due to the war 200,000 Russians were estimated to have emigrated from the country during the first 10 days of the invasion alone.
In the period that we monitored, we saw a huge increase in demand for the Travel category, particularly in the days after the invasion.
We saw a mean increase in overall Sessions on Travel-related websites of 65%, with an increase in the Air Travel category of 20.3%. The increased demand likely contributed to a rise in prices, due to Russia’s ruble losing about 40% of its value against the US dollar, alongside many Western countries closing their airspace to Russian flights in the days and weeks post-invasion.
Outside of Air Travel, the Ground Transportation category, which includes train and coach travel, saw a slight drop in Average Order Values, perhaps due to increased supply to meet the increase in demand caused by flights being grounded and travel bans.
Sessions for people interested in the Vehicles category, such as buying or hiring cars, increased by 5.8%.
Russia began to restrict access to many apps made by US technology firms in March, such as the Meta-owned Facebook and Instagram, as well as Twitter.
Demand in Russia for VPNs and encrypted messaging apps has surged to gain access to blocked websites and apps. We saw an intriguing increase in demand around two key areas that support this trend.
In the Computer Electronics and Technology category, we saw notable increases in Sessions in the Web Hosting (9.4%) and Computer Security (6.4%) sub-categories.
We monitored over 34 million transactions in both Russia and Ukraine during the 90-day period before the invasion, and 30 days after. In nearly all industries across both countries, e-commerce declined.
Particularly in Ukraine, where e-commerce came to a standstill, with revenues dropping by 87%. Certain industries had smaller drops in demand and revenues than others, most notably the demand for Air Travel & Tickets, as uncertainty gripped both countries in the immediate aftermath of the invasion.
Whilst there has been some stabilization in the decline of e-commerce activity in both countries. Demand and revenues are nowhere near where they were pre-invasion. And, with the wider economy forecasts in both countries predicted to contract quite significantly, as the conflict continues indefinitely – 45% in Ukraine and 11% in Russia.
It may take several years for a recovery that takes the economy and the e-commerce sector to pre-invasion levels.