E-commerce challenges in Albania,

Bosnia and Herzegovina and Kosovo

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Imprint

Published by the
Deutsche Gesellschaft für
Internationale Zusammenarbeit (GIZ) GmbH

Registered offices
Bonn and Eschborn, Germany

Open Regional Funds for South-East Europe – Foreign Trade

Zmaja od Bosne 7-7a, Importanne Centar O3/IV,
71000 Sarajevo
Bosnia and Herzegovina,

Phone +387 33 957 500

Fax + 387 33 957 501
giz-bosnienherzegowina@giz.de
www.giz.de/

As at
December 2019

Text
Armin Konjalic, Shpat Begolli, Vasken Spiru

GIZ is responsible for the content of this publication.

On behalf of the
German Federal Ministry for Economic Cooperation and Development (BMZ)

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Table of Contents

Introduction ............................................................................................................................................................................................................... 4
1. International Sales ............................................................................................................................................................................................. 5
1.1. Orders from abroad are rare and costly for consumer goods e-commerce businesses ......................................... 5
1.1. Handcraft creations find their way to international customers despite the obstacles........................................... 5
1.2. Creative digital industries focus on serving the demand of international clients .................................................... 6
1.3. International sales are administered through sister companies abroad ...................................................................... 6
2. Regional Sales ....................................................................................................................................................................................................... 6
2.1. Regional sales are managed through regional partners and branch offices ................................................................ 6
2.2. Lack of common definition of the Western Balkans regional market ............................................................................. 6
2.3. Common infrastructure partners are a prerequisite for regional market expansion ............................................. 7
3. Logistics................................................................................................................................................................................................................... 7
3.1. Different regulations for national post providers and private courier companies bring complications to
the market ............................................................................................................................................................................................................. 7
3.2 Cash on delivery make e-commerce businesses dependent on the delivery partners ............................................ 7
3.3. Cost of international delivery often exceeds the value of the order ................................................................................ 8
4. Payments ................................................................................................................................................................................................................ 8
4.1. Cash on delivery is the most popular payment method for users, not for the companies .................................... 8
4.2. The digital payment processing technologies are underdeveloped compared to global standards ................ 9
4.3. Banks and financial regulations are not adopted to needs and trends of the digital economy .......................... 9
5. Taxes ...................................................................................................................................................................................................................... 10
5.1. Taxpayers are questioning the legitimacy of parafiscal taxes ......................................................................................... 10
5.2. Digital invoice is a fundament of the digital economy ......................................................................................................... 10
6. Customs ................................................................................................................................................................................................................ 10
6.1. Slow customs procedures create additional costs for businesses ................................................................................. 10
6.2 Outdated classification and customs information .................................................................................................................. 11
6.3. Frequent opening of parcels by customs officers .................................................................................................................. 11
6.4. Import incentives support the rise of marketplaces ............................................................................................................ 11
7. Consumer Rights .............................................................................................................................................................................................. 12
7.1. Customers are not fully aware of their rights .......................................................................................................................... 12
7.2. No effective mechanism to protect companies against fraudulent consumer claims .......................................... 12
8 Administration ................................................................................................................................................................................................... 12
8.1. Digital business dependent on handwritten signatures and paperwork ................................................................... 12
8.2. Authorities have a poor understanding of the digital economy...................................................................................... 12
9. Intellectual Property and Data Protection........................................................................................................................................... 13
9.1. Intellectual property is not taken seriously by users, companies and authorities ................................................ 13
9.2. Intellectual Property is perceived as a liability ....................................................................................................................... 13
9.3. Requirements for data protection and cybersecurity standards are not clearly defined .................................. 13
Conclusion ................................................................................................................................................................................................................ 14

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Introduction
This document represents a summary of the findings of the analysis of challenges from the private sector
with regards to e-commerce in Bosnia and Herzegovina, Kosovo, and Albania. The research was
conducted for the Open Regional Fund for Southeast Europe - Foreign Trade, a project implemented by
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH commissioned by the German
Federal Ministry of Economic Cooperation and Development (BMZ). The project aims to eliminate
barriers of trade, improve trade procedures on the national level, and strengthen institutional capacities
for implementing trade-related regional agreements, especially in the framework of the Central European
Free Trade Agreement (CEFTA).

