E-sales chipping away consumer conservatism and conventional store sales

  • 2011-09-28
  • By Linas Jegelevicius

ON-LINE NATION: The rapid growth of on-line purchases is due to sellers offering better product quality and lower prices, says Dainius Liulys.

KLAIPEDA - Though many Lithuanians are traditionally conservatives to the marrow of their bones, nevertheless, more and more compatriots, instead of the traditional touching and patting of a desired article in the store, are accepting being able to take a virtual 3D look at it, let it be a hip mobile phone, TV set or a piece of clothing.
“Without any doubt, e-trade is riding high currently. With the market recovery and the changes in consumer behavior, e-buyers are on a steady rise. Last year, only 10.8 percent of all inhabitants claimed to use the Internet as a shopping tool. According to the last statistics, today over 18.5 percent of all Lithuanians buy online, a 70 percent increase compared to last year,” Dainius Liulys, director general of the trendy online store Pigu.lt and president of Lithuania’s Electronic Trade Association (LETA), said to The Baltic Times.

He maintains that Pigu.lt sales have doubled in one year. “In 2011’s first half-year, our turnover reached 15 million litas (4.3 million euros), nearly twice more against last year’s first half turnover,” the director maintained.
He explains the rapid growth by several reasons. First, he says, it has been boosted by the economic recovery. Second, active competition of e-stores with retailers in providing better product quality, a larger assortment, better customer service, and, most importantly, lower prices have spurred e-sales dramatically. Third, Liulys says, changes in customer behavior should be taken into consideration. And they are dramatic!

The statistics says that in 2007, only 44 Lithuanian enterprises were engaged in e-trade, while at the end of 2010, there were a bit less than 300 businesses of this kind.
“This year, I would put the number at around 500. I am happy to see that the e-trade market is stabilizing, with more reliable and client-oriented e-stores available,” Liulys notes. He credits the crisis for the e-trade rally.

“Crisis-stricken and money-strapped buyers were desperate to find cheaper goods. In the crisis years, people have learnt to shop cheaper. Nevertheless, ‘cheap’ did not necessarily mean bad quality. To sum up, people have positively evaluated the direct advantage of e-trade – fast, simple and convenient shopping, allowing everyone to save. That has boosted trust in this kind of trade. In addition, with life’s tempo accelerating, Lithuanians started being more conscious about their time, reckoning on whether to go to a store and stand in line, or make the purchase online, while spending the saved time with family and friends,” Liulys said.

Launched on the crisis’ eve, the summer of 2008, Pigu.lt’s director general maintains that in 3 years it has increased its trade volume seven-fold, taking approximately 35 percent of the national e-store market today, which makes it the e-market leader. In addition, the venture has acquired the major Latvian e-store - 220.lv. With the deal sealed, Pigu.lt became the largest e-trade service provider in the Baltics. The Lithuanian venture plans to invest 1 million litas into invigorating 220.lv, which has become a Pigu.lt subsidiary.

The mega e-store owner relates that the popularity of goods in the e-stores also depends on the season. He says that in summer, buyers opt for buying leisure and sports products, like sleeping bags, bicycles, tents, photo cameras, navigational gadgets and cardio equipment, as well as large-size items, like lawnmowers or patio furniture.
“Before September 1, school goods, like computers, children’s furniture and, certainly, school knapsacks are the trendiest,” Liulys notes.

Before Christmas, e-orders for Christmas gifts pour in, particularly for perfumes and colognes, all kinds of cosmetics, little or medium-sized kitchen appliances like coffee machines, grinding apparatuses, as well as training equipment.
The store director, however, admits that despite the robust increase in e-sales, Lithuania still considerably lags behind other EU countries.

Gytis Juodpusis, director of TNS LT, the largest Lithuanian market and media research venture, is even harsher in estimating the e-trade scope in Lithuania, calling it “rather small.”
“Though, statistically, every fifth Lithuanian has bought online, increasing the army of e-shoppers by nearly two in the past two years, comparing the numbers to those in the nearest countries, even Estonia, we fall heavily behind. For example, in Estonia 44 percent of the country’s inhabitants go online shopping, twice more than in Lithuania,” Juodpusis noted.

Speaking of Lithuanians, he says that company and institutional leading officials are among the most frequent online buyers. Nevertheless, he notes, the Lithuanians who resort to online shopping do so more regularly than the slowpoke Estonians.
The market and media research company has also revealed that, age-wise, most e-buyers fall in the age group of 20-39 years in Lithuania. “As a rule, most of them have a higher education and pretty large incomes. As I said, if looking at the e-buyers occupation-wise, heads are the most active online buyers. It can be explained by their lack of time and inclination for innovativeness,” the TNS LT director said.

The research also shows that Lithuanians tend to obtain tickets to various venues online (32 percent of 1,667 respondents claimed to do so), as well as shoes, clothes and accessories (also 32 percent), also electronic appliances (21 percent of all the respondents). Among the least desirable goods to be bought online are food, furniture and household interior items.
Liulys says that several reasons hold back the e-trade market from more significant inroads in more households. “Traditionally, Lithuanians are rather conservative and, when buying something, they feel like touching the product. Many people, especially when buying online for the first time, fear that they will not receive the product they paid for. In addition, people are anxious about the safety of their personal data, which revelation is unavoidable with an e-sale transaction. Possible default of the seller’s obligations is also kept in mind,” the LETA president said. He adds: “However, I call the year of 2011 to be a breaking year for the online trade market. The economic recovery, the online trade competitive environment, better customer care, a larger assortment of goods and, most importantly, lower prices have irreversibly fostered the online buyers’ trust in this kind of sale.”

Redas Perminas, head of the e-commerce department at Sanitex, the largest wholesale, distribution and logistics company in Lithuania and Latvia, concurs on the increase of e- sales. “They have, obviously, surged, as well as the flow of interested visitors. The improving economic outlook encourages people to buy more expensive electronic gadgets,” he admitted to lrt.lt.
He says there is a clear seasonality in e-sales, with sales of refrigerators, freezers and navigational equipment prevailing in the summer, TV sets, entertainment systems being trendier in the fall and teaching-oriented gadgets going hip before Sept. 1.
“The online trade market is very perspective, however, it still remains in a very early stage. All players of the market see a very big potential for expansion. Nevertheless, in the sense of the e-trade penetration, Lithuania is well behind more advanced Western markets. In that sense, Lithuanians are still very conservative and are cautious in trying out new things, as the mentality ‘they-are-going-to-dupe-me’ kicks in. We need more time and more consumers’ vivid stories touting the qualities of online shopping to be heard,” the Sanitex representative emphasized.

It seems that not they, but the stories about e-trade scammers, receive the biggest media coverage, re-convincing many conservatively-inclined compatriots that they are right to snub online shopping, “If they had bought it in a conventional store, they would not have been duped by some invisible sellers,” he says.
In the fall of 2010, thousands of Lithuanians became victims of electronic scammers – people would transfer money for goods to non-existent e-stores. “Therefore, e-trade lacks trust in Lithuania, as anyone can set up an online store for 30 litas. Clients still do not have any guarantees that they will get the item that they paid for,” Erlandas Jakubonis, Topo Centras CEO emphasizes.

However, Vitas Usas, Consumer Rights Protection (CRP) chief specialist, maintains that his institution receives only very few complaints regarding online buys. “They make up 3-4 percent of all customer complaints. However, there is a slight increase of them in the recent years,” Usas noted. This year, the CRP has handled 