Online stores take two steps forward

Newsroom 04/03/2008 | 17:33

“Force of habit is an obstacle. In addition to this, limited connection to the internet, since at most one third of Romanians have access,” says Dragos Manac, lead operations at System and Network Solutions. Moreover, it depends on the specificity of the products: some are more suited to offline sales – regular products such as food and commodities. For these the customer does not take the pains to order online because it is too complicated. In other cases, there are products which require direct interaction with a representative or seller and again this is not suited to online retail, says Manac. “There are many niches which are not yet covered and sales will grow as the number of offers from a wider range of domains does.” He forecasts that the market will double this year and there will certainly be no shortage of new stores that will cover some of the niches that have not yet been explored.
Other setbacks include the lack of infrastructure, the fact that Romanians still do not trust to the card as a payment instrument and a shortage of big players on the online market, says Manac.
This enumeration of drawbacks is completed by Dan Calugareanu, CEO of & Alliance Computers, with two additional ones. The first is the fierce competition: at this point the market has 1,500 online stores in Romania, which also have to face the reticence of potential buyers. Logistics are another problem. “Bucharest is a city that is very difficult to cross during the week,” he says. Calugareanu forecasts, for the 1,500 online stores (800 of which accept online payment by card), a 50 percent growth for this year to EUR 150- 200 million.
Still, a study by the online IT equipment store eMag is even more optimistic, predicting that the online market of retail for IT&C will reach EUR 250 million. Compared to 2007, the study forecasts that the IT&C online retail market will double in 2008, from approximately EUR 115 million last year.
Most consumers still do not “go big” when ordering on the internet. Romanians are still lagging behind Europeans when it comes to ordering online: the average value of a transaction in Romania amounts to EUR 77, falling below the European average of EUR 130, Manuela Stoica, PR & communication specialist at GECAD ePayment, told Business Review. The market continues to be dominated by two types of products, namely tourism/transport and telecom, followed by a third category, retail, which holds a smaller percentage of the market, 18 percent of the total number of online transactions. “Still, the fact that the volume of online transactions is up by 263 percent last year compared to 2006 shows that those consumers who have purchased online once return while among new consumers the degree of trust in e-commerce with online payment is beginning to increase,” says Stoica.
The industry experienced a pioneering period between 2003 and 2006 after which it began to reach a whole new level. “In other words, the substantial involvement of banks and the entry of the big companies in the electronic commerce sector are the first signs of moving towards maturity. This will continue as online stores, in their turn, accumulate experience and perfect their services,” says Stoica, adding that these will influence consumer behavior and lead to an increase in buyers.
Rises in the standard of living in big cities are also changing online consumer behavior, according to Mugur Frunzetti, managing partner in Grifon Group, the company which owns The need for quality is greater and premium products are given preference, while large brands draw a higher degree of loyalty. The more the internet gains higher penetration the more diverse segments of the population will understand the advantages and the way online orders are made and therefore the online market will increase to the point at which the online stores will be “a commonplace presence just as it happened the last few years with supermarkets and hypermarkets,” says Frunzetti.

Marketing strategies
In the race to gain a satisfied and repeat customer base, viral marketing can be an efficient instrument. “Viral marketing has brought us the best results so far: satisfied customers have returned to our site and even brought along others who are sending us the feedback that we need,” says Calugareanu.
With the right strategy, in a busy period such as the Christmas or Easter holidays, Valentine's Day or March 1- March 8, online sellers can strike gold. In such a full holiday season, the marketing strategy of an online store should include several stages such as preparing the products (promotions, discounts, coupons, choosing several star products), arranging the store (with a special design for holidays), setting a price strategy depending on the objectives, marketing instruments (product bundle, cross selling, up selling, gift option, discount), both conventional and unconventional communication channels and online promotion (which also includes performing an audit on the level of usability of the site).
The online is much less likely to allow for hit and miss marketing. “Online, you can reach the customer with a much more targeted message. You can almost sell directly, one to one.This medium allows for interaction with the customer and measurable and immediate results,” says Manac, who counts among the most effective marketing methods the offer of content and information through online articles, blogs and newsletters, targeted advertising when the customer already displays interest in the sold product, direct communication, making the site more accessible and offering simple methods of payment and delivery.
Trust in the card as a payment instrument is on the way up. GECAD ePayment data suggests the average value of a transaction increased in the period preceding Valentine's Day, compared to December. It seems the card is building up a good name since, while the winter holidays saw an average transaction value of EUR 72, from January 15 – February 14, the figure reached EUR 84. During this period, Romanians bought 21 percent more than in December through this payment instrument, the total number of transactions being 40,400.
Sales during the past month surpassed December in the context in which “not very many stores prepared especially for these holidays. I did notice several successful promotions and several special ‘windows' in the case of the bigger stores, but I think more would have been possible,” says Laurentiu Ghenciu, sales manager at GECAD ePayment. “These ‘holidays' are very good opportunities for small online stores to attract customers and win their loyalty,” he added.
To take full advantage of these ‘windows,' e-traders should start preparing about a month in advance, draft special offers, alter the design of the site so that it fits the occasion, implement an intelligent promotion strategy and most importantly, Ghenciu says, make sure they have enough stocks and delivery capacity. “The majority of the buyers' complaints are about the deficient logistic infrastructure of most online stores.”

Online stores boast fat profits
Based on studies showing that women are more and more interested in shopping online but represent a low targeted public, plans to focus more on this segment of the population and is placing at their disposal professional advice in order to help them decide on the best choice. This targeted approach also includes a promotion on Women's Day, offering a prize to those women who “have the courage” to buy IT equipment online.
The electronics that were most popular at, run by Alliance Computers, were those for dynamic customers, such as laptops, home and personal care gadgets and devices such as MP3 players and voice recorders. Currently, the store targets three percent of the online market and plans to enlarge its portfolio of products by 300 percent.
Laptops were also the best sellers of store with the peak in sales taking place in January and February. This segment represented 30 percent of the store's total sales during this period. Online sales were also accelerated by the numerous promotions especially in February, when MarketOnline launched a CSR campaign and exclusive promotions for Valentine's Day and its Romanian equivalent, Dragobete, as well as March 1-8.
Apart from laptops, mobile phones also sell like hot cakes, especially on the smartphone segment. Apple iPhone remained “the star” of, selling over 500 items over the last few months. Most in demand were premium brands and products which totaled 75 percent of the total sales in January and February.
In the electronic and home appliances sector, LCDs, MP3s and MP4 players as well as smaller home appliances such as vacuum cleaners, mixers, microwave ovens provided the cream of the sale profits.
Founded in 2001, eMag is one of the pioneers of e-commerce in Romania, currently having an estimated 70 percent market share and a turnover of EUR 76.7 million. Forecasts for this year place its turnover at EUR 140-150 million, aiming for “1 out of 4 notebooks in Romania to be delivered by eMag in 2008,” according to Lucian Condruz, director of product management at the firm. Notebooks are expected to lead the way for sales, and the company aims to reach a share of 22-25 percent of this market. They will be followed by mobile phones, multi-functionals and software solutions. In the category of electronic appliances, LCD sets will be leaders of growth, followed by photo and video cameras.
So in this respect nothing will change dramatically, only evolve. And in e-commerce terms, this means more money.

By Otilia Haraga

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