eNET Internetkutató és Tanácsadó Kft.

No Crisis So Far in Online Shopping

2009. August 16.

GKIeNET_grafikon_17In the first half of 2009, the number of online retail stores using a shopping cart system exceeded 2,400 in Hungary. With the population of internet users continuing to grow, the number of consumers experimenting with online shopping is also expanding steadily. By the end of 2008 almost 750 thousand people had tried online shopping at least once over the preceding 12-month period. Online retail sales totaled 63 billion forints, contributing one percent to the total retail sales volume.

Sales volume

A GKIeNET survey indicates that online retail sales amounted to 63 billion forints in 2008, which equals one percent of the total retail sales. The weight of online sales in the retail sector increased sharply compared with previous years. According to the expectation of retailers and the estimates of GKIeNET, the dynamic growth seen in the previous years will be continuing in 2009, as well, with total online sales reaching 95 billion forints by the end of the year.

Sales volume of online stores between 2001 and 2009 (in HUF billions)
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Source: GKIeNET

Based on our estimates, the annual net revenues of almost half of the online retail stores remained below 5 million forints in 2008.  This rate can be considered high, however, it reflects a significant improvement  in comparison to the level 2-3 years earlier, in the initial developmental stage of online shopping, when more than three-quarters of all online retailers belonged in this category. This indicates that viable ideas coupled with good business models promise success, while the lack of these factors results in doomed attempts and quick business failures. It should be noted, however, that 80% of all online retail sales are generated by approximately twenty of the largest web stores.

Payment methods

The lack of consumer confidence continues to be one of the biggest obstacles in the expansion of online shopping. Customers are generally not eager to prepay for goods that they cannot see except on the computer screen.  This assumption is confirmed by the survey of GKIeNET, as well,  which documents that in 2008 92% of all web purchases were settled by the method of C.O.D. (Collect on Delivery): 47% used a courier service and as low as 1% used postal C.O.D.  44% of the purchases were paid by cash on delivery, while only 5% of the transactions were paid by bank transfer and only 3% by a credit or debit card. Mobile phone payment (via text message) was not mentioned by any of the responding online stores, while direct transfer (cash transfer orders)  was indicated in the category of miscellaneous payment methods, but only in a negligible fraction of transactions.
The trends seen over the recent years indicate that consumers’ confidence in online payment methods (whether by bank card or money transfer) is not increasing at all. Rising delivery fees are reducing the rate at which courier services are used, while almost half of all purchases are still picked up in person.

Payment methods used for purchases made at online stores in 2008

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Delivery methods

Given that the confidence of consumers depends greatly on the actual and timely arrival of the purchased products, choosing the right delivery method is a major challenge for every online store. Hence, the majority of web stores offer their customers several delivery methods to choose from.
In 2008 two delivery methods dominated in online shopping: 47% of all purchases over the internet were delivered via courier services, while 45% of all purchases were picked up on site by the customer. 6% of the purchases were delivered by the seller’s employees, while the Hungarian Postal Service had a share of only 2%. These rates clearly reflect the opinions of retailers and consumers regarding the quality, reliability and speed of the available delivery methods.
It needs to be pointed out that online food purchases play a substantial role in terms of the number of transactions, and most of them are handled by intermediary companies. The actual delivery is mostly done by the employees of the restaurant from which the food was ordered; on-site pickup by customers is rare, as is the use of a separate courier service. Due to the large number of online food order transactions, these figures are not included in the above data in order to avoid skewing the results.
On-site pick-up by customers has become more prevalent in recent years, while  postal deliveries continued to drop further, despite the already low rate seen previously.

Delivery methods used for online purchases

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Online auction marketplaces

In addition to business-to-consumer (B2C) sales between retailers and end users, consumer-to-consumer (C2C) sales are an increasingly popular form of online shopping, for which online auction marketplaces offer the most fitting channel. At the same time, many retailers prefer to use these auction websites to sell their products rather than open up their own online stores.
Vatera.hu and Teszvesz.hu are Hungary’s two leading online auction marketplaces (both C2C and B2C). The volume of sales flowing through these two sites amounted to almost 15 billion forints in 2008 (revenues are generated solely from listing/selling fees), and it will likely continue growing rapidly.


About the study

During the course of the study researchers of GKIeNET contacted more than 2,400 online retailers via e-mail in the first half of 2009 to fill out  an html-based survey form. We received 241 responses, which included the largest online retail stores.  Due to conceptual considerations, this survey did not include online financial service providers, tourism-related companies or online stores using non-shopping-cart websites.

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RESEARCH THEMES
Bonus/Coupon, e-commerce, e-government, e-finance, e-tourism, Electronic Communications, Frequency, Information Society, Information Security, Internet Subscriptions, Internet Economy, Internet usage, Internet Access, Internet Penetration, Internetbank, Internet Commerce, R&D, Christmas, Social Site, Media, Mobile Payment, Mobile Purse, Mobile Shopping, Mobile Internet, Mobile Games, Mobile Phones, NGN, Smartphone , Online Games, Online Shopping, PC, Tablet, Telecommunication Spending, TV, Video Sharing, VoD