For this study, more than 40 e-commerce companies from Albania, Bosnia and Herzegovina and Kosovo
were interviewed about online communication, cross-border sales, payments, logistics, customs, taxes,
consumer rights, intellectual property and data protection. The study covered online retailers, service
providers, fashion designers and craft accessories producers, industry associations, payment providers,
couriers, online marketplaces (B2C, B2B, C2C) for physical goods and digital services. The size of
interviewed companies ranges from 10K to 10M annual turnover, 55% of interview companies sell
predominantly physical products; 46% are B2B-oriented businesses and 36% of companies sell in
international markets outside of the region. The objective of this study is to summarize and cluster the
most important challenges for companies involved in (cross-border) e-commerce from these three
economies. In other Western Balkan countries, challenges for the private sector are systematically
analyzed by e-commerce associations.

This document presents the main findings from the interviews and examples to explain the challenges
better.

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1. International Sales

1.1. Orders from abroad are rare and costly for consumer goods e-commerce businesses
E-commerce businesses selling physical goods and services in Albania, Bosnia and Herzegovina and
Kosovo are mainly serving specific needs of local customers and do not try to market their products
abroad. The most common reason for avoiding the global market are high international delivery costs and
complicated export procedures. Orders from abroad are rare and come mainly from diaspora clients
seeking specific domestic products that are not available abroad.

Example. The Albanian Football Federation is receiving lots of international orders for the
merchandise of the national football team. International payments are processed through PayPal and
delivery is organized via DHL with a minimum cost of 28 € per parcel, costs being covered by the
customers. The delivery of the same product to the local Albanian customer would cost around 1 €.

1.1. Handcraft creations find their way to international customers despite the obstacles
Individual creators and small companies that are creating their own art, fashion and craft products sell
predominantly to the international markets through platforms such as Etsy, Instagram and Facebook. The
high demand for handmade products in high-income countries results in the willingness of customers to
pay a premium price. The local and regional market is less appealing because of oversaturated markets
with competitors selling similar products at a much lower price.

Difficult export procedures lead e-commerce businesses to bypass the laws and avoid declaring sales as a
legal entity. The most common practice is to send products as a gift using regular post services.

The simplest option to register a legal entity in Bosnia and Herzegovina is a handicraft company (“obrt”).
It is the most popular choice for small entrepreneurs in the beginning even though it has limitations on
direct sales and export without intermediaries. In order to establish direct sales channels, handicraft
companies have to re-register as a limited liability company by paying much higher administrative costs
and going through organizational complexities that are impractical for small companies. The limitations
of handcraft companies were recognized by concept stores. They provide an online marketplace and
offline showroom for handmade products.

Example. Since the products of the handmade jewelry design studio, from Sarajevo appeared in the
music video of Beyonce in 2019, global demand for their products kept rising. Instead of maximizing
the momentum for achieving global success, at the peak of their popularity, they were hindered by
slow local bureaucratic procedures. It took them more than two months to acquire an export ID
number a prerequisite for legally selling abroad.

In Kosovo fashion designer brands are particularly widespread. Beyonce also featured creations of
fashion design studios from Kosovo. One of the success stories in Kosovo is a fashion designer with a
turnover of 1 million € per annum and more than 100 employees. While fashion designers can absorb
the high cost of delivery due to the high price of luxury products, it is not the case for handcrafters and
many other local producers.

