E-commerce summary: How were Q1+Q2 in wider CEE?
What did the first two quarters bring for markets in Czechia, Hungary, Slovakia, Romania, and further down south?
E-commerce in the CEE region jumped three years ahead last year, GKI Digital announced in the first quarter of 2021. Globally, e-commerce grew by 27.6% in the memorable year of 2020, with Central and Eastern Europe averaging at 29.1%, making the region the driving force in the European market. In fact, Romania, Czechia, Croatia, Hungary and Slovenia (together with Lithuania and Cyprus) boast one of the highest growth rates in e-commerce between 2015 and 2020, according to Eurostat.
In Hungary alone, the domestic online retail turnover had a record 45% YoY increase (909 bn HUF / 2.5 bn EUR) while in previous years, it’s been growing steadily by 16-18 %. Romanian e-commerce was expected to hit 5 bn EUR whereas in reality it reached seven, according to PayU. Czech market grew by 26% in revenue, double the normal speed, resulting in 7,5 billion EUR, APEK e-commerce chamber informs. In Q1 specifically, Czech e-commerce grew by 79% YoY, resulting in growth of both delivery and logistics industries which currently lack workforce to match the growth, according to Marketing and Media. We could go on, but chances are your business has felt the shift, and you as a customer (and citizen) have been part of the process. So, what does it all mean?
Where we stand in the middle of 2021
Continuing on what started a year ago, the beginning of 2021 confirms we are settling in in the new normal. Consumers across CEE have absolutely changed their shopping habits long-term, a notion that’s become clear with the second wave of lockdowns and is still visible across all countries in the first part of this year. National nuances can be found since not all markets undergo similar measures in the same strictness, seriousness, or time. For example, Hungarian e-commerce repeated Slovakia’s unprecedented growth resulting from Q1 closures, only almost a quarter later.
Trends, segments and shopping tendencies
Customers. Just three years ago, the 25-54 age group still accounted for the waistline of online shoppers globally, but by 2019, the 16-24 age group took over and by 2020, the two segments had agreed at the same level, GKI Digital shows. Of these two age groups, 78% of internet users now shop online. The new lockdown and post-lockdown customer has several features in common with members of the under-26 age group: they are all about convenience. According to Piac and Profit magazine, “six out of ten consumers will not use an application or website that loads slowly or is difficult to navigate, and is just as likely to hang up if no one answers their call in 45 seconds.” In addition, 3-5 days of delivery is already considered not only standard, but borderline with new customer’s patience. Low level of tolerance for the return of goods and refunds is another common trait across CEE consumers. Convenient and effortless payments are a must: contactless payments increased by a massive 89% last year in CEE compared to 84% in Europe on average.
Delivery habit change also challenged e-commerce players to innovate faster than they originally intended, or hoped for. While PPL delivered 10 million parcels in the Czech Republic, twice as much as in 2019 (Retail News), waiting for a courier has gone out of fashion, Seznam sums up the zeitgeist of the (almost) post-pandemic world. Out of the 10 million parcels, 2 million alone went straight to pick-up points (PPL currently operates 2300 partner pick-up points all over the Czech Republic).
Self-operated parcel vending machines, pick-up points and contactless home delivery with prolonged hours including same day delivery are all most consumers go-to options when making shopping decisions. Zasilkovna (Packeta Group) as one of the regional leaders in logistics built over 100 pick-up points in the Czech Republic (and 5 in Slovakia) and is planning to add another couple of thousands across CEE throughout 2021. Alza with current 205 Alza-boxes plans to operate up to 600 by the end of the year, as pandemic increased their usability by 130%.
Segments. Due to the transition to home office and digital education that had remained unchanged all throughout the first quarter, and increased interest in technical and computer products is logical. In Hungary, the segment experienced 35-40% increase in online traffic. DIY tools and home furnishing sellers can’t complain in the long-term either and the winners of the pandemic have been FMCG: food, pharmaceuticals and household products, with sales growing by over 65% year-on-year in Hungary alone, and fashion. With lockdowns spread around the year during seasonal changes, we are now used to buying almost one in five fashion items online, Kosarérték breaks. Scarfs, accessories, pajamas and home wear continue to be best-selling categories. In the Czech Republic alone, search for tracksuits has grown by 863% across generations, Glami (Re)Search shows. The same source states that contrary to the 14% forecast for Hungary, the total turnover of webshops operating in the sector increased by 40%.
