Czechia, Slovakia and Hungary pose a chance for cross-border development of e-commerce.
Cross-border e-commerce makes up a huge potential for the development of on-line stores: by expanding business to foreign markets it is possible to grow faster than being present only on one local market. Factors contributing to the success of the expansion include, among other things, appropriate knowledge of social and cultural differences, competition, trends and preferences of e-consumers in various countries. How to put this knowledge to practice? And in which countries is it worth to try your hand at cross-border e-commerce?
In the upcoming years we will witness rivalry for nearly 40 million consumers not shopping online yet from Poland, Czechia, Romania, Slovakia and Hungary. Polish e-commerce, with an excellent technological infrastructure and numerous mature webshops, has all the resources to address the needs of this group .
Joanna Pieńkowska-Olczak, PayU’s Country Manager Poland
Among other things, due to this significant base of new online consumers, Czechia, Slovakia, Hungary and Romania together constitute an attractive direction of development for e-shops. Let’s take a closer look at the first three countries.
E-commerce in Czechia is a very popular form of business and the country itself is the fastest growing market in this sector in the entire Europe (1). And although statistically the most webshops per capita can be found in Czechia (4 webshops per 1,000 inhabitants, whereas in Germany this index is 1.3), there is still room for expansion and there are a lot of potential new customers.
Czechia, in comparison to the entire Europe, has the most webshops per capita. The total number of the Czech webshops is relatively high and amounted to over 40,100 in 2017. [1] An interesting fact is that contrary to Western Europe, global giants like eBay, Amazon or even Allegro never became popular there. For that reason, the most popular e-commerce webshops and search engines in Czechia are the local ones. The largest shops include Alza.cz, Notino.cz, Vemzu.cz, Mall.cz, Fashiondays.cz and Bonami.cz, whereas the largest auction services and marketplaces are Heureka.cz, Bazos.cz, AliExpress, Zbozi.cz, Sbazar.cz and Srovname.cz. In Czechia there are also group purchase services and their aggregators, for instance Slevomat, Skrz.cz and Pepa.cz. An interesting fact is that Google is not the first-choice search engine of the Czechs – the largest player is Seznam.cz.
The most popular purchase category in the Czech e-commerce is fashion, with an annual revenue of almost EUR 785 million (2). Analysing the following charts, i.e. the value of the sectors and the level of their growth, we can see that the most promising sectors for investing are: fashion, toys, hobby, furniture, household items and electronics.
What is characteristic of the Czech e-consumers is the fact that for a long time they preferred COD. This still accounts for approx. 50% of all payments, although the trend is changing towards online transfers, card payments and digital wallets (2).
Interest in cross-border e-commerce is growing among the Czech consumers. The decision to make a purchase from foreign webshops is usually based on the lower prices and larger selection of products which are not available in Czechia (3). Czechs making cross-border online purchases usually choose webshops localized in Germany and China, followed by other EU countries and the USA. The most sought-after products include electronics, followed by clothing, jewellery, watches and cosmetics. If you want to earn the trust of the Czech shoppers, it is a good idea to have a well-operating customer service office and general transparency of the webshop which should contain the necessary contact details. These are very important aspects considered by the Czechs when assessing the webshop’s credibility.
The Czech e-commerce market is quite saturated, however, the e-consumers there shop at foreign webshops more and more frequently. As many as 19% of them have already decided to shop in other European countries, and 10% – outside of Europe. The market itself is growing quickly: e-commerce sales in 2018 grew by 16% in comparison to the preceding year, and online shoppers account for approx. 68% of the entire population. And even though the competition in Czechia is considerable, this may be a good direction to expand – Czech e-consumers are very open to online shopping.
Slovakia is a country with large expansion potential. In some aspects it resembles the Czech market, however, it is not that much saturated with webshops. That means that there is more room there for new players who are planning expansion abroad.
Slovakia is an interesting market due to certain characteristics which are common with Czechia: cultural similarity, consumers understanding webshops in the Czech language, but also a very strong presence of Czech webshops or price comparison websites.
Due to the cultural similarity, Slovak e-commerce functions basically on the basis of Czech webshops. Slovaks readily use Czech services and don’t have problems with their Czech language version. There are approx. 10,000 webshops operating on the market. The most popular ones include: Alza.sk, Notino.sk, Mall.sk, Nay.sk, Datart.sk, Hej.sk and tpd.sk, whereas the largest auction services and marketplaces are Heureka.sk, AliExpress, Bazos.sk and Bazar.sk. Slovaks also use group purchase services and their aggregators, for instance Zlavomat.sk and Zlavadna.sk. In contrast to the Czechs, when searching the Internet for information, Slovaks usually use Google.