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1.2. Creative digital industries focus on serving the demand of international clients
Companies that are offering digital products and services are mostly oriented to international clients
because the quality-price ratio is a competitive advantage in the global market, but too expensive for the
local standards. Creative industries (advertising, art, handcrafts, design, fashion, software, toys, video
games) from all three economies show a positive trend in international online sales. A lack of
international-minded sales and marketing professional capacities is a hindering factor for further growth.
The process of attracting and hiring foreign specialists is challenging. Interviewed companies expressed a
need for an effective model of professional education for international sales and digital marketing. Local
companies have difficulties finding and retaining talents with international sales skills.

1.3. International sales are administered through sister companies abroad

Companies are hoping for regulatory improvements that will allow export-oriented businesses to be
competitive in the global market. In order to ensure seamless customer experience to international
clients, local companies commonly open a separate legal entity dedicated to international clients. It is
more convenient for processing international invoices and supporting growth abroad.

Example. A digital service provider from Bosnia and Herzegovina reported an unpleasant experience
of losing an important international client because of their condemnations to a Bosnian bank account.
The financial department of the international client refused to sign a contract because it was
perceived as a risky transaction given Bosnia and Herzegovina’s lacking compliance with the anti-
money laundering and combating the financing of terrorism and proliferation standards (AML/CFT).
In order to prevent similar drawbacks repeating, they opened a sister company in Estonia for
international invoicing purposes.

2. Regional Sales

2.1. Regional sales are managed through regional partners and branch offices
For most interviewed companies regional cross-border e-commerce is not a common business practice
because of the high overhead costs. If there is a significant interest to go to a certain market of the region,
the usual practice is to open a branch office that deals with local jurisdiction, operations and account
management. Interviewed companies do not aspire, but they confirm to accept specific individual orders
from regional customers at an additional cost.

Example. An e-commerce platform launched in the Albanian and Bosnian markets at the same time
with the same brand name but with separate legal entities. Because of the different language and
specifics of the local market, they abandoned the idea to launch a common regional platform. Over
time both became leaders in direct facebook sales in their local markets. Because of the high demand
from users in Kosovo and North Macedonia, the Albanian entity expanded its activity to neighboring
countries. Because of the difficult export procedures, the Bosnian entity does not consider expansion
abroad.

2.2. Lack of common definition of the Western Balkans regional market

When speaking about the potential of the regional market, companies have a poor understanding of the
exact meaning of ‘Western Balkans’ or ‘CEFTA region’. For companies from Albania and Kosovo regional
sales means serving the demand of the Albanian-speaking communities in Albania, Kosovo, Montenegro
and North Macedonia. The language barrier is the most common reason for overlooking the rest of the
Western Balkans region. Other hindering factors are trade barriers, such as Kosovo’s 100% tariffs on
products from Bosnia and Herzegovina, which led to a drop in imports of 97% in 2019.

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For companies from Bosnia and Herzegovina on the other hand, Croatia is considered the most important
neighboring market. The hindering factor for export to Serbia is an additional cost for attestation and
standardization procedures. The total cost of all certification procedures in Serbia can be up to 150 € per
product. This is especially burdening when products have already been approved according to
international standards, but Serbian authorities insist on recertification in Serbia. It is exceptionally
difficult for businesses that produce unique products or limited series. They undergo these procedures
for each new iteration and modification of the product.

2.3. Common infrastructure partners are a prerequisite for regional market expansion
The opinion of all surveyed companies is that the individual markets of the Western Balkans region are
considered small. The idea of a single WB6 market is unimaginable without equal rules and prerequisites
for all participants of the market. Interviewed companies agree that such an idea would certainly create
more opportunities, but because of the uncertainty of regional market development, companies do not
think about regional strategic planning at the moment.

Easier access to all regional markets at once would unlock the potential for regional expansion. Single
payment processing and logistics partners covering each economy of the region without exception would
be a fundamental prerequisite. The companies suggested that it would be of great help if they had access
to information about the requirements and specifics of each market of the region.

3. Logistics

3.1. Different regulations for national post providers and private courier companies bring
complications to the market
There are three types of physical product delivery providers in all three countries: national government-
owned post, private-owned couriers and international couriers (DHL, FedEx, etc.).