Growth of marketplaces and cross-border shopping is by no means groundbreaking news, but with rising patriotism (a gesture by many to support nationally-owned stores in hard times) it is fair to say that 30% of CEE’s online shoppers still ordered from other European countries. The 16-24 age group is at the forefront in this area: 34% have acquired something from another EU country and 24% from outside the EU. Amazon, eBay, Allegro and Zalando are the four most visited marketplaces within the EU, while Ikea, H&M and Pandora are the leading cross-border retailers. According to Google Certified Trainer for the Czech Republic and Slovakia László Szabó, “businesses that have been able to strengthen in domestic markets are opening up to foreign markets.”
In terms of digital marketing trends, the key performance indicator to watch is marketing investments. While the cost of Google ads fluctuated between 131% and 177% relative change during Q1 2021, the cost per click rose from 120% to 166%. However, market demand grew during the same period, from 108% relative change in transactions at the end of Q4 2020 to 208% at the end of April 2021, and from 124% relative change in transaction revenue at the end of Q4 2020 to 236% at the end of April 2021.
A few hand-picked updates for each country of the wider CEE area:
Slovakia. Google advertising for online stores grows with growing demand and traffic. In Slovakia, Google Ads activity has really peaked after the closures, according to the unique data we are aggregating from 340 Central and Eastern European webshops since the beginning of the pandemic. The first quarter of 2021 clearly shows Slovakia stands out compared to the rest of the region.
For example, the Slovak company Inspio recently expanded to 5 more EU countries in 43 days. To achieve this goal, Inspio first estimated the market potential for each country, focused on high-quality translations for the e-shops, and adapted their available inventory and payment methods and customer service to needs of the local market.
Hungary. In February, the number of impressions, clicks, and spend on Google ads in Slovakia was two and a half times higher than a year earlier. As a result of the closures in the country since December 19, Google advertising spending on e-merchants surveyed has multiplied in a single month, following traffic growth. After the first week of closing, the Hungarian market trend follows the Slovak pattern. Advertising activity for e-merchants increased by 30 percentage points in two weeks.
By Christmas 2020, there were 6000 webshops in the Unas system, an increase of 1300 from March 2020. Although other countries in Europe have more e-stores per capita than Hungary, several new Hungarian e-stores earned billions in revenue in the past few years. This growth can be attributed to targeting the local market, selling their products in multiple online marketplaces, and advertising on social media.
The Czech logistics startup DoDo has also entered the Hungarian market. DoDo doubled its annual revenue from 250 million in 2019 to 500 million crowns in 2020, and it expects to reach one billion crowns of annual revenue in 2021. What began four years ago with two cars and ten couriers has grown to 1200 couriers and 600 cars in over 50 European cities. Last year, DoDo started in Hungary with nine cars and now has over 70.
This growth is expected to continue as e-commerce companies expand into foreign markets. For example, Hungarian e-trader Extreme Digital has gained significant market share in neighboring countries, particularly Croatia and Slovenia.
The Czech Republic. The online retailer Bonami grew from one billion Czech crowns in 2019 to 1.55 billion Czech crowns in 2020. Before the pandemic, the company improved their warehouses and logistics, and focused on delivering products within days instead of weeks or months. In 2020, these improvements in inventory and customer service resulted in rapid growth and increased revenue, which will be invested in further innovations and expansion into foreign markets.
As of May, brick and mortar stores are reopening, and customers are returning. However, these customers are spending less than usual at physical outlets and spending more online. SOCR President Tomáš Prouza said that people will always prefer to choose certain goods in person, but a higher percentage of products such as toys and electronics will be bought and sold online. According to a survey by Checkout.com, 74 percent of European customers plan to continue shopping online at the same level as during the pandemic.
Poland. Back in 2016, Polish mail-order startup InPost almost went bankrupt. But in 2020, revenue rose to 677 million US dollars, with a profit of 97 million. The company survived bankruptcy with the help of investors and by narrowing its focus to storage boxes, specifically boxes within comfortable walking distance of customer homes. As of June 2021, InPost delivers over 36 percent of all packages in Poland. There are well over 10,000 InPost storage boxes in Poland, a thousand in the UK, and hundreds more in Italy.
