E-RISE
The e-commerce industry in Azerbaijan has been steadily rising, and has at least doubled in volume for the past two years in a row.
Additional emphasis is placed on rapidly emerging markets as Azerbaijan endures a decline in oil and gas prices. One specific market has been growing at an incredible rate, attracting the attention of investors and businesses alike. E-Commerce has posted record growth in the country and this trend does not appear to be slowing down any time soon.
To place the growth of this industry in perspective, e-commerce has doubled its volume over the past year alone, posting a record AZN8.9 million in 2014. That same year, the e-commerce market in Azerbaijan more than doubled. With two consecutive years of phenomenal overall growth, the e-commerce industry carries with it implications that go much deeper than a simple retail trend. Accordingly, almost 97% of online transactions in Azerbaijan were to purchase manufactured goods. The e-commerce growth that has taken place in Azerbaijan thus far represents only the first phase of thorough, country-wide implementation, as seen in e-commerce development trends in other countries. Although e-commerce still comprises a comparatively small area of the AZN15.9 billion retail sector, the focus is on the future. This is still the first phase of e-commerce development in Azerbaijan, meaning the future will provide significant opportunities for expansion and increased business prospects. For example, it took over eight years for this type of B2C e-commerce market to grow from 2% to 6% of the retail sector in the US. With the current domestic growth rate of e-commerce, this market is poised to reach 3% of the total retail sector of Azerbaijan within 5 years.
This e-commerce movement comes at an interesting time in Azerbaijan. In 2008, the percentage of Azerbaijani internet users were 17% of the total population. By 2013, this number had jumped to over 60%. Azerbaijan ranks 48th in the world in terms of fixed broadband connections per 100 residents, even besting countries such as Russia, Poland, and Turkey. In addition, mobile phone penetration currently sits at 110% in Azerbaijan, an important figure when considering businesses are offering e-commerce applications to consumers. More importantly, mobile broadband connections in Azerbaijan rank 46th in the world, which has interesting implications for the mobile future of e-commerce as well. The ICT sector of Azerbaijan in general has been exploding, averaging a 25-30% expansion rate every year since 2005
The next two phases of e-commerce implementation will take place after the culture of online payments and shopping becomes more ingrained and established as an ordinary practice in Azerbaijan. Accompanying Phase II, and already slowly creeping into Azerbaijan, is that more companies will start to offer e-commerce solutions to customers in order to cater to new needs. Apart from standard online retail shopping, which is the overwhelming juggernaut in the current e-commerce market, an example of growth is the purchasing of movie tickets online. GoldenPay, a key company that is driving the e-commerce market in Azerbaijan, recently began offering this service for movie tickets. Similarly, more businesses in the food industry are providing the option of ordering food online. While this practice already exists in Azerbaijan, most customers still prefer to pay in cash when the food is delivered rather than pay online. Thus, businesses have been increasing the amount of e-commerce services as it grows in popularity, which will continue to increase as more people adopt its use.
In the final phase, from the perspective of consumers, e-commerce will become increasingly pervasive in the lives of Azerbaijanis. As more people begin to use e-commerce in everyday life, they will begin to expect a business to provide online services. Essentially, people's increased use of available online services will necessarily increase the amount of businesses that offer it, so long as businesses wish to remain competitive. As the progression continues, there will likely be a rise in the number of business-oriented mobile applications to facilitate e-commerce activity, as we are already seeing. This is especially relevant due to Azerbaijan's preferable mobile phone situation. Consumer expectations for online services will act as a driving force for the e-commerce industry. The year 2016 is merely part of the rise of what is shaping up to become an important domestic industry.
E-RISE
TABLE OF CONTENTS
Year In Review
Good Times Ahead
<strong></strong><strong>In a year dominated by the overarching theme of low hydrocarbons prices, Azerbaijan showed resilience and verve in putting in place bold measures both to counter the slump in energy prices and put its economy on a surer footing.</strong>
read articleReview: Diplomacy
Operation Outreach
In 2015, Azerbaijan's military budget increased by a notable 27%, to $4.8 billion, or 17.9% of the government's total budget for the year. The first Azerbaijan Defence Exhibition (ADEX 2014), drew over 200 companies from 34 countries, including Russia and the US.
read articleInterview
Rufat Mammadov, President, Azerbaijan Export and Investment Promotion Foundation (AZPROMO)
TBY talks to Rufat Mammadov, President of the Azerbaijan Export and Investment Promotion Foundation (AZPROMO), on large-scale events and their ability to attract FDI and the potential Iran may hold.
read articleReview: Banking
More Interest
In a sector faced with relatively flat growth for 2015-16, new opportunities are still there aplenty, led by the nascent Islamic banking sector, e-banking, and microfinance initiatives. Together, these areas should make banking more diversified and less reliant on a buoyant energy sector for its capital inlay.
read articleReview: Capital Markets
Taking Stock
As Azerbaijan grapples with the knock-on effects of low hydrocarbon prices, the Baku Stock Exchange (BSE) finds itself at the center of the country's efforts to stave off a budget deficit this year. In January, the government announced plans to sell $500 million worth of bonds on the BSE.
read articleReview: Industry & Mining
In The Bag
Industry in Azerbaijan is long established, diversified, and, in many areas, fast growing. Together, these qualities make the sector well placed to see through the global slump in commodity prices, while at home, the manufacturing industry continues to find ways to use its hydrocarbons expertise in other fields, including high technologies and research.
read articleInterview
Khanlar Fatiyev, , Chairman of the Supervisory Board, Ganja Automobile Plant Production Association
TBY talks to Khanlar Fatiyev, Chairman of the Supervisory Board of the Ganja Automobile Plant Production Association, on the role of the plant in driving growth in the non-oil sector.
read articleReview: Transport
The New Node
With major new railways linking the region, the opening of the new Baku International Sea Trade Port Complex, the completion of a massive program of road building and upgrading, investment in state-of-the-art fleets ranging from Boeing 787s to rail locomotives, Azerbaijan can rightly claim the title as the Caucasus' transportation hub.
read articleReview: Agriculture
Lots More
Farms across the country are pursuing a policy of increased yields for year-round fruit and in the wheat harvest to stave off an over-reliance on imports. With carefully targeted increases in exports, better routes to port and to market, and greater sophistication of agricultural facilities, farming could soon be the morning star of Azerbaijan's diversified economy.
read articleReview: Health
Under One Umbrella
Life expectancy at birth (2015) is 75 years for women and 70 for men. The median age is 30. For both sexes, longevity increased by six years between 2000 and 2012. Azerbaijan is a relatively youthful country—an important factor in healthcare—with 22% of its populace aged under 15 and just 9% aged over 60.
read articleReview: Education
Baku to School
Azerbaijan's culture has always harbored a deep respect for educational values. This is embodied in the country's Azerbaijan 2020 mission statement, which seeks to raise standards across the sector and introduce ICT as a standard part of the learning experience at all levels.
read articleInterview
Elkhan Mammadov,, Secretary General, Association of Football Federations of Azerbaijan (AFFA)
TBY talks to Elkhan Mammadov, Secretary General of the Association of Football Federations of Azerbaijan (AFFA), on the experience Azerbaijan is gaining in hosting international events.
read article