Christmas cannot come too soon for many of the smaller players trying to make a breakthrough in the world of Internet shopping, but the four biggest players on the Czech market are celebrating having broken through the “magic billion” figure—that is, they can now say they are pulling in more than Kč 1 billion
(€ 36.85 million) in revenues annually.
It took Internet store Kasa.cz some eight years to leap the 1 billion barrier. When the company entered the as yet undiscovered world of Internet retailing, virtual shops were still mostly being used by only a few computer buffs pursuing products out of the mainstream. Now Kasa.cz—which Oct. 24 launched a Hungarian branch to complement its foreign operations in Germany, Poland and Slovakia—is thinking big.
By the second quarter of this year, the Internet, which arrived 15 years ago in this country, had penetrated 32 percent of Czech households, according to the Czech Statistics Office (ČSÚ), and, in the opinion of the Association for Electronic Commerce (APEK), Internet purchases have become an everyday part of life in the Czech Republic.
Like its rival Kasa.cz, operated by Eurocomm Group, Mall.cz, run by Internet Mall, is already present in all of the Czech Republic’s immediate neighboring countries as well as Hungary. Driven by turnover of Kč 1.46 billion in the fiscal year ending March 31, 2007, Mall.cz is set to rival Kasa.cz’s planned Christmas Internet and print advertising expenditure of Kč 4 million with what it describes as a massive seasonal advertising campaign. “It will be a campaign prepared in cooperation with a major partner from the field of telecommunications,” said Ondřej Fryc, chairman of the board of directors at Mall.cz, without specifying how much would be spent on the campaign, but disclosing that the company’s advertising budget amounts to tens of millions of crowns annually.
Core market is tech savvy
Internet stores typically target the more tech-savvy younger generations when advertising their wares. “In general, young people are bigger experimenters when it comes to Internet shopping,” said Šárka Bártová, media research specialist with market research company GfK Praha, adding that the firm’s Online Shopping 2006 survey had confirmed that the biggest Internet retail spenders are people between 20 to 29 years of age.
The commodities most frequently sold via the Internet are books, magazines, consumer electronics and IT components. However, Bártová said there was a constant upward sale trend for clothes and beauty products and mentioned event tickets, photo services, items featuring in e-auctions and various vacation market segments as being popular with e-buyers.
Jan Vetyška, president of APEK, said electronics were outstripping books as the top selling item on the Internet. The large number of well-known retail electronics chains that have launched virtual shops in recent times is evidence of this, he added.
Gift language courses
Demand for online booked tropical vacations as dread of the upcoming winter freeze builds is expected to boost sales of Internet store services, as opposed to products. Travel, language learning and au pairing agency Student Agency said more than half of its turnover now comes through Internet business. The company is currently preparing special prices for language course trips abroad. “Parents may sometimes hesitate over what present they should give to their children. We think a special language course can be both an interesting present and a good investment, too,” said Radim Jančura, owner of Student Agency, adding that the company has not found it necessary to prepare any special campaign to capitalize on the lucrative pre-Christmas period. “Our advertising stays more or less constant all year long. Naturally, most of it is placed on the Internet, with the other two advertising channels being radio and the print media,” Jančura added.
Multiplied demand for winter tires and winter sports equipment is also anticipated by Internet traders, making up for sales of satellite navigation technology, digital cameras and video cameras that decline after the summer months. David Šimoník, communication manager with Kasa.cz—which before making its Kč 1 billion breakthrough, posted turnover of Kč 470 million in the year to Aug. 31, 2005, and Kč 721 million to Aug. 31, 2006—looked at Christmas gift opportunities. Perfumes for women and watches for men would likely be best sellers, he said. “Of course, the gifts that are seen as universal seem to be the most popular with online store customers. This is the case with CDs, DVDs and computer games. And, as usual, we expect increased interest in MP3 players, mobile phones and small electronics,” he added.
Taking on brick-and-mortar
Looking at factors that encourage retail consumers to log on, rather than make the journey to town or an outlying shopping mall, Vetyška said Internet stores’ strategy is to provide such comfortable Web sites and search engines that clients keep coming back for more. “Their inventiveness is the biggest plus that makes them so different from the usually narrow-minded brick-and-mortar stores,” Vetyška added. “On a regular basis, they come up with new customer care improvements,” he said, adding that while some bet on last minute deliveries, others went for enhancing communication with clients by establishing call centers or easing “gift dilemmas” by creating consultant departments that can offer the shopper “a little inspiration.”
Speed of product delivery and item availability are other areas that Internet store business will not neglect. Kasa.cz store, for instance, is strengthening its pre-Christmas team to try to ensure customers receive their orders before Christmas Day.
Broken promises
There is no doubt that at least some people will suffer a sorry e-shopping reality amid the upcoming peak retail period. According to the Consumers’ Defense Association of the Czech Republic (SOS) there is a constant stream of complaints about the practices of Internet sellers. “The most common problem we encounter is sellers that do not respect the right that allows a customer to return a product within two weeks without stating a reason and with no sanctions. Some companies have been breaching this right, obstructing product return by claiming that their sales arrangements mean the product can only be returned in its original packaging, for example,” Jan Šulc, a lawyer employed by SOS, said. “Perhaps the second biggest problem is that many companies simply do not keep to the delivery terms,” Šulc added. Customer rights are also sometimes infringed when the responsibility for damage suffered by a product during delivery is pinned on the post office or courier. The responsibility actually remains with the seller, he said.
SOS provides certification for Internet sellers that it ascertains are reliable. Generally, it said, the bigger Internet stores seem to be much less problematic than the smaller ones in terms of customer treatment.
But a problem arises when a definition of what is actually an “e-shop” must be provided. Vetyška said it is nearly impossible to define what an Internet store actually is. “Is it someone who advertises a few things on his Web site? Or is it simply the stores that only operate in the virtual environment?” he said, adding that there are too many entities that fall in between these two extremes. “I can only say that there are about 300 to 500 operators on the Czech market. I cannot give an exact number since nobody really knows what an e-shop is,” Vetyška said.
Security for payments
Vetyška said that anxieties about the security of Internet payment channels are declining. APEK’s line is that credit and debit card transactions can be made even safer when they are conducted online. Most Internet retailers now use the 3D Secure system. This sends customers’ confidential information directly to a bank. “This is actually much safer than when you pay at a cash desk. No one can record or manipulate the card data,” Vetyška said. However, he added, the majority of e-customers still preferred to pay cash on delivery. “It’s not the most comfortable way of doing things, it’s supposedly the safest approach,” he said.
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