The national postal services are considered by all surveyed companies as the lowest-quality service
providers, but in most cases also the most affordable option. Private couriers offer a reliable door-to-door
delivery service, and international couriers offer a premium service for international orders for notably
higher prices.

In Bosnia and Herzegovina and Kosovo, the pricing strategies of private couriers are limited by law: The
minimum price for the delivery services of private couriers is 4,5€ in Bosnia and Herzegovina and 1,5€ in
Kosovo. The association of private couriers in Bosnia and Herzegovina so far unsuccessfully initiated an
anti-monopoly legal case against the national post providers. As a result of this regulation, end-users
continue to pay high prices for delivery. In order to decrease prices for regular clients, it is a usual
practice that private couriers absorb 17% VAT costs, therefore the final price for customers is around
3,8€ for domestic delivery within 24 hours.

Most of the interviewed companies in all three economies have clearly stated that they prefer to use the
services of private couriers over the national-post providers because of trustworthiness, speed and
quality of service.

3.2. Cash on delivery make e-commerce businesses dependent on the delivery partners
Most private delivery companies offer a service of collecting payments for cash-on-delivery sales. The
usual practice is that legal entities receive the money via wire transfer from the logistics partner at the
end of the month. Non-registered sellers get the cash delivered to their address immediately, which
practically means that couriers are doing double delivery for the same price.

In order to reduce dependency on external partners, bigger companies are using an in-house delivery
service.

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3.3. Cost of international delivery often exceeds the value of the order
For international orders, the most affordable delivery partners are national post providers because of the
low cost (around 2€ for products below 100g, priority delivery and tracking number not included in the
price). This pricing applies only to products of envelope-size packaging. If the parcel is heavier and
bulkier, the price of post services for international delivery is about the same as with international
couriers. The minimum cost of an international delivery via express post is 20 € for packages below 200
g. The Albanian and Kosovar posts have slightly lower pricing for neighboring countries, but not to the
rest of the region. Introducing regional delivery rates could be a first step towards enabling a regional
cross-border e-commerce market.

Locally, the costs of private courier services vary from around 2 € to 7 € in Kosovo. Informally e-
commerce companies state that based on volumes, the price of delivery from Albania to Kosovo might be
negotiable in the case of a larger volume of orders. A delivery van operates daily between Albania and
Kosovo for service worth around 5-7 € per parcel. Respondents also pointed to the address system in
Kosovo as a problem. Two companies have confirmed sending parcels via bus drivers for orders from the
region. The customer (or a local business partner) is waiting for the package at the bus station.

Example of how a company turned challenges into an opportunity: One of the interviewed companies’
business models is taking advantage of the limitations imposed on Bosnian customers in US-based
online marketplaces by providing a service of delivery from the US to Bosnia and Herzegovina. The
buyer is ordering a product to the company’s US-based storage address and then the parcel gets
repackaged and shipped to Bosnia and Herzegovina. Companies with a similar business model also
exist across the region.

4. Payments

4.1. Cash on delivery is the most popular payment method for users, not for the companies
Cash on delivery is by far the most used model of payment for domestic e-commerce in the region. The
local customers are often reluctant to use electronic payment through the website and companies adapt
to users’ habits and preferences. For companies, this method creates a cash-flow management problem
because goods are cleared from the inventory, but payment is kept at the courier company for up to
several weeks. For couriers, this method is also troublesome, because of accounting complications with
processing the payments. The larger amounts of cash expose the courier drivers to additional risk. One of
the logistical solutions proposed by companies is introducing modern delivery systems, such as APM
(automated parcel machines). A parcel delivered to a designated locker can be unlocked with user
verification. The lack of digital identity verification becomes the blocking factor for the establishment of
modern delivery systems.

