In this edition of “E-Commerce in…” we’ll be taking a closer look at Latvia, which became famous as the home of the “European Capital of WiFi” back in 2014. And while this claim to fame is less important in 2024, the small northern country still has plenty to offer to tech-savvy customers and market newcomers alike. In this article, we explore what makes Latvia an attractive target for e-commerce expansion, its market potential, and key factors companies need to consider.

Facts and Figures

In terms of size and population, Latvia is the second largest of the three Baltic countries. With an area of 64,589 km², it’s comparable to the German state of Bavaria. Among EU states, Latvia falls between smaller Croatia and its slightly larger neighbor, Lithuania, which shares Latvia’s southern border. Latvia also borders Estonia to the north, Belarus to the southeast, and Russia to the east.

Latvia has a population of just under 1.9 million people—roughly the same as Vienna, the capital of Austria. The country’s capital, Riga, is its largest city; with around 600,000 residents, it is home to nearly a third of the nation’s total population.

Based on the Human Development Index (HDI) of the United Nations, Latvia ranks 37th in the world with a score of 0.879 (for comparison: Germany 0.950; Austria 0.926). Latvia’s GDP is about 45 billion USD, with a purchasing power-adjusted GDP per capita of roughly 41,700 USD (compared to Germany’s 67,200 USD).

Latvia has been a member of the European Union since 2004, and in 2014, the euro replaced the lats as the official currency.

Language

Latvian is the official language of Latvia and is also recognized as a minority language in neighboring Estonia. About 1.7 million people speak Latvian as their native language. Its closest linguistic relative is Lithuanian. Unlike Estonian, both Latvian and Lithuanian are part of the Indo-European language family, although they are not mutually intelligible. Both languages have similarities with Slavic languages but also contain elements from German and Dutch due to their historical influences. Latvian is written using the Latin alphabet, with several special characters such as ģ, ļ and ž.

Approximately 36% of Latvians speak Russian, and about 25% of the population identify as ethnic Russians. This makes the Russian-speaking population the largest ethnic minority in Latvia. Up until 2023, there were even some schools and kindergartens using Russian as the language of instruction. However, this will be phased out over the next three years as Latvia seeks to distance itself from the Russian language and culture. There are also smaller Polish, Hungarian, and Lithuanian minorities.

Since the 1990s, English has overtaken Russian as the most important foreign language, particularly among younger Latvians, many of whom now speak better English than Russian. English also facilitates cross-border trade between Germany and Latvia. However, for companies seeking to target Latvian consumers, it is always advisable to translate your website into Latvian. No matter how many people speak English, people still prefer to do business in their native language. It is also important to localize your website to conform to local standards, for example by offering “local hero” payment processors.

Internet Usage, Consumer Behavior, Cross-Border Commerce

Thanks to their excellent internet connectivity, Latvians have no trouble staying entertained during the long winter nights. In 2014, Riga earned the title of “Europe’s Captial of WiFi,” with three free hotspots per square kilometer. By 2020, 90% of households also had internet access at home, and in 2024 the country boasts an internet penetration rate of 92.9%.  A total of 2.65 million cellular mobile connections were active in Latvia in early 2024, which is nearly 150% of the total population.

Internet speed has also increased drastically in the last year. According to a study by the company Ookla, mobile internet speeds increased by 59.7% in the 12 months prior to 2024, and non-mobile internet speeds increased by 22.7% in the same time period.

Statista reports that, in 2023, over 46% of Latvians had made an online purchase in the past three months. During the pandemic, that number was over 50%. The most popular product categories purchased from foreign online shops were clothing, footwear, and accessories. Only around 8% of Latvians purchase food and beverages online.

In 2022, Statista found that 79% of online shoppers in Latvia had purchased from a Latvian business, while 43% had purchased from sellers in other EU countries, and 21% had purchased from non-EU sellers. This shows us that Latvian shoppers are open to cross-border shopping, particularly from EU sellers.

Payment methods, major marketplaces, e-commerce trends

Statista reports that Mastercard and Visa are the most popular means of payment for e-commerce purchases, followed by debit cards. 35% of consumers report using bank transfer, and 34% use digital wallets such as PayPal. The company Adyen reports that the Russian payment platform Yendex.Money, a type of pre-paid card, is also popular.

The most popular online marketplaces in the Baltic region in 2023 were pgu.lt, with 4.5 million visits, followed by Senukai.lt and 220.lv with 3.7 and 2.5 million visits each. Amazon does not have a dedicated Latvian website, but some Latvians do successfully order from the German Amazon.de website.

E-commerce businesses in the Baltics are coming into their own. In May of 2024, the Baltic E-Commerce Star Awards was established and presented to innovative e-commerce brands of all sizes throughout the Baltic region. And the E-Com ‘21 conference, where businesses can learn about payment trends in e-commerce, will be held in Riga in 2024.

Logistics

For Latvian customers, shipping is seen as the biggest hurdle in cross-border e-commerce. It often takes too long and is expensive, and returns can be problematic. For example, DHL estimates that a parcel from the Netherlands would take 5 to 7 business days to arrive in Latvia.

Despite this, Latvia’s geographical location positions it as a key transport hub between Europe and Asia. In fact, it has been a key trade route for thousands of years. Goods are typically transported via road or the well-developed rail network, connecting Latvia to neighboring countries like Russia and far-off markets such as Japan and China. Latvia’s three major ports—in Riga, Liepāja, and Ventspils—also handle goods from all over the world. These ports remain ice-free even in winter, ensuring year-round accessibility. As special economic zones, the ports offer local businesses attractive incentives like tax breaks and other forms of support.

Import and Customs Regulations, Packaging Requirements, Country of Origin Labeling

Since Latvia joined the EU on May 1, 2004, EU import regulations apply. This is great news for EU businesses who are thinking about expanding to Latvia, as goods can move tariff-free within the EU. For imports from non-EU, tariffs apply as specified in the EU’s Common Customs Tariff (TARIC).

In e-commerce, as of July 1, 2021, the EU’s VAT regulations apply. The VAT on e-commerce shipments is handled through the One Stop Shop (OSS) system, using Latvian VAT rates. Businesses that sell more than €10,000 in Latvia will be required to register for a VAT number in the county.

Latvia charges a fee for packaging materials under their Law on Natural Resource and Packaging Law, which are aligned with the EU waste (94/62/EC) and packaging (2004/12/EC) Directives. Products must be clearly and understandably labeled to show their safety and quality. A country of origin label is required only for goods from non-EU countries, so products made in Germany, for example, are not required to display “Made in Germany” labeling. However, this can still be a positive selling point.

Conclusion

Latvia offers significant potential for European e-commerce companies. The country’s excellent internet coverage, tech-savvy population, strategic location, and EU membership make it an appealing target market. Latvia’s economy is one of the fastest-growing in the EU, and its political environment is stable. Latvians are open to cross-border e-commerce and, with Latvia being positioned in such a key location for transport, a warehouse in Latvia could be a boon to any company looking to sell to the wider EU market.



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autor_eurotext_100Author: Eurotext Editorial Team

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