Report on the internet economy II. 2001 Summary for the press
november 16, 2002
In association with Webigen Inc. and Sun Microsystems Hungary, GKIeNET conducts quarterly surveys on internet usage and the development of the electronic economy in Hungary. The following is a summary of the most crucial results of the 2001 second quarter survey in the trade sector. As with numerous other studies, GKIeNET Ltd. synthesizes the results of the domestic internet usage survey in one index, called the GKI-Webigen Retail and Wholesale Internet Usage Index.
Sentiment indicators have proved to be practical predictors in numerous cases. Inferences are drawn from responses to questions regarding “improvement/decline” or “increase/decrease.” This methodology, also recommended by the EU, involves calculating the balances of those responses, and indexes based on these calculations are called balance-type indexes.
Breakdown of the retail and wholesale pool
Retail and wholesale firms were grouped into two main categories. Retail chains operating three or more units were given survey forms emphasizing features associated with the network structure (storage, complex inventory processing, operation of distribution and logistics networks, relationship between retailers, suppliers and distribution centers, etc.). We also examined to what extent their sales volume, which substantially exceeds that of smaller companies in the market, impacts their internet usage, expenditures for development and future expectations. The other group is comprised basically of non-network retail and wholesale companies with one or two leased or owned retail spaces.
The e-sales subindex describes changes in the ratio of electronic sales to total sales at the individual companies. In the category of non-network trade companies, the revenue-weighted index was at 1.2 (compared with 15.9 in the previous quarter). This implies that in companies with one or two stores the percentage of online sales in the total sales volume will likely edge up marginally or remain flat over the next twelve months. For retail or wholesale networks this value was 6.1 (compared with 15.4 in the previous quarter), indicating that they expect the ratio of online sales to total sales to increase moderately. In both groups there has been a decline since the previous quarter; the initial optimism wore off.
Internet market impact subindex
This subindex shows the impact of the internet on corporate markets. For non-network trade companies the index was at -9.8 (-21.5 in the previous quarter). In the category of retail and wholesale chains the index was at -13.5 (-24.7 in the previous quarter). Although non-network companies are still more pessimistic with respect to the internet’s role to reshape the market, the extent of their pessimism was on a downward trend in the second quarter of 2001. Retail and wholesale chains indicated significant changes: businesses participating in the survey believe that the internet will increasingly affect their markets in the future.
The e-procurement subindex reflects trade companies’ expectations regarding the role of electronic procurement transactions in the next twelve months. In the category of non-network companies, the index was at 0.3 (compared with 11.2 in the previous quarter). The responses of network companies yielded 0.8 (13 in the previous quarter). The subindexes dropped substantially in both categories, which suggests that the weight of online transactions in the total procurement of trade companies will not change in the next twelve months.
Internet potential subindex
This subindex reveals to what extent retail and wholesale companies take advantage of the internet’s capabilities. In the category of non-network trade firms the index was at 30.3 (compared with 25.6 in the previous quarter), while the index value was 14 for retail and wholesale chains (23.2 in the previous quarter). Apparently, non-network businesses are somewhat more optimistic than previously regarding the utilization of the internet, unlike trade networks, where the decreasing index is a sign of softer expectations.
GKIeNET Webigen Retail and Wholesale Internet Usage Index
The internet usage index of non-network trade companies and wholesale and retail chains is the simple mathematical average of the above subindexes. In the second quarter of 2001 the GKIeNET Webigen Retail and Wholesale Internet Usage Index was at 7.0 (compared with 7.3 in the previous quarter).
Additional remarks based on the survey
78% of the trade companies in the pool have internet access, but only 7% provide internet access to workers on all computers. Based on the expectations of firms in the sector, internet access will expand by approximately 10% over the next year.
Every other responding business has its own website. 17% of the trade companies have no interest in setting up company websites, while 11% plan to do so in the near future.
34% of trade companies say that customers can find information about their products or services on the internet. In addition, 11% use the internet to accept orders for goods or services, 6% allow specifying shipping conditions and 5% allow determining the payment method over the internet. In a couple of years, 39% of the trade companies will be able to advertise their products over the internet, but only 31% will offer online sales. 20-22% of the businesses will allow customers to choose their shipping or payment options.
Does the company offer products or services over the internet …
Taking all types of internet access into account, ISDN is the most widespread connection type among trade companies, accounting for 42% in this sector. This is followed by dial-up modem connections (33%) and leased lines (19%). According to the responses, the next twelve months will bring changes to this structure. There will likely be an increase in the percentages of leased lines (21%), cable TV (8%) and ADSL connections (7%), reducing the roles of dial-up modems and ISDN (24% and 36%, respectively).
In 2001 retail and wholesale firms participating in the survey (45%) will likely have spent an estimated 12.6% of their investment expenditures on information technology developments. Consequently, trade companies are creating a demand of some 29 billion forints in the IT market this year.
Trade sector pool
The survey targeted retail and wholesale businesses with five or more employees (based on the database of the Hungarian Central Statistical Office). The pool of 1500 businesses includes all trade companies with more than 50 employees (930), with the remaining 570 businesses representing the actual distribution of trade companies by number of employees. Companies in the pool were grouped in one of two categories based on the number of stores (owned or leased). The response ratio was 7.6%, which is in line with the 5-10% response ratio of similar surveys in Western Europe. In terms of absolute numbers, this represents 57 responses from store chains and 54 responses from non-network companies.