Example. One shop in Bosnia and Herzegovina adapted online sales to the basic needs of local
customers. At the checkout, the user only needs to provide a phone number. The employee confirms
the order and address by phone call and offers free in-house delivery. In case the user wants to pay
with a bank card, the driver brings the card processing terminal to the delivery address. This solution
works well for them because they are less dependent on couriers and online payment processing
providers.

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4.2. The digital payment processing technologies are underdeveloped compared to global
standards
Another common problem are difficulties with the integration of local banks’ online card processing
solutions, know as “virtual POS”. Often, bank employees themself lack knowledge about virtual POS. The
technical integration can take a few months and it often requires major changes to the company’s
website. As a consequence, less than 10% of the interviewed companies are using local banks’ Virtual POS
service. Companies are looking for payment processing alternatives in non-bank affiliated financial
technology solution providers.

International fintech giants like the Asseco group acquired Monri local payment processing products
enabling a Virtual POS for lower cost and easier integration. The company provides financial technology
solutions, and the ledger of all processed transactions are registered by a licensed local bank. The idea of
having a single payment processing partner in each market of the region is strongly supported by
companies with regional ambitions. Surveyed companies from all three economies complained about
customers’ reluctance to use bank cards for online payments.

Example. Three companies in Albania reported that they deleted the electronic payment processing
feature because it was bringing additional costs without positive results on sale. These businesses did
not report of any case of customers insisting on card payments. Moreover, banks often block the first
online purchase by default as it is perceived as a possibly suspicious activity and fraud risk. Local
users use credit card payments for purchases at e-commerce stores abroad but refuse to use them for
local purchases. An Albanian online marketplace had over 25% of sales via bank cards in the
beginning as they were perceived as a foreign shop. When it became known that it was a domestic
company, electronic payment sales dropped to less than 1%.

PayPal is mainly preferred as a payment option by foreign orders and used as an alternative to the Virtual
POS. It offers more protection for online shopping, acting as an "escrow account" and almost in all cases
resolved incidents in favor of the customer. PayPal accounts of Albanian and Bosnian users can not be
directly connected to bank accounts but the only possible two-way transaction is through Visa
credit/debit cards, for an additional fee. PayPal does not accept opening an account with Kosovar
documents, but in some cases shops from Kosovo use PayPal by claiming that they are Albanian
companies as long as they are not banned. According to the Association of ICT companies in Kosovo
(STIKK), the lack of representation in online payment institutions would be solved if Kosovo receives a
top-level national web domain.

Examples of emerging new payment technologies. One of the respondents recently launched a
mechanism for the evaluation and pre-approval of credit. The courier delivers the parcel and upon
receipt, the consumer signs a contract on a monthly installment basis to the financial institution that
approved the credit. Other emerging fintech solutions are e-wallets. One provider offers a way to top-
up E-wallet accounts at kiosks in Albania and North Macedonia. It is mostly used for utility payments
and online purchase of event tickets. In the rest of the region, such top-up solutions are especially
popular for online betting casinos.

E-Commerce companies state that they welcome any payment innovation that could replace the cash-on-
delivery system.

4.3. Banks and financial regulations are not adopted to needs and trends of the digital economy
A digital service provider from Serbia reported that the major obstacle for regional sales are overly
expensive cross-border transaction fees. Citing an example case of a Montenegrin customer demanding to
pay a subscription for a few years in advance in a single payment because the monthly subscription is

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bringing immense cross-border transaction costs. Another problem for companies that offer
subscription-based services is the inability to set up automatic recurring payments. One of the most
serious issues for B2B businesses is requesting overdue payments. The legal instruments to enforce
overdue payments are too weak. In some cases, it can take up to 5 years for a company to receive their
money back.

The cost of international bank transactions in Albania starts from 8-15€, and Bosnia and Herzegovina has
an international wire transfer fee of 10€. In Kosovo money transfer to the neighboring countries is 10€
and 15€ per transaction while a transaction to the EU and the rest of the world starts at 20€ per
transaction. The Central Bank of Kosovo recently removed the 1% payment fee for processing card
terminal payments of clients with different domestic bank accounts. This does not apply to online bank
card processing.

