Report on the internet economy: In focus: The retail and wholesale sector Q1. 2002

2002. 11. 17.

The GKI-Westel E-Commerce Index reveals that retail and wholesale companies are expecting a dynamic rise in online sales and procurement in 2002. In association with Westel Mobile Telecommunication Company Ltd. 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 first-quarter survey pertaining to retail and wholesale companies.

The GKI-Westel e-commerce index was at 15.5 in the first quarter of 2002, indicating a substantial improvement from the previous quarter. The index trend reflects growing confidence in internet applications and the internet itself. This growing optimism is primarily due to the rising percentages of online sales and procurement.

The 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.

According to the responses of retail and wholesale companies with five or more employees, online sales of products and services totaled some seven billion forints in 2001, excluding online stores. GKI Co. anticipates that online retail and wholesale production could exceed nine billion forints in 2002. This can be attributed, among other things, to the dynamic rise in real wages (particularly of college graduates, who have internet access at an above-average rate) and to the surge in consumption during 2002. In addition, the increasing availability of hardware and software fully or partly paid for by the government in 2001-2002 also plays a key role and could significantly boost online sales.

Online procurement amounted to 37 billion forints in 2001 in the category of businesses with five or more employees. Based on the expectations of retail and wholesale companies, this figure will rise to 47 billion in 2002, which would reflect an approximately 30% rise.

As the internet and internet applications gain momentum, it is more and more crucial that companies integrate these benefits and opportunities into their business processes. Overall, the ratio of orders placed on computer networks (internet- and non-internet-based) barely exceeds 10% at present. Traditional procurement channels are more prevalent: the majority of orders are placed in person (29%), via fax (29%), and by phone (27%).

Currently, less than 15% of all medium-sized and large retail or wholesale companies are using internet applications. However, this area is expected to see substantial changes in the future. The internet’s role will increase particularly in the management of customer and supplier relationships. Retailers and wholesalers with 50+ employees say that cost cuts and revenue increases are their key concerns when implementing internet applications, but the majority of businesses also believe that internet development could also help them gain market advantages. For the time being, improving organizational flexibility and catching up with the competition are low-priority factors.