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A nearly two-year decline in sales at online stores last year suggested that this year could be the last year of their existence for some of them, blood was felt in the market. But the caravan continues. Contrary to expectations, the market did not experience a major slump in domestic e-shops; domestic online shops have successfully passed the test in the form of the most significant slump in history. According to experts, customers can expect more discounts next year than they have been used to in recent years.
Online shops had to struggle with a loss of sales for the second year in a row, something they had never experienced before, and Czechs were buying more from them every year. However, the combination of a sick domestic economy and fat pandemic years that brought record sales meant e-shops had to work much harder this year to retain their customers. The total number for this year is not yet known. Based on the situation throughout the year, it can be assumed that e-shop sales will decrease by about ten percent compared to last year, when there were almost 200 domestic e-shops billion crowns.
“Everyone has started to behave much more cautiously and is focusing much more on financial efficiency and cost savings than in the past,” confirms consultant David Antoš from the Boston Consulting Group. According to him, the current situation is particularly good for large online shops, while smaller ones are losing their positions.
His words are confirmed by Matěj Kapošváry from Shopsys. “So in general I don’t think it’s mainly the big guys who are losing.” They already had a more difficult situation at the beginning of the decline almost two years ago, it came out of nowhere. They are taking longer to adapt to the change, but now they are used to it, these are large companies that are often well managed,” he said in an interview for e15 in December.
A successful end to the year
Jakub Ouhrabka from Comgate, which provides e-shops with a payment gateway, has the opposite opinion. “For example, anyone who sells their own goods is flexible enough and was able to adapt more quickly to the market situation.” “Anyone who has used it to optimize their operations comes out stronger,” he says, based on the information he receives from his company’s customers .
This practical experience is confirmed by Ondřej Klega, who, together with the eRockets group, holds shares in several e-shops with a turnover of one hundred million to one billion. “It wasn’t an easy year at all, but I have to say that this year is ending quite successfully.” For most projects, we managed to meet the growth plans, ie an annual growth of between twenty and thirty percent. “The last two months in particular were record-breaking, when we recorded the largest sales in the history of the Grizly, Vuch and Ovečkárna e-shops,” describes the investor.
But in the same breath he adds that online shops have to try to persuade the customer to buy, which reduces the overall profit of the goods sold. “On the other hand, it has to be said that it was somewhat at the expense of the planned profitability. But we also managed to achieve good EBITDA margins there,” he says.
Discounts are coming, customers knew it and waited
Due to the still weak spending of Czechs, e-shops were forced to work more with discounts, so this year was characterized by frequent discounts. For example, some retailers started the Black Friday shopping holiday a week early this year, and overall market figures showed that Czechs were simply feeling the discounts this year and were willing to wait until the period of low prices to buy.
“Retailers have a positive attitude towards Black Friday; our customers achieved higher sales at this event than last year.” would be ten percent lower every year,” says Kapošváry. Among the big players, Notino from Brno, for example, reported a strong shopping holiday, with sales increasing by 40 percent during this period compared to the previous year.
According to David Antoš, customers can also expect lower price pressure in the following year. “The pressure will continue from new markets for which price is the main and fastest method of acquiring customers. If they continue to gain market share, in 2024 the pressure on other players will increase and they will have to react,” he believes.
Ondřej Klega calls discounts the main theme of this year’s business strategy, but points out that they need to be worked with carefully. “The discount is a good tool, but it also needs to be managed well.” Today you cannot grow without sales support tools, and you also need a well-calculated discount mechanism,” he says.
Cautious investors
The more difficult phase of online shops also affected the willingness of investors to enter this industry, as e-shops did not receive as many offers as in previous years due to lower profitability. “Although interest in investing in e-commerce has decreased, it has not disappeared completely.” “However, investors are more interested in the financial health of e-shops or investing in e-commerce-related infrastructure with more stable profitability,” describes Antoš.
Despite the “stupid mood”, there were no major accidents this year that were threatened due to overcrowded warehouses. A number of online stores have managed to take a dangerous turn and face the risk of poor cash flow. “In e-commerce, in contrast to brick-and-mortar retail, retailers have better conditions to adapt to a more difficult situation.” They are not restricted by such setup costs; they can, for example, use the fulfillment option,” says Ouhrabka from Comgate. Antoš adds that when some players left the market, it mainly affected the smaller ones who didn’t attract as much attention.
In summary, all experts surveyed agree that next year is likely to be significantly better than this year. “The run-up to Christmas shows that the situation is not as bad as it might be portrayed in the media,” says investor Klega. It is the end of the year that makes Ouhrabek optimistic for the coming year. “There is already optimism among traders this year,” he concludes.
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