5. Taxes

5.1. Taxpayers are questioning the legitimacy of parafiscal taxes

The regular taxation is not seen as a big problem for respondents of the interviews. VAT registration is
not applicable as long as the annual turnover is below approx. 16,200 € in Albania, 25,000 € in Bosnia
and Herzegovina and 30,000 € in Kosovo.

Besides direct and indirect taxes collected by the tax authorities, specific purpose government bodies are
financed by the private sector through “parafiscal charges”. It is especially challenging in Bosnia and
Herzegovina because there are more than three thousand parafiscal tax obligations. Since the public
spending of collected money through non-fiscal obligations is not transparent, the private sector is
questioning the legitimacy of these taxes. The government admits the fact that these redundant costs
stifle the local economy, but no concrete measures have been taken to eliminate them. Recurring to grey
or black markets is a strategy for companies to avoid non-fiscal tax obligations. The underlying rationale
is that it is easier to pay a fine, or a bribe when caught in illegal activity than being continuously exposed
to uncertainty regarding amount of taxes and obligations they need to pay.

5.2. Digital invoice is a fundament of the digital economy

Digital invoicing is not recognized by law and tax administration at the moment in Albania, Bosnia and
Herzegovina and Kosovo. It is counterintuitive for digital companies to collect stacks of printed paper
invoices as proof of online purchases. The problem arises when a company tries to claim digital invoices
as the company’s procurement expense. Albania introduced an "auto-invoicing" procedure in order to
enable recognition of digital services as an expense, but at an additional cost and the understanding of the
service is so far low. A company has to issue an invoice as a service provider. This process ensures the
recognition of expense for the profit tax but also makes VAT reimbursement not applicable. According to
the surveyed companies, legally-binding digital invoices are a prerequisite for the progress of the digital
economy in the Western Balkans.

6. Customs

6.1. Slow customs procedures create additional costs for businesses

One of the common problems for exports of goods in all three countries is slow procedures for obtaining a
customs ID number, a pre-requirement for export. When a company receives the first order from abroad,
the sales process might be delayed for several months until all paperwork is ready for export.
Interviewed companies are not satisfied with the speed and quality of customs. Every delay of goods at
the border or customs terminal is considered as a financial loss for the company. Most of the respondents
find problems with inbound customs because of lags and uncertainty. It is very important for businesses
to accelerate customs’ clearance time. The digitalization of customs procedures would significantly

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increase efficiency.

A common issue is that original import documentation is not accepted by customs because of the absence
of a handwritten signature or a stamp on the import documentation when importing from countries in
which an electronic signature is a common business practice. Usually, the problem is resolved by express
mailing the same documentation with an additional handwritten signature and official stamp to the
customs office in order to release the delivery.

6.2. Outdated classification and customs information

A commonly mentioned obstacle by the respondents was the outdated customs category classification
and price valuation. An example of an undefined article is a smartwatch. In some cases, a smartwatch is
categorized as a smartphone, which increases the price valuation. In another case, it is classified as a
medical device that requires additional procedures.

Interviewed e-commerce companies complained about the very limited access to knowledge about the
import-export procedures for regional orders. Many of the companies report that they are not aware of
what should be done in order to export in an official way, so they prefer to choose a delivery company to
take care of the process. The cost of outsourcing export customs procedures to freightage companies in
Kosovo has a fixed cost of 50 € regardless of the value.

6.3. Frequent opening of parcels by customs officers

It is common practice that customs officers physically open parcels. The use of scanners and non-
intrusive equipment would solve this issue. In addition, a majority of companies stated the corruption of
customs officers as a big problem. According to the respondents, many customs officers are used to
receiving gifts that can smooth customs clearance.

Example. Two interviewed companies mentioned the case of customs officers taking “a gift” directly
from parcels. The freight forwarder asked the company owner not to take any legal action against the
customs officers because it might irretrievably harm their freightage business. These incidents were
never reported to authorities.

