Giants knocking at the CEE e-business doors
The entry of Google or Amazon to the e-commerce market in CEE has been brought up on many occasions,but the business does not seem to take the matter seriously. The bill for turning your eyes away from the global trends and restraining from action will be very high – Mateusz Gordon, Gemius expert in e-commerce, sums up.
Within the next 5-10 years the CEE online commerce sector will be undergoing changes leading towards greater concentration and globalization. Apart from such companies as Apple, Google, eBay or Amazon – stocking heavily in e-commerce – the industry’s potential has also been noticed by mighty investment funds that contribute to the emergence of yet other giants by supporting consolidation. An example illustrating this phenomenon is Zalando – an online store in the portfolio of Internet Rockets, a fund quickly gaining ground on the CEE market. There are a number of its clones operating around the world. Even if they differ among each other in their geographic catchment or range of offer, they still are based on the same business model, copied from market to market. And so, in Asia it is known as Lazada, in Africa – Zando and Jumia, in Brasil as Dafiti, and in the Middle East as Namshi; the latter recently injected with 13m investment dollars by the fund.
Arrival of Google and Amazon is a question of time
The CEE e-commerce will also evolve in response to the upcoming expansion of Google, now launching Google Shopping in new countries and doing so in a more subtle manner than Amazon: it monetizes its e-market presence by affiliating the buyer with the seller. The aforementioned presence is, however, no longer an exclusively virtual one. By acquiring logistics companies, Google has begun introducing same-day delivery service. Thus, as a direct competitor for e-stores and price comparison websites, it becomes a real threat to e-commerce investors in CEE.
The introduction of Google Shopping on the CEE market will be a blow most painful to price comparison sites, which following the example of e-stores, have quite recently broadened their offer with the “add to cart” functionality, hence allowing the customer to strike a transaction directly on their site. Consequently, they took over a significant competency of smaller online shops. This is how a pyramid of competencies and concentrating the market around large entities is being built. Interestingly, most of them have Google Analytics scripts embedded in them, and their data belongs to Google – according to the regulations. One could not wish for a more comfortable situation on the eve of the Mountain View giant expansion.
Another area where Google invests is the tourist industry. In some countries, special applications provided by the corporation offer search services concerning flights and hotels. There is little doubt that the currently scattered booking market will become far more concentrated. Especially that most of the traffic on these websites is generated via the Google search engine.
Amazon’s entry to the CEE market is only a matter of time. Whether it arrives is not the right question to ask anymore. Allegro, the local player, did manage to fight off one eBay assault on the internet auctioning market, but will the dispersed e-store segment repel? Quite improbable in the light of the fact that a considerable number of Poles already shop in the largest e-bookstore of the globe. According to Megapanel PBI/Gemius data, Amazon is one of the ten e-shops scoring best in audience rankings with 4 per cent of Polish internet users visiting the site.
Consolidation will help defend against expansion of giants
What strategy is to be taken, then? Can you protect CEE e-business against global competition? There are at least several solutions at hand. First off, you cannot forget it is narrow specialization that counts: expert assistance and wide range of choice will serve as added value for customers. Clients searching online for goods by very specific criteria, e.g. shoes or cosmetics, are more willing to buy them in a dedicated shoe or cosmetics store, respectively, rather than in one of these massive malls offering a wide choice of merchandise from all product categories.
You could also bet on uniqueness. Moving away from mass sale is a way to offer customers the types of goods that are hard to copy. There is much truth in the common phrase saying that only those entrepreneurs who do not sell barcoded products will avoid being trod over by Amazon. This surely pertains to handicraft, art and design.
Another way is to join forces in business and pursue a common goal, which should be fostering brand awareness, so as to increase the competitiveness of offer against foreign corporations. It might be worthwhile to promptly get down to building barriers where the giants have not taken over yet; when they do come it will already be too late to unite.
It may seem that consolidation of local businesses equals sharing confidential trade information. This argument is often put forward by owners of e-commerce companies whenever the is subject of joining forces is brought up. But do they plan to consolidate with Google? Rarely do entrepreneurs realise that the global giant, developing competitive services on the European market, already has the key data about their business activity. It may hence be most beneficial to refer to research tools that facilitate aggregation of data on website traffic and transaction data, as well as their comparative analysis while keeping the secrecy of performance details against competition. Such solution, offered by an independent research entity, and not the potential client, may limit the influence of world giants, who may briskly shift from a role of a tool provider to a competitor, as it is happening now on the western markets. Creating a standard for the e-commerce market, which could be a point of reference for the entire sector, is the only future. Will this mechanism prove effective? This may be best illustrated on the example of the advertising industry. Creating a standard currency for measuring the online market was a great boost to the development of that sector.
Nothing is worse in business than idleness
An interesting move, in the view of the giants’ arrival onto the Polish market, was made by Merlin.pl: it was acquired by Czerwona Torebka, a company owned in 70 per cent by Mariusz Świtalski, who is one of the most affluent Poles, a creator of retail brands such as Biedronka or Żabka. With this merger, Merlin will be developing a network of collection points. At present, there are seven of them, but by the end of this year there are going to be as many as thirty five in total. It would appear that their natural location will be the shopping centres built by Czerwona Torebka, but the rumour has it that Merlin will not restrain to these venues only. The investor says such points could come in thousands, ultimately. This sets a barrier hard to cross for small shops, but also for global competition. So the path chosen by Czerwona Torebka is most intriguing.
Ideas on how to resist the giants are plenty. Whether they end up in failure or succeed we shall soon see. For the time being, the shops that are taking action deserve a honorable mention, as it is idleness that is the worst attitude to take in business. Unfortunately, I constantly hear shop owners saying: “We’ve heard about Google or Amazon entering the CEE e-commerce market for so long, but their plans are always postponed".
Strategic thinking needs a wider perspective. Turning one’s eyes away from global trends and restraining from any reaction will bring a painful failure.