Products that are the most frequently purchased online by Slovak e-consumers are electronic equipment and accessories: the sales value in this category in 2019 amounted to EUR 310.2 million (4). Other popular sectors which are worth considering when planning investments are electronics, toys, hobby and fashion.
In terms of payments for online shopping, Slovaks most often choose card payments (42%) – this definitely differentiates them from the Czechs. At the same time, still almost one third of the consumers pay cash on delivery, although popularity of cards and e-wallets is growing from year to year (4).
Slovaks readily decide to shop online in other countries – as many as 39% of e-consumers do cross-border shopping from European webshops and 19% from webshops outside of Europe (5).
The most popular foreign shopping platforms chosen by Slovaks are eBay, Amazon UK, Amazon DE and AliExpress. At the same time, Slovaks are also attempting to expand to neighbouring markets and several local webshops, including mall.sk, alza.sk and tpd.sk, are successful abroad (6).
Slovakia is a market which is slowly starting to develop (sales in e-commerce increased in 2018 by 9.74% in comparison to the preceding year) and for that reason it is worth considering it today in the plans to expand abroad. It is not saturated with webshops so much as the Czech market, competition is relatively small, and a huge portion of the citizens of this country are yet to do their online shopping – currently 59% of Slovaks do their shopping online.
The Hungarian e-commerce market has a huge development potential. It can be said that Hungarians are only just discovering what online shopping is all about: 53%, i.e. just a bit more than half of them, do shopping online (compared to 68% of Czechs or 59% of Slovaks). Meanwhile, the saturation of the market with webshops indicates that competition is still small: the number of webshops is 6,000, which means 0.6 webshop per 1,000 Hungarian citizens (in Czechia these numbers amount to respectively 40,000 and 4, and in Slovakia 10,000 and 1.8) (8).
That is why expansion to Hungary may be a good direction for foreign online stores. Apart from the reasons indicated above, it should be noted that Hungarian webshops often do not follow the latest practices concerning design, which allows the Polish vendors to enter that market and distinguish themselves right away. However, please remember to adjust yourself to the requirements of the local market, i.e. in case of Hungary, you need to take into account the fact that this is a country with one of the highest VAT rates in the world (27%) (7).
In comparison to other Central and Eastern European countries, Hungary does not have many webshops. There are approx. 6,000 webshops present on the market. The most popular ones include: Vatera.hu, eMAG.hu, Ujjé.hu, edigital.hu, mediamarkt.hu, mall.hu, alza.huagua.hu and ipon.hu, whereas the largest auction services and marketplaces are: AliExpress, eMag, Arukereso.hu, Meska.hu, Vatera.hu and Jofogas.hu. In Hungary there are also group purchase services and their aggregators, for instance DiamondDeal and Gruppi.hu. The most popular search engine is the Hungarian version of Google.
Toys and products associated with hobby is a sector which is most frequently chosen by Hungarian e-consumers: its annual revenue amounts to nearly EUR 476 million (8). In the context of popularity, the values of the sectors and the level of their growth, the most promising sectors in terms of investment are: electronics, fashion, toys, hobby and interior furnishings.
The most popular online payment method in Hungary is card payment – 40% of all online transactions are paid this way. This trend is changing though: the cards are minimally losing popularity in favour of e-transfers and digital wallets whose share in overall online transfers is increasing from year to year (8).
Although the Hungarian market is not saturated yet with webshops like the neighbouring Central European markets, more and more Hungarians decide to do online shopping in other countries. As many as 40% of e-consumers do cross-border shopping at European webshops, and 26% of them – at online stores in the rest of the world (5). The most popular foreign platforms in Hungary are: eBay, Alibaba, booking.com and Amazon.com.
The Hungarian market is an interesting market in the context of e-commerce: it is expanding rapidly (e-commerce sales in 2018 increased by 16.5% in comparison to the preceding year), the Hungarians readily shop online abroad, but only 53% of all citizens shop online so far. Small competition and small saturation of the market pose a huge potential for foreign online stores.
In Western Europe the number of consumers doing online shopping is gradually entering stagnation: no new e-consumers are appearing, and is some of the countries their number is even decreasing. An opposite tendency can be observed in Central Europe where the number of e-consumers is growing every year, and a relatively small number of online shoppers translates there into the highest annual growths in the region: e-commerce sales in 2018 increased in Czechia by 16%, in Slovakia – by 9.74%, and in Hungary – by 16.50% (in comparison to 2017). And even though e-consumers from those markets already have certain preferences or buying habits, they are frequently not so strongly rooted as in the case of their Western neighbours. That is why it is worth considering which market poses the best opportunity for a specific sector and, remembering the principles of expanding onto foreign markets, fight for the loyalty of new consumers from Czechia, Slovakia or Hungary.