6.4. Import incentives support the rise of marketplaces

Marketplaces are the most prosperous segment of local e-commerce. Companies from Bosnia and
Herzegovina have confirmed that sales through marketplaces provide much better results than the sales
through their website. In April 2019, Bosnia and Herzegovina removed customs tariffs and taxes for
parcels with a value below 150€ for a physical person and 45€ for a legal entity. That decision
significantly increased orders by Bosnians on international e-commerce platforms. Import incentives
resulted in a rise of dropshipping through local online marketplaces. Albania had similar customs
incentives, but in 2016 the Ministry of Economy and Finance reduced the threshold to 22 € for parcels
ordered online. This incentive has been positively accepted by local e-commerce providers as it resulted
in an increased number of orders, higher volumes and also a rising number of e-commerce marketplaces.

Example. The national post providers in Bosnia and Herzegovina continue to charge approx. 4.75€
for “customs check-up service” for parcels that are exempted from customs tariffs and taxes. This
example shows that the national post providers do not necessarily adapt their practice to favoring the
end-users, even when the law is providing for it. It was also reported that national post providers
impose additional fees to customers for free shipping orders from abroad even though the delivery
costs are being paid by the sender.

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7. Consumer Rights

7.1. Customers are not fully aware of their rights

All interviewed companies have responded to questions about consumer rights with a full commitment to
rendering customer satisfaction. The usual practice is to offer a 14-day return policy and a 2-year
warranty; even non-registered businesses are claiming to offer such guarantees. Goods are returned if not
damaged, but often it is unclear who should cover shipping costs of the returned goods. Customers are
not fully aware if their rights are protected by law, or they may have doubts as to whether the law will
protect their rights in the case of an incident or dispute. Raising consumer rights awareness would
increase trust in e-commerce and online payments.

7.2. No effective mechanism to protect companies against fraudulent consumer claims

Most companies agree that better consumer rights consequently improve customer satisfaction and trust.
Some customers are taking advantage of consumer rights to request more than they are entitled to.
Companies request clearer regulations on the return of goods and dispute solving mechanisms.
Unjustified returns and fraudulent claims could seriously harm the business for large volume orders.

Example. In one case, an Albanian international e-commerce company had to shut down operations in
the Middle East and North African markets because of the high rate of returns and associated costs.
Unclear regulations regarding delivery costs of returned goods is a discouraging risk factor.

8. Administration

8.1. Digital business dependent on handwritten signatures and paperwork

It is obligatory to record each sale on a dedicated fiscal POS bill printer, even for online sales. Each
contract requires a handwritten signature and stamp. These rules apply to online sales as well. For
companies from Albania, Bosnia and Herzegovina and Kosovo, paperwork, handwritten signatures, and
paper invoices are part of an everyday routine. In some cases, international companies send a digitally-
signed document and local authorities ask for a stamp and handwritten signature.

8.2. Authorities have a poor understanding of the digital economy

Digital companies have difficulties to reach a common understanding with supervisory authorities. The
regulatory representatives often show a lack of basic understanding of online commerce. The black
market is taking advantage of the situation by executing unregistered and untaxed online commercial
activities without consequences. Companies which do declare all online sales to the tax office, get regular
visits by financial inspectors and other supervisory bodies. This often leads to inconvenient disputes
because inspectors cannot fully comprehend the concept of online sales. Current trade regulations are not
adapted to the specifics of online sales. Multiple interviews concluded that the business environment in
the Western Balkans favors the grey economy.

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9. Intellectual Property and Data Protection

9.1. Intellectual property is not taken seriously by users, companies and authorities
In general, companies have low interest in intellectual property protection as long as they do not face
problems. For example, companies start using copyrighted multimedia only after they experience the
negative consequences of using unlicensed images.

