Clicking for profit
Now those businesses will have to stop copying the West, and begin introducing their own innovative approaches.
By 2010 the value of Polish online trade will reach EUR 4 (zł.15.3) billion, a 300-percent increase from today's turnover. Poland is already eighth in Europe in terms of the popularity of web shopping, despite the fact that broadband internet access is not widespread. Hoping to capitalize on the trend, a growing number of Poles are trying their hands at e-commerce, and plenty of Polish bricks-and-mortar companies are also launching online counterparts.
Do you need a fridge, two kilograms of Scottish salmon and a bottle of the finest Sauvignon Blanc? Or perhaps the latest Uzbek-language bestseller, some latex underwear and a plane ticket to Nimbin, Australia? Whatever you need, these days you needn't even budge from your armchair to get it as a growing army of 'e-tailers' are more than willing to locate the goods and deliver them directly to your living room.
In 2005 the value of Polish internet trade amounted to EUR 1.1 (zł.4.2) billion, half a billion euro more than the year before. Interestingly, the bulk of the exchange is generated at online auctions, especially Allegro. Recent research by pollster Gemius predicts that the share of e-commerce in Poland's overall retail trade will grow to four percent by 2010, as compared with one percent currently.
According to Gemius' Robert Hałacz, e-commerce revenues should get a boost thanks to the spread of broadband internet access and increasing numbers of businesses promoting online sales with home delivery.
Rapid development
Entrepreneurs operating in e-commerce look jealously at the British market, where more than 70 percent of internet users shop online. Poland can boast only half that figure, but the speedy development of the sector is encouraging more and more investors.
The first e-commerce company debuted on the Warsaw bourse just last year. The price of Travelplanet.pl's shares grew from zł.18 just 16 months ago to zł.39 this week. Other e-businesses have followed, and Netmedia's recent successful IPO proves that investors are enthusiastic about solid e-commerce ideas.
Browsing virtual aisles
While some investors are satisfied with owning shares in e-businesses, others decide to embark on their own. As WBJ went to press, another e-shop had just launched its operations.
Frisco.pl is an online supermarket financed by Sobiesław Zasada, an 11-time Polish auto-racing champion who gained his fortune and business reputation as a Mercedes car dealer and today sits high on the list of Poland's top-100 richest people. Sobiesław Zasada Ltd invested almost zł.100 million in Frisco and owns 80 percent of its shares. The rest belong to Witold Ferenc, previously involved in political marketing, who is now responsible for the Frisco project.
"We want to follow the business model of the very successful British online store Ocado. We plan to start off very dynamically in Warsaw and the most prestigious environs such as Konstancin, offering premium products for the most demanding customers. For instance, we will sell 150 kinds of tea or 10 kinds of freshly roasted coffee," Ferenc told WBJ.
Ferenc also boasts about Frisco's attractive interactive options: "Our users will be able to match the food they choose with an appropriate wine or order all the ingredients for a recipe with just one click," he explains.
But while the British Ocado cooperates with the Waitrose chain, Frisco doesn't plan to partner with any supermarkets and will order food directly from distributors or producers.
Not exactly innovation
However, the sale of food via the internet is not a novelty in Poland. It has already been done by the traditional supermarkets, whose services make use of their physical resources. Leclerc, Piotr i Paweł and Bomi all offer online services and obtain positive results, although this still accounts for just a fraction of their overall revenues. This is a drop in the ocean compared with the Tesco chain in Britain, whose dotcom business revenues last year reached L1 (zł.5.73) billion.
"In the UK, where online grocery shopping is very popular, Ocado's customers spend on average L75-100 [zł.429-573]. In Poland the figure is zł.200-400. Still, the market is very promising," Ferenc says.
Click-and-mortar is a business model which is growing in popularity in the US and Western Europe. Poland is now adopting the pattern as well. Enterprises operating in the offline world spotted the great potential of e-commerce some time ago and started launching online counterparts. That was the case of the Barnes and Noble bookstore chain, which has now become a major competitor to Amazon. A similar situation has come about on the Polish market where the biggest bookstore chain, Empik, has launched an online store and is now successfully competing with the most recognizable Polish online bookstore, Merlin.pl.
"The internet is becoming a more and more important sales channel, so it's a natural development for a company such as Empik to try and follow the market's development. The physical and online Empik are complementary to each other," Jacek Kotur, deputy director of Empik.com says. He didn't want to reveal Empik.com's sales figures, but said they are comparable to the revenues of a large bricks-and-mortar Empik store. The largest Empik, located on ul. Marszałkowska in Warsaw, last year generated five percent of the total turnover of all the firm's stores.
Order online, fetch it yourself
Although the principal idea was to expand the geographical scope of Empik, since its shops are only present in cities, over half of all online customers order a CD or a book via the internet and then fetch it themselves from a chosen Empik store. By doing that they avoid delivery fees.
Interestingly, the click-and-mortar model also works the other way around, with dotcoms opening outlets in the offline world. Last year, Merlin.pl opened its first physical retail store in Warsaw.
"We were really tempted to check how this was going to work. The aim of the physical store was to represent Merlin.pl, to make it even more credible. We showed our customers a tangible company and a tangible product," explains Mirka Puczko, deputy president of Merlin.pl. The effect was that the majority of customers treat Merlin's outlet as a place where they can come and fetch their purchase to avoid delivery fees.
"Currently we've only got two physical stores and we believe it's quite enough. If we open more, they will only function as places to fetch the order and not as real bookstores," Puczko explains.
Physical bookstores are not the only way Merlin is trying to reach its customers offline. The company spent zł.3 million on its last ad campaign alone. "We've launched an image campaign. We've decided the time has come not only to develop organically since, with the growing internet penetration the business will grow on its own, but also to present ourselves to a wider public," Puczko says.
Caveat e-mptor
For Travelplanet.pl, the nine points of sale it opened in shopping centers have become an integral part of the business and generate a significant share of the company's revenues.
"At the moment, it's 26 percent. I believe the figure will grow along with the opening of new offices and will amount to one third of our sales in the end. But the internet will always be our main channel," says Tomasz Moroz, Travelplanet's CEO.
Both Puczko and Moroz, who have already succeeded in e-business, see a lot of room for development but warn that starting an e-company firm doesn't mean an immediate return on invested capital.
"People seem to think that any internet business has to be a success, which is not the case. I think you have to ask yourself three basic questions before you start: Is this what the customer needs? Can I capitalize on it? And, will I be able to reach the customer?" Moroz says.
According to Merlin's Puczko, the future belongs to niche services. "I've noticed the strong activity of specialist websites and I believe that's where the internet is going. After all, it's a conglomerate of users with niche interests," she says.
But she would also like more innovation on the Polish e-business market.
"I'm rather disappointed with the fact that nothing really fresh and new has emerged from the Polish market and we're still more copycats than trendsetters. I would really like to see that change," Puczko concludes.
