Report on the internet economy. In focus: The retail and wholesale sector II. 2002

01. 09. 2002.

In association with Westel Mobile Telecommunication Co. and Sun Microsystems Hungary, GKI Economic Research Co.  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 2002 second-quarter survey in the retail and wholesale sector.

In the second quarter of 2002 the GKI-Westel E-Commerce Index was at 14.3, basically reflecting no change from the previous quarter.

GKI-Westel e-Commerce Index

This sentiment index, representing the expectations of certain segments of the economy regarding the market impact of internet use and internet applications, is  comprised of responses to four questions. The questions relate to the following issues: expectations regarding internet sales and procurement,  the impact of the internet on the market of the company, as well as the expected utilization of opportunities provided by the internet. The GKI-Westel E-Commerce Index is the average of the subindexes, with figures above 0 indicating optimism and positive expectations.

The online sales of wholesalers and retailers are expected to amount to approximately 8.6 billion forints this year. Retail sales account for 5.3 billion forints, while wholesalers account for 3.3 billion forints of the total online sales of products and services. Even though many companies are now carrying out an increasing percentage of their sales transactions over the internet, some still stick to the traditional sales channels.  In most cases, this is due to the product types they carry. Another key factor at the majority of companies is the fact that their clients and customers do not yet expect these services. Also, the lack of qualified human resources or capital to set up the system plays a major role at many firms. In 2002 the online procurement of companies with 5+ employees is expected to reach 47.7 billion forints. Retail businesses will account for 12.1 billion forints of this, while wholesalers will account for 35.6 billion forints. Based on the expectations of retailers and wholesalers, the share of online procurement will continue to increase over the rest of the year.

The dynamic advancement of the IT sector raises the question whether new alternative sales channels can compete with the existing traditional ones. Retailers and wholesalers are still skeptical about mobile-phone-based transactions. The majority, however, is optimistic regarding not only the sales of discount and standardized merchandise, food and electronic products, but also with respect to the introduction and marketing of products and services. The most frequent payment methods used by the customers of retail and wholesale firms include cash and money transfer (93%). Companies believe that the role of credit card payments and money transfers will increase dynamically in the near future (within one to three years), reducing the dominance of cash and money order payments.

As few as one out of three retail/wholesale companies with more than five employees have their own websites. The growing importance of internet presence is underscored by the forecast that within a year two out of three companies are expected to be present on the internet. Micro-businesses with 5-9 employees are predicted to see the greatest increase. Respondents have said that general company information as well as short descriptions of products and services are usually accessible on their websites. Newsletters, registrations or customer analysis, however, can only be seen at a small percentage of companies at this point.