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E-shop till you drop

Online retailers are proving resilient despite tough economic times

By Bibiána Duhárová
Staff Writer, The Prague Post
November 26th, 2008 issue

Low consumer confidence is reflected in the present problems of industries as diverse as glass-making, car manufacturing and real estate, and the effects of the global financial crisis are already tangible in the Czech Republic as companies launch emergency cost-cutting measures to stem the tide.
But one business model continuing to show resiliency — even growth — during tough economic times is Internet retail. In the Czech Republic, this growth is natural, as it is still for many an untapped market. What is more, in the current climate, the Internet offers a solution to those thinking more deeply about how much they are willing to pay for a product. This combination of factors backs skyrocketing growth numbers in Czech Internet retail in the past six years.
“Internet retail is still a new business sector and is every day more popular among customers who are used to shopping at brick-and-mortar retail places. It is possible that people will stop buying luxurious goods, but they will always need a fridge. Prices on the Internet are lower than in classic retail, which actually means that the current crisis will boost Internet sales and will encourage more customers to shop online,” explains Jan Vetyška, director of the Association for Electronic Commerce (APEK). The number of Czech online customers has grown from 700,000 in 2004 to 2 million in 2007. Revenues in online sales rose from 1 billion Kč in 2001 to 18 billion Kč in 2007.
According to the Technology Fast 50 Central Europe Rankings 2008 performed by Deloitte, the fastest-growing company in the country is an online travel agency named Invia.cz, which sells plane tickets, trips and vacation packages. “People trust Internet shopping more, and once a Web site is marked by the APEK trademark, people know there is a certain guarantee in the quality of the product they receive,” said Michal Voska, affiliate marketing manager at Invia.cz. Invia.cz is the biggest travel agency in the Czech Republic with revenue of 1 billion Kč ($49.2 million) and 2 percent yearly growth. Since its establishment in 2004, the company has serviced more than 200,000 customers.
Virtual inconveniences
Second place on the Technology Fast 50 rankings is held by another Czech Internet retailer: Kasa.cz, the largest Internet retailer in Central Europe. “We presume there is great potential for company growth, even though the Czech Republic still lags behind Western Europe in household Internet penetration and online sales,” explained Jitka Součková, Kasa.cz marketing manager.
“People are now more considerate about making a quality purchase and for what price. We also presume that the current times of financial crisis will boost our sales since people are more aware of their spending budgets.”
Kasa.cz specializes in Internet sales of household appliances, electronics, perfumes, clothing and other products. They sell not only in the Czech Republic, but also in Germany, Poland, Hungary and Slovakia. In the past three years, the company’s sales jumped from 470 million Kč in 2005 to 1.28 billion Kč in 2007.
Online retailers undoubtedly present major competition for brick-and-mortar shops. There are, however, slight inconveniences in legal terms. “The legal rules do not yet fully capture such flexible business as the Internet. Online retailers are dependent on the companies that deliver the product to the customer. It is often the case that online retailers are held accountable for mistakes made by the delivery company,” explained Vetyška.
In addition, Internet retailers often face difficulties acquiring storage facilities large enough for their stock. Kasa.cz
alone has 1,300 square meters (13,993 square feet) of warehouse space at its disposal. “Securing warehouse capacities and logistics from the supplier to the customer is generally problematic for retail. Those who have logistics solved are the most competitive on the electronic market,” Vetyška said.

Bibiána Duhárová can be reached at bduharova@praguepost.com


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