Romania. The Romanian e-commerce market, including electronic payment for goods and services purchased from local sellers, amounted to approximately 7 billion euros in 2020, up by 36% compared to the previous year, according to internal and external data analyzed by PayU, the leader of the online payments market in Romania. “For 2021, we forecast an increase of at least 15% of the local e-commerce market (purchases from Romanian merchants),” PayU says.
Livestream shopping, a combination of online and offline interaction, is also projected to grow. This shopping method will be especially valuable for niche products, and it is designed to appeal to younger customers who want a “direct, personal, and interactive” experience. Oveit, a Romania-based tech startup that runs the livestream shopping service Streams.live, has set a goal to raise 450 thousand euros by Q4 2021.
Serbia. Serbia’s Delta Holding is creating Ananas, “the Amazon of the Western Balkans.” Over the next five-year period, they have raised over EUR 100 million in investments. An Ananas spokesperson said that the Western Balkan region has long been deprived of quality e-commerce platforms and shows significant potential. For example, online auction site Limundo and its sister site Kupindo which offers fixed prices, have over 1.5 million monthly visitors and over 1 million registered users, 90 percent of whom are in Serbia.
Players, moves and news
Smart bidding is finally available on Hungary’s top comparison engine, Arukereso. Due to Heureka Groups’ March acquisition of Dataweps, a Czech company behind Beed software, all sellers on Arukereso.hu can now use advanced ad automatization features to improve their cost-of-return. Until now, online stores didn’t have a tool built into the platform itself to help them make more effective use of advertising methods and various paid features. As an example of what is possible, Kytary.hu (guitar webshop) achieved a 150% increase in revenue in the first year of using Beed in cooperation with Growww Digital (with only 70% increase in spending).
Rohlík.cz / Kilfi.hu embarked on a true Pan-European expansion after securing 190 million euros this March from a French-based venture capital firm Partech, followed by Index Ventures and other players. The plan is to increase this online grocery store’s presence in the Czech, Hungarian and Austrian markets, as well as expand its reach to major cities in Germany, Poland, Romania and several other European countries.
Fashion marketplaces have also grown. About You appeared on the Hungarian market in September 2019, and in 2020, it became the largest cotton face mask retailer in Europe. H&M is currently in second place, and Bonprix is in third place, up from fifth place last year.
E-commerce has extended to B2B marketplaces. MerXu, a new platform founded by former Allegro executives, has launched in the CEE region with a focus on industrial goods. ProCircle, a B2B e-commerce company from Romania, now offers its services in Germany and Switzerland and plans to add France and Poland to its network by the end of 2021.
Favi, the furniture online marketplace, is aiming to expand to 10 new countries each year. According to David Holý, the founding partner of Pale Fire Capital, Favi had 650 million sales in 2020 and expects to sell one billion in 2021, on track for its projected 40% annual growth rate.
The Central European e-commerce group Mall Group is finishing preparations for admission to the stock exchange. The initial public offering (IPO) could come in about two months. Admission to the stock exchange should take place through the dual listing, where the shares would be listed on the Euronext stock exchange in Amsterdam and at the same time on the Prague stock exchange. One of the preparatory steps is the spin-off of the Košík.cz e-shop into an independent company, MFresh Holding 1. At the same time, Mall.cz is constantly trying to expand its online marketplace. Thanks to a new cooperation with Lemoner, it will lend up to a million crowns to beginning e-shops in its marketplace.
Everli has entered the Czech market. The Italian online food shopping outlet has announced that it has received 85 million euros from investors to accelerate European expansion. It currently operates in Italy, the Czech Republic, Poland, and France.
Amazon gains over one thousand new sellers in Europe per day, mainly from Germany, the Netherlands, and the United Kingdom. At the current rate, by the end of 2021, there will be over 500 thousand new sellers in Amazon’s European marketplace.
Notino, the largest European online perfumery, grew by 42 percent to 14.5 billion crowns last year. Compared to 2019, the Czech company’s revenue grew by almost 5 billion crowns. The paradox is that the Czech Republic accounts for only 12 percent of its total sales. In total, Notino shipped over 12 million packages with 55 million products to the 24 European countries where it operated last year. An investment in a new foreign distribution center in Austria, where it handles Greek and Bulgarian orders, also paid off.
Let’s not end here
What had been your highlight in the first half of the year? Join us in a conversation on our Facebook export mastermind group and read on exclusive insights from across the markets.