Since the local authorities do not have strict control over unlicensed software, it is a common practice to
use illegal software without repercussions. It is possible to acquire a software license only through local
resellers at a much higher cost compared to pricing in other parts of the world. For example, Adobe
Creative Cloud is an essential set of tools for professional photo and video production. Subscription
packages cost between 10-50 € per month for a regular internet worldwide user, but users from Bosnia
and Herzegovina need to negotiate a deal with a local supplier for prepayment of 1,000-3,000 € per year.

Interviews have reported cases of impersonation of their businesses on social media for the purpose of
attracting customers to make orders through the clone site with scam offers. Authorities did not take any
action to take such violations seriously. Companies would support awareness campaigns in order to
educate clients on the importance and advantages of using online payments and also to educate them to
better identify scam sites.

9.2. Intellectual Property is perceived as a liability

Kosovo has not yet joined WIPO or any other international IP treaty, therefore companies from Kosovo
have difficulties with intellectual property registration. Companies from all three economies expressed
the need for easier access to information on how to protect their IP, how to register it worldwide and also
to reduce the costs associated with brand protection. Patenting and intellectual property protection is not
a popular topic in Western Balkans because it is perceived that it brings costs rather than benefits for a
company. Intellectual property was reported as a challenge mostly for companies that are offering
proprietary products.

Example. One of the respondents complained about the high cost associated with destroying pirated
goods. When customs seized pirated goods, they reached out to the company with the reselling rights
of a particular product. The company needs to cover all the costs related to the IP protection and
destruction of confiscated goods. In order to compensate for this cost, they have to sue the pirate
company.

9.3. Requirements for data protection and cybersecurity standards are not clearly defined
The surveyed companies engaged in international business are fully GDPR compliant and take care of
personal data protection. Companies that are doing business on a local or regional level are not aware of
special data protection and cybersecurity requirements. Most companies that are operating locally are
not concerned about data protection since there are no clearly defined requirements.

Raising user and company awareness regarding data protection and cybersecurity would establish trust
in local e-commerce.

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Conclusion
E-commerce in Albania, Bosnia and Herzegovina and Kosovo is still underdeveloped compared to global
standards. Online shopping is not a common practice for the average local customer. The knowledge of
authorities but also of companies involved in e-commerce of the necessary procedures is still low. The
numerous hindering factors for e-commerce development include low penetration rates of online
payments, lack of trust in regulatory bodies, high transaction costs and complicated export procedures.
According to the interviewed e-commerce companies, the most important challenges for local e-
commerce are: a strong cultural mindset barrier about online shopping (44% of respondents), high
payment and delivery costs (38%), and an underdeveloped online payment processing market (35%).

Regarding cross-border e-commerce, the interviewed companies referred to the high international
transaction costs (47%), difficult access to information about export (41%), expensive international
delivery (38%) and a deficit of specialists with international sales and marketing skills (29%) as the most
hindering factors.

The data collected through the interviews shows that creative industries and digital products have
positive international sales results. The local e-commerce development is driven by marketplaces and the
cash-on-delivery payment method.

In order to tackle these issues, the following actions are suggested:

• Education campaigns aimed at raising awareness of customers, companies and authorities
regarding online shopping standards and digital services,
• Certification of “trusted traders and service providers”,
• Easier access to information with regards to import and export procedures and regulatory
requirements for new markets,
• Incentivizing the reduction of transaction and delivery cost,
• Streamlining customs procedures,
• Enabling digital administration of cross-border sales processes,
• Encouragement of the development of regional e-payment solutions.

In general, e-commerce is still a black box for many involved stakeholders: customers with regards to
consumer rights protection, responsible authorities with regards to suitable and implementable policies
and companies who are still partly unaware about the rules they have to comply with and rather engage
in grey economy activities due to uncertainty. Measures to increase trust between stakeholders and
raising awareness about the advantages of e-commerce (reduction of cost, time and efforts, but also
macroeconomic benefits) are an important first step to achieve a broader impact.

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