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The Online Market Continues to Gain Momentum: Strong First-Half Finish for Domestic Online Stores

Árukereső - A year and a half after the coronavirus appeared, the question seems to be settled: based on the results of the first six months of 2021, it appears that online retail, which saw sudden and tremendous expansion last year due to the pandemic, has managed to keep its momentum, and the increase in order frequency is still driving growth, as revealed in the latest Online Retail Index report by Árukereső.hu and GKI Digital.

Despite the high base, growth remains solid and impressive

In the first half of 2021, the Hungarian online retail market expanded by 30% and generated gross domestic sales of HUF 494 billion. Within that period, first quarter sales outperformed Q1 2020 by 43.7%. Even more importantly, the second quarter, which already brought record-high figures last year, saw a further 21% growth in sales this year, up 25% on the stabilised average growth rate of around 14-16% in the years before the pandemic.

More and more orders are placed online

During the first 6 months of 2021, the number of newly-registered online shoppers did not increase significantly (currently 3.44 million people can be considered to be active online shoppers in Hungary), but the number of online transactions (i.e., orders placed in online stores) spiked significantly with a 32.4% increase, meaning that close to 27.9 million domestic online orders were completed. In addition, the per capita purchase frequency has also continued to grow, and currently averages 17 online orders per person per year. The increase in the latter indicator is mainly due to the fact that now we can and want to buy much more online. In addition to the steadily expanding range of products available on the Internet, the appetite for shopping online has not fallen dramatically either, despite the lifting of restrictions.

In addition to technical goods, daily groceries, along with home, household and DIY items are also becoming increasingly popular

Numerous retail product categories that had barely made a dent in the online sales market in previous years had set out on an explosive growth trajectory by H1 2021. Shoppers are no longer shying away from online purchases of product groups like daily groceries and consumer goods, which grew by nearly 50% compared to last year’s base, as well as home equipment and DIY (+35.7%). Moreover, growth in the latter areas is also being boosted by the government’s home renovation programme.

Once again, home-office or hybrid work, digital education and summer sports events (the Euro 2021 and the Olympic Games) have combined to generate strong first-half demand for technical goods, including consumer electronics and computing, this year. Growth in the sector’s online turnover came to 30.7% in the first half of the year, with turnover reaching HUF 114 billion.

Growth aside, 2021 also posed new challenges

However, in addition to positive changes, the pandemic has also brought a number of unexpected challenges to retailers:

Production capacities lost in Asia as a consequence of the virus and disruptions in international shipping have led to stock shortages for trade and its online branch that had previously been quite untypical. On top of that, shortages are most acute regarding the most sought-after DIY, building materials, furniture, garden, leisure, sports and technical goods, and are also having a major impact on prices. Increases in the cost of goods sold have spilled over into retail prices in a matter of weeks, and that has also impacted domestic online trade; it suffices to consider the size of inventory stocks and the increase in committed delivery times.

Major players enjoying field advantages

The online retail market has been concentrating at an accelerating pace since the pandemic broke out: consumers have gravitated towards reputable major online stores and retail chains, which have typically responded with a steadily expanding product range and faster deliveries, and usually have bigger choice and more secure, predictable inventory to begin with.

The larger players also benefit from the fact that, as a direct consequence of ever-changing circumstances, the existence of a traditional store network has appreciated even more as a symbol of security and interoperable distribution channels.

What to expect in the second half of the year?

In light of results to date, online retailers are optimistic about the upcoming half as well, with online retail growth slated to continue exceeding last year’s base, although the rate of that growth is hard to estimate at this stage. Again, the upcoming fourth wave and related measures might likely have a big impact on autumn and Christmas figures.