Extreme Digital succeeds with service, ‘hybrid’ approach
Hungary’s largest purveyor of digital goods and appliances will soon expand its reach to 1.5 million products, available online and also in more than a dozen stores.
Starting from one shop back in 2001, Extreme Digital has grown to be the biggest retailer of digital goods, TVs and household appliances in Hungary. While most of the sales are online, the shop also has 13 “brick-and-mortar” locations in Hungary, where shoppers can talk to salespeople and see the merchandise. This “hybrid” system of in-person and online sales has fuelled the firm’s success.
Extreme Digital has been expanding the types of items it sells, and will soon carry roughly 1.5 million different types of products. We interviewed founder Balázs Várkonyi about his success and future plans.
Q: Extreme Digital is a true Hungarian success story. The firm has grown from a store on Visegrádi utca to the largest seller of digital goods and appliances. Did you expect this level of success when you started out? Were you surprised by “overnight success” or has it felt more like a long continuum of hard work?
A: When we started Extreme Digital, digital cameras and PC hardware were not widely available for a reasonable price. Prices at the traditional brick and mortar electronic stores were high. Of course we were not able to occupy large department stores, so it was obvious to expand through the online world. Maintaining a webshop proved successful: anyone who wanted a reasonable price ordered from us. During the coming years, our customers got used to shopping online, and as the Hungarian e-commerce market grew, so we did.
Q: How does your growth help you stay on top of the market? Can you enjoy economies of scale?
A: The reason of our market leading position is that we quickly adapt to the latest trends, we are constantly monitoring the changes of consumer needs and developing our portfolio accordingly.
Q: Your original product focus was more on computers, phones, cameras and HDTVs. What was the reason for that focus?
A: These product categories have been hit products for years, but also particularly expensive in Hungary. We could offer much better prices than the competition.
Q: What areas have you added to your original focus and why?
A: While initially we only dealt with photographic supplies and electronic devices, nowadays we are expanding our inventory with products that people don’t want to bring home themselves: anything between pet food to diapers can be found at our online store. By 2018, we want to make 1,5 million different products available on Edigital.hu.
Q: Information on the company puts your success down to being a “hybrid”, with both brick-and-mortar stores and online sales. How does it help to have both kinds of storefronts?
A: Although the e-commerce market is growing unstoppably, a large proportion of the customers are still mistrustful with online shopping. For them, our hybrid model is an acceptable compromise: they can collect their orders in our shops, or check them before paying or contact our customer service in person – the latter is quite unique in the age of online services.
Q: How many physical stores do you have in Hungary, and elsewhere in the region? If you include online, how many countries do you serve?
A: We have 13 department stores in Hungary, and are operating online shops in the Czech Republic, Slovakia, Romania, Croatia and Slovenia. This year we want to enter the Austrian market, and want to open physical stores in Romania and Croatia.
Q: Aren’t the majority of your sales online? Why maintain so many brick-and-mortar stores?
A: While 95 percent of our customers visits our online store, only half of our sales have been accomplished online: many Hungarian shoppers are still distrustful with online shopping – they order the product online and then pay for and receive it in one of our stores. Traditional brick-and-mortar stores make Extreme Digital more attractive to conservative shoppers: they can go in our stores and discuss any questions or try the latest TV or smartphone in person – unlike some of our web-only competitors.
Q: What is the importance of logistics for your operations? Are most logistics functions handled in-house?
A: Keeping as many products as we can is key, because that lets us take short delivery times. Extreme Digital does have 2 large warehouses near Budapest, and from this year we can also use the free storage capacities of Kika. This year, we are also going to expand our logistics by establishing our own warehouse in Romania.
Q: What can you do to maintain your position and set your firm above the competition?
A: Maintaining a large inventory of products, and offering fast delivery for free is very attractive to our customers. We are continuously expanding our product categories (e.g. now we are selling pet supply), and have been always available in person in our retail outlets.
Q: How do you ensure a good customer experience, and how important is that for your competitive position?
A: In the near future, we are going to make offline shopping more comfortable in our stores by using automated cash registers and offering online services in-store.
I also assume that in the coming years, warranty services will be more important to shoppers, as the latest gadgets are highly integrated and cannot be repaired easily – and no one wants to dispose his or her expensive tablet or smartphone in the trash. It does matter where you bought your TV or notebook.
Q: What kind of changes and progress do you see for the future?
A: The introduction of new product categories will continue this year as we will soon be expanding our supplies with KIKA’s furniture. In parallel, we are going to open Extreme Digital shops in KIKA’s malls.
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