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News Release

Prague

Online retail world continues to grow in the CEE region but e-commerce and shopping centres will develop hand in hand

Online shopping is a domain of population in their 30s and 40s, according to the new report by Jones Lang LaSalle


Prague, 5th December 2012 – Jones Lang LaSalle presents its new report titled “Clicks or Bricks? E-commerce trends in Central & Eastern Europe” regarding trends in online shopping in Central & Eastern Europe, target groups involved and the impact e-commerce is having on bricks & mortar retailing across various retail categories.
Kevin Turpin, Head of Research, Central and Eastern Europe, Jones Lang LaSalle, commented: “E-commerce is now changing the retail environment of the region, as it has with the more advanced Western markets. The rise of the internet and the penetration of smartphones, tablets and other devices, along with the increasing popularity of social networks, have all brought changes in consumer behaviour patterns. E-commerce is not only an additional channel for making purchases, the internet itself allows consumers to learn more about products before buying them. With so much information at hand, the consumer is no longer a passive buyer, but becomes a demanding active player”.
The key development factor with regard to online sales is the availability of a range of secure and quick payment methods like online banking, mobile transfers and online payment services.
The dossier of the CEE online shopper
Although increasing, internet access in CEE is still not as high as it is in Western Europe and ranges from 41% of households in Serbia to 71% in Slovakia. It is also one of the reasons why e-commerce development in CEE is not homogenous and varies from country to country. E-shoppers are not necessarily youngsters, as according to GfK Polonia, people in their 30s and 40s make the most purchases. Women tend to be more eager to shop on the web than men, but that is subject to the specific retail category. Web shoppers look for bargains, search for information about goods and services, follow recommendations, watch and compare prices. The share of individuals making purchases online still lags behind the more mature economies of Western Europe and although this gap is slowly closing, it will take a few years before CEE will catch up in this regard.

 

Czech Republic
It appears that Czech shoppers are taking full advantage of the opportunities that e-commerce provides: more than half of the population have already had their first online shopping experience. High growth dynamics are to be found in most sectors, with electronics and electrical goods being those most sought after online. Convenience goods and fashion are also gaining momentum with triple digit growth rates registered over the past year. Today, more than 30% of Czechs shop online on a regular basis.
Online payments have still not quite earned consumers´ trust, as most people prefer to pay upon delivery instead of using a cred card, which would be cheaper. The click & collect phenomenon is becoming more visible, as some e-tailers are opening brick & mortar stores which serve as collection points and showrooms offering the touch and feel experience.
Czechs value e-commerce most of all for its cost-effectiveness, access to a wider range of goods and convenience. They base their purchasing decisions on widely available references.
Almost half of the surveyed international brands which are present on the Czech market also operate online. However, only a few have a dedicated Czech-language website, with the majority operating on centrally-run, international platforms. There are also numerous multi-brand stores that complement the online offer.  
 
Outlook for retail sectors
The rationale behind online shopping varies between particular retail categories.
• The influence of fashion e-stores on the performance of traditional stores in CEE is still of low significance. It is because some people are still distrustful with regard to distance shopping,  largely due to the urge to touch the fabric and try an item on. Others find online payments unsecure or fear that in case of an unsatisfactory purchase it would be a hassle to return the item.
• With regards to the multimedia sector, the accelerating digitalisation is exposing traditional retailers of those goods to falling turnovers. In no other retail category is the showrooming phenomenon so apparent. People can now visit the store only to become familiar with a particular product and to compare the price.
• In electronic equipment,  as many electronic products are as standardised as they can possibly be, it is primarily price which differentiates one shop from another.
• Kids products belong to one of the top retail categories traded online. Rationale behind shopping includes such factors like costs of raising children, difficulties in arranging time for traditional shopping when a child needs constant care and a challenge regarding shopping with a little kid. Increasing expenditures encourage many parents to look for cheaper substitutes; however, not at the expense of quality.
• Shopping for groceries is one of the most quality-sensitive sectors of e-commerce. In CEE the development stage of this category varies from embryonic (in Serbia and Romania) to maturing (in the Czech Republic and Poland).
• DIY, Home and Garden sector is the example of the situation when products are researched in traditional stores and then purchased on the web. The items which are most frequently purchased online are those that are somewhat standardised, i.e. building materials, ceramic tiles, tools, etc.
• Consumers of jewellery or expensive accessories are seeking exclusivity, which an e-store might not necessarily satisfy. At present, shopping on the internet is associated with convenience or bargain hunting which does not necessarily match the image which luxury labels are trying to convey to their most select customers.
• Health and beauty sector is predominantly fuelled by price, which is reflected by beauty products being among the most searched for items on price comparison services. In the long term, showrooming may become a serious threat for high-end perfumeries.
Development strategies for shopping centres owners and retailers
The mindset of approaching e-commerce as an opportunity, rather than a threat, helps one to better understand and prepare for new retail dynamics. Providing an exceptional shopping experience is a key. Offline offers should be adapted and extended, so as to complement the assortment of online stores and help to combat the showrooming effect. It is essential for a store’s shop assistants to become well trained consultants and advisors. Other strategic factors to take into consideration are offering unique products that are not for sale anywhere else and working with manufacturers to release products earlier than anyone else. Moreover, the role of marketing events will additionally increase. Traditional retailers should take part in the internet revolution and participate in the online sales stake. Organising delivery chains, payment methods and returns handling systems which all function well are of key importance for a successful online platform.
Beatrice Mouton, Head of Retail, Central and Eastern Europe, Jones Lang LaSalle, explains: “Creatures of habits, it takes time for consumers to modify their shopping behaviour. In CEE malls are not only destinations for shopping, they play the role of venues, places to be, integrating communities and this will not change over the course of the next few years. However, some that are most vulnerable to online trade will most likely rearrange the role of bricks & mortar stores, either by downsizing or changing functionality. Tenant mixes are likely to shift towards more gastronomy, services and leisure, at the expense of electronics and multimedia anchors. Shopping malls should evolve into venues, servicing, leisure centres and dining destinations with a hip and happening atmosphere, which can be created by organising attractive events”.
At present, the share of e-commerce in retail sales is still too small to threaten the performance of modern shopping malls and despite high projected growth rates, it must be remembered that the vast portion of items sold online are not necessarily shopping centre type goods and therefore, will not decrease traditional sales volumes.
“In terms of modern retail floorspace, CEE markets are still considered as ‘emerging’, which is reflected by its shopping centre density: with 157 sq m per 1,000 residents, the region markedly lags behind the Western European average of 246 sq m. This indicates that along with the growth of CEE economies, there will still be room for additional modern shopping centres. Online sales, although dynamically increasing across the region, will most likely grow hand in hand with the development of the physical retail sector, with little interference. Increasing levels of disposable income will be a driver for both traditional and online retail sales. E-commerce on the other hand, seems to be reaping the largest benefits in the larger, more saturated cities. Given the rising purchasing power and retail sales across the region, we do not expect e-commerce to negatively influence the turnovers of prime shopping centres in the near future, although some retail categories might be affected. It is the matter of proportion of participation in this growth which is the key challenge”, Beatrice Mouton summarises.