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E-commerce Leaps Ahead Three Years in 2020

Árukereső - According to the latest joint research by GKI Digital and Árukereső.hu, domestic online retail sales turnover reached HUF 909 billion in 2020 in the wake of record 45% growth. Based on the figures, it is now possible to state that the online market, which initially had only gathered momentum due to extra and shifted (forced) spending, not only gained a temporary speed boost last year, but also a real competitive edge that, if managed well, could set it on a sustainable growth path in the long run, transforming the shopping habits of millions of consumers.

GKI Digital, in cooperation with Árukereső.hu, Hungary’s leading price comparison site, has examined the domestic online retail market since 2014 in the scope of the Online Retail Index research series. Taking into account the mid-2020 results of the research, it can now be said that e-commerce is one of the biggest winners of the pandemic:

In 2020, gross domestic online retail sales shaped up around HUF 909 billion, which represents record-setting 45% year-on-year growth.

The coronavirus has accelerated digitisation, forced the public to level-up, encouraged retailers to improve and, last but not least, reshaped shopping habits, so that in 2020, online commerce will have leapt ahead by at least 3 years in terms of development, building on the steady growth (between 16-18%) of previous years. Taking into account the steadily deteriorating income situation of the population throughout the year, shrinking family coffers due to extra spending and the weak year for retail as a whole, the online sector’s Y2020 results are all the more outstanding. This is also due to the fact that, unlike other sectors, the online sector (and the logistics involved in serving it) was not hampered by mass contagion-related shutdowns or closures in 2020.

External conditions have been favourable for the sector

While the pandemic and the measures that came with it have swept through the economy and had negative effects on several sectors, the online retail segment has even managed to bolster its turnover thanks to the pandemic situation and the constraint-driven change in consumer habits. The main processes behind the 2020 level jump included the following:

The (positive) impact of the coronavirus on e-commerce was already indirectly present in Q1 2020, but it became really definitive in the second quarter. In the spring of 2020, during the first wave of the pandemic, online sales figures for the largest nationally known online stores were reminiscent of Christmas seasons in previous years.

Is the momentum fleeting or long-lasting?

Back in June 2020, it was not yet possible to know how long the online sector’s momentum could last: Was the spike in sales “just” the result of sudden store closures, panic buying and digital education/home office demands, or the first manifestation of a shift that will stay with us even in the longer run?

This question, which is fundamental to retailers’ strategy, was made all the more tough to answer by the fact that during the summer months the government, similarly to many other European countries, relaxed its epidemiological restrictions, the digital school year ended, people were set free from the confines of their four walls, and most retail and hospitality outlets reopened. All of that combined, plus extra spending that had declined by then, resulted in ‘slower’, yet still highly dynamic expansion during the third quarter.

The last three months of 2020 were again characterised by rising caseloads, as well as the restrictions that arrived in November. That resulted in a repeat of the trends already seen in the second quarter, surpassing all previous expectations for the festive season. Despite the high base, the final quarter, which was strong even by Y2020 standards, saw an overall increase in turnover of around 59%.

Clothing and FMCG are the champions of online sales growth, but demand for technical and DIY goods has also increased significantly

Due to the shift to home office and digital education, the online sales growth of technical and computing products could be described as prominent at 35-40% in 2020, although the first half of the year saw a higher increase than the second due to spending that was brought forward or reallocated (e.g., from holidays). Last year also brought significant improvement in the case of DIY equipment and household goods. At the same time, the biggest winners in 2020 were the clothing sector and the online FMCG sector, which includes groceries, drugstore and household products, with turnover in the latter expanding at an annual rate of over 65%. In the case of clothing, the lockdown of retail outlets in the spring triggered a change in consumer behaviour that, combined with the experience of international players that had entered the market in recent years, more than doubled the sector’s turnover.

Changing preferences in how goods are received

In addition to the increased number of orders, the virus situation has also shaped delivery and collection habits. At the same time, and largely independently of the pandemic, the largest retailers have embarked on major logistics improvements. Self-operated parcel machines for contactless pick-up and delivery have started to gain ground, while others chose to develop their self-managed delivery services, offering even same-day home delivery.  Courier services can be considered the real winners on the delivery market in 2020, as it was the volume of door-to-door orders that increased the most. However, the use of parcel points and self-operated pick-up points has temporarily declined due to the restrictions.

Courier services held their own even despite high parcel volumes: the spring months served as a dress rehearsal of sorts for logistics companies, which took away the key lessons and managed to keep abreast of the year-on-year growth of parcel and transaction volumes without major disruptions, thanks to a significantly expanded workforce and much better balanced volumes.