State of eCommerce
Just like the rest of Europe, eCommerce in Hungary has been reshaped by the massive advent of eCommerce post-pandemic. Consequently, the populations integrated online shopping with success to their daily life after a 2020 in which a three-year-in-one growth took place.
The proportions are jaw dropping: 2021’s turnover for online shopping increased by more than five times compared to the period before the Sars COVID-19 pandemic. In other words, of the 10 million souls that represent the Hungarian population, 71% were online shoppers in 2021!
When considering how the country is currently experiencing a strong digitalization gap between the cities and the countrysides, we already know that once eCommerce and online banking will start to spread into countrysides, the number is destined to increase.
Also comparing number of orders from year 2020 and 2021 we can see that the numbers related to last year have doubled. There are about six million active Internet users in Hungary, of whom 3.9 million are also online buyers, and this number grows constantly.
Even if the country wasn’t exempted by the sales atrophy that the first of 2022 experienced, sales were still over Europe’s average.
The growing numbers around purchases that take place in virtual spaces have also brought the government to take action and implement measures against unfair promotions. These measures will be particularly useful for consumers during Q4 which is traditionally the strongest quarter of the year. To learn more you can jump to the “what will Q4 look like?” paragraph.
Who is the Hungarian consumer?
It is interesting to notice that the typical Hungarian eConsumer greatly values the opportunity to find trough internet and purchase a product at a good price, regardless the age.
If it’s not surprising that Gen Z and Millennials buy online, it is now to consider that older groups, the so called Baby Boomers, have developed a strong online presence and take advantage of digital services just as much. According to Péter Mondovics, marketing manager for Mastercard Hungary “the online ecosystem should take into account how they can better keep the needs of the older age group in mind when developing their products and services, because with this attitude you can gain a serious competitive advantage.”
The numbers associated with their buying power cannot be ignored.
We can describe the Hungarian ebuyer as someone that carries western characteristics as well as typically eastern characteristics
Very eCommerce-oriented, the Hungarian consumer is slowly catching up with western European trends as well as certain purchase behaviours. It is interesting to observe how many elements that are part of the Hungarian eCommerce reality resemble incredibly a part of the USA and Europe’s history of eCom penetration with the former setting the path for the latter.
For example: today the majority of purchases take place on desktop devices, but mobile devices are in a growing pace.
With this said, it shouldn’t surprise anyone how 2021 has been an outstanding year for companies selling beauty products and supplements online. While it’s no new news that markets like electronics have a large share in eCommerce, beauty and nutra recently boomed and the popularity of their products is still on the rise.
Anyhow, the average Internet user that buys online used to order 10-11 times per year. Now, the number of orders has risen all the way up to 20 and is expected to grow. To notice that the number of orders corresponds to a decline of the average order value as, exactly like in a western manner, people have added to larger purchases also smaller transactions.
Nevertheless, only time will tell if these developments are towards a clone of the western model or will just represent an overall influence for the Hungarian eCommerce culture.
The population of this country is sensitive to marketing tactics up to a certain point, anyway, in a different way if compared to western consumers result as more resistant to impulse purchases. Unlike the western consumers in fact, they don’t buy emotionally only to justify with logic right after, but ponder their decisions and are more focused on buying things they actually need. They look around carefully and study products by following their favorite brands on social media and compare prices with the help of applications. When sales events approach there is no frenzy they fall victim to, but carefully prepare for the event and are fully in control of the situation.
What will Q4 2022 in Hungary look like?
Hungarian Q4 starts with a very peculiar assumption: 33 to 50% of the online buyers consider Black Friday a scam and this led physical stores to register better results than online ones during Q4 2021 despite the fact that they were offering weaker discounts.
Past years have registered a peek in fake promotions during Q4, a myriad of deceiving discounts that would trigger consumers to buy a product thinking they made a good deal just to discover when searching for additional information after the purchase that the price had been incremented just to apply the discount and that the so called deal didn’t actually lead to money savings.
To give an idea of the practice’s level of diffusion let’s quickly examine what happened with eMAG, considered the largest retailer for center Europe which is present in four countries: Poland, Romania, Bulgaria and of course, Hungary. The multinational company was inflicted a 200 million HUF fine (approx €500.000) for unfair promotions and was ordered to pay HUF 4 billion (almost €10 million) in consumer compensation.
Just like black hat marketing, this practice has the power to destroy any trust in eCommerce. But an aid has been applied during last May. On the 28th a government decree that enforces EU Parliament and Council’s directives has inflicted a deadly wound to illegal Black Friday advertisements making it much more hard for malicious retailers to trick consumers.
According to the new rules every commercial enterprise will have to display not only the discounted price but the last lowest price applied within the last thirty days. In fact the sale will be based on the lowest price applied during the last thirty days and that will be the only way possible to quantify the promotion. This applies to every activity selling in Hungary, eCommerce stores too, even if they sell to Hungarian consumers but are not based in the country.
This means that an interesting Black Friday awaits Hungarian customers, as the new rules will be fully applicable. Even more, the period after Black Friday will be revealing from the moment that any retailer who will want to start a new sales campaign, will have to offer a percentage discount calculated on the Black Friday price.
This is the main reason why fewer and apparently weaker discounts are expected this season, but this time the deals are real!
Only after December we will know if such measures were enough to restore some faith into the advantages of buying online during Q4.
Facebook will surely be the place to look for positive or negative reviews related to the event, in 2021 91% of the considerations on Black Friday were published on Facebook and for every negative comment there were three positive comments. There clearly is a lot of healing to do here.
Recession, Inflation, Energetic Crisis?
Surely the country is in the middle of an overall political and environmental situation common to all European nations in 2022, but there are a couple specific traits that distinguish this moment for the Hungarian economy. Brand owners that want to sell to this country must take such element into consideration:
- Price increments: as the HUF loses in value and price in euros increase, traders are is in a situation where they’re paying approximately 15% more for imported products when compared to last year. This will limitedly impact the consumer especially during Q4 as retailers are burning margins to keep up with the fierce competition. (and hoping that the exchange rates will become more favourable in a short term). The overall effect is that inflation will make its entrance in the economy later, probably in 2023.
- Energetic crisis: another peculiarity is that while the majority of Europe is suffering the energetic crisis, Hungary isn’t. It’s Prime Minister Viktor Orban has worked with his ministers during the first meeting of the autumn political period they have disclosed through MTI, the Hungarian News Agency, that measures have been put in place that will guarantee enough gas, electricity and heating resources for the Hungarian population. In other words Russia’s Gazprom will supply additional natural gas to Hungary, the contract has already been signed. This puts the country in a privileged position compared to others (like Germany for example which made public criticism of such situation) which economies depend on Russia’s gas.
Logistics and operations
Like every eastern European country, Cash On Delivery plays a crucial role in eCommerce and has been the most chosen transaction for online purchases so far. However, the stores that gain a reputation as trustable and reliable also obtained more prepaid sales which is determining an overall increment of customers that, with the right conditions, are willing to pay in advance. Curious fact is that stores that provide both solutions are considered more trustworthy by 52% of Hungarians. They in fact think about having different payment methods available like one of the top five considerations when deciding on which site they should ultimate their purchase.
This duality isn’t a challenge for Borderl3ss. Specialized in eCommerce across the marvellous and diverse Europe, we know that not all customers are the same and that not all DTC Brands are the same. If you want to offer a premium tailored customer experience and expand to European countries, then partnering up with Borderl3ss is the next step. Book an appointment HERE and our team will show you all the strengths that your business will acquire through our technology and logistic network.