Are you sure?

Virtual business still means real profit

It is easy to assume that the crisis knows no exceptions, but it is difficult to ignore that some sectors were hurt more than others. Those that were best off were the ones built on cost savings: using better or cheaper technology, more streamlined processes, savings on real estate and labor costs. Like, for example building a webstore instead of running a bricks and mortar version in the real world.

 

“Please raise your hand if there’s a free seat next to you,” the lecturer asks: the mid-sized conference room in the office building of a Buda shopping mall is packed well before the beginning of the presentation. Although it’s a registration-only event, those arriving late will have a hard time finding a place to sit down. The presenter, István Róbert Kulcsár, a dynamic man in his early 30s, is about to begin his speech on something every entrepreneur or wannabe entrepreneur longs to know: how to build and run a successful webstore on the Hungarian market.

“Of the 5.4 million Hungarians with Internet access, some 92% say that they research the web before making shopping decisions, and 36% claim that they have already spent money online,” Kulcsár begins. He represents Webshop Experts, a company that sells and leases e-commerce solutions to clients, but he doesn’t need to be too pushy. It seems as though the figures and trends do all the hard work for him. “Please raise your hand if you have a webstore or if you want to open one in the coming year?” he asks the audience. I am practically the only one in the room who keeps my hand down.

Still on the way up

In a shrinking economy this hype should be of no surprise. From an aggregate turnover of HUF 155 billion in 2011, the Hungarian e-commerce sector grew to HUF 180 bln in 2012, and 2013 projections are in the neighborhood of HUF 210 – 220 bln. Industry experts expect that some 50% of the estimated growth of HUF 30 bln this year will come from newcomers; in other words, from people like those sitting in the room, aiming to take their fair share of the e-commerce booty.

To gain a little broader perspective, the current figure roughly equals 2.4% of Hungary’s retail volume. Take a look at a more advanced market, the UK, and you’ll see that e-commerce’s current share is around 12%, a number that is expected to increase to around 23-25% by 2020. This, more or less determines the trends of the Hungarian market as well. And, as if it wasn’t enough, it is important to highlight that the above numbers only cover B2C commerce. Both B2B and C2C volumes are estimated to be much larger than that – although these are much more difficult to measure as certain areas will necessarily remain hidden.

Professionals say that there are three distinct types of markets. First, the well established markets, which are already highly competitive. Examples would be books, home entertainment, computers, and even sex toys. Then there are the markets that are currently on the rise – mainly because traditional retailers have been forced to adjust their profiles to the post-crisis environment, like the construction industry. And finally there are the white spots and market niches that are currently non-existent: if someone manages to find an untapped area, the Internet can still turn into the goldmine it used to be.

Payments are from real world

The vast majority of current e-commerce volume comes from the “traditional” industries. More than half of the aggregate volume is generated by food sales – most prominently food delivery: behind that comes computer electronics, home entertainment and books. Somewhat different from the above, but an area clearly on the rise, is apparel and clothing. While the book or electronic markets operate with standard products, meaning there won’t be too much difference between the selections of any two online bookstores, fashion stores usually offer unique products making it easier for newcomers to avoid competition with well-established giants, who dominate the market.