Report on the internet economy Q3. 2001
30. 11. 2001.
In association with Webigen Inc. 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 2001 third quarter survey in the trade sector. 8% of all trade companies with five or more employees responded to the survey. In terms of revenues, they represent the trade sector at 18% (12% in retail and 26% in wholesale). The expectations of companies are summarized in subindexes, which are shown in the following chart.
GKI-Webigen Retail and Wholesale Intenet Usage subindexes
Remark: the values are between -100 and +100, with figures above 0 indicating positive expectations.
GKI-Webigen Retail and Wholesale Intenet Usage index
The pattern of the GKI-Webigen Retail and Wholesale Intenet Usage index over the past four quarters reveals that while companies are still optimistic about the impact of the internet on their markets, their optimism has been on a steady decline in the past year (the index was at 3 in this quarter). The fact that the index decreased again in the third quarter of 2001 is due to a considerable drop in the internet impact subindex (while the other three subindexes rose moderately).
Nevertheless, changes in this quarter do not lend themselves to negative assessments, as the decrease in the internet impact subindex is solely an indication that retail and wholesale companies are less certain that the internet will significantly modify market positions in the short term. They believe that with well thought-out and circumspect corporate strategies the current market positions will likely stay in place in the internet-era, as well.
The subindexes of e-sales and e-procurement increased in the third quarter, which implies that businesses are increasingly optimistic about the sales and procurement opportunities over the internet. The internet potential subindex (22) reveals positive expectations again this quarter. Retail and wholesale companies are confident that the current trends will continue and they will be able to increasingly take advantage of the opportunities the internet offers.
Additional observations based on the survey data
Retail and wholesale companies anticipate that the volume of e-commerce will increase over the next twelve months. The index value calculated on the basis of their responses was 15, which, compared with the expectations of the previous quarter (at 6), is indicative of growing optimism.
Company executives indicate that website design and development expenditures will likely see the steepest rise among one-time IT investments in 2001, totaling 916 million forints in this segment of the economy this year. The sharp rise in webpage-related expenses is due to the fact that in response to the market’s demands many companies launched their product and/or information services over the internet this year.
Non-network companies: In the third quarter of 2001 85% of non-network retail or wholesale companies in the survey sample have access to the internet, with an additional 3.5% looking to get internet access within the next twelve months. Consequently, internet penetration will be almost full in the segment of retail and wholesale businesses (98.4%, or 94.4% unweighted) within a year. On average, 68.4% of employees at retail and wholesale firms work on the computer, and 50% of them have access to the internet. One-third of the rest are able to send and receive e-mails. At companies in the computer business, basically all employees work on personal computers. All computers at these firms are connected to the internet, and all employees have computer skills.
One way to promote effective information flow within a company is to implement an in-house intranet system. Currently 81% of non-network companies are using intranet. 13% have extranet systems (intranet that allows business partners controlled access to specific parts of the network). This area will likely see substantial growth in the future. WAP-based information services are offered by only a small fraction (3%) of businesses, but the next twelve months are expected to bring advancements in this segment, as well. There have been tremendous changes in the use of Electronic Data Interchange (EDI). While only a minuscule percentage of companies took advantage of this technology for data transfer in the previous quarter, as high as 16% used EDI in the third quarter of 2001 to transfer data.
Computer-based inventory management is now a given for non-network companies, with 95% tracking inventory on the computer. Automated orders are becoming more popular, as companies can save significant resources this way. Every other company takes advantage of automated ordering solutions.
ISDN lines continue to be dominant among non-network retail and wholesale companies. 45% of businesses have ISDN lines. Dial-up connections are still relatively common (one-third of businesses access the internet via modems), but there is growing interest in cable TV and ADSL-type internet connections.
Non-network companies with ten or more employees primarily use the internet for e-mail. At the same time, the internet is playing an increasing role in research, data collection, database access, marketing and customer relationship management. Wholesale companies increasingly use the internet for internal information management.
A company’s image is significantly determined by whether or not it has a website of its own. At present, 71% of non-network retail and wholesale companies have their own websites, and 15% plan to set up a website in the next twelve months. While wholesale firms and companies in the computer business generally refresh their websites on a weekly or monthly basis, 43% of retailers do so only once every quarter.
Retail and wholesale networks
In the third quarter of 2001 97.6% of the survey respondents in this segment have access to the internet (unweighted average: 82%). Another 2% plan to get internet connection over the next year, which will make the internet available for all companies.
Half of the staff of retail or wholesale chains work on computers. 62% of their computers have internet connection. 58% of the computers with no web access have e-mail functionality. There is significant variation between corporate segments in terms of internet access. In wholesale companies two-thirds of the computers have internet access, while in the retail segment only one-fifth of the computers are connected to the internet. 42% of the staff at retail and wholesale chains have computer skills, which will increase by another 5 percentage points over the next year.
Intranet use will exceed 80% in both network and non-network comapnies within a year. Extranets are in the initial development stage at network companies. The current market penetration of 2% (5% unweighted) in this segment is expected to increase dynamically, to possibly reach 34% in a year.
Similarly to non-network companies, retail and wholesale networks prefer ISDN lines to access the internet (at 50%). Dial-up connections continue to be very common (39%). Internet access via cable TV is gaining popularity among network companies, currently used by 7%. Leased lines continue to play a significant role (11%).
Mode of access in Q3 2001. (retail and wholesale networks)
At present, 76% of network companies have their own websites, but the remaining 24% are planning to lauch websites over the next year. A small fraction of the companies have WAP-enabled sites at this point. One out of five retailers as well as vehicle and fuel companies plan to deliver information to customers and clients via this technology over the next twelve months.
Respondents evaluated the impact of the internet on their markets on a scale between “not at all” and “completely.”
The e-sales subindex reflects the expected changes in the ratio of online sales to the the company’s total sales over the next twelve months. Possible responses range from “decreasing significantly” to “increasing significantly.”
The e-procurement subindex describes companies’ expectations with respect to the ratio of e-procurement to total procurement for the period of the next twelve months.
This subindex reveals to what extent companies are able to take advantage of the opportunities provided by the internet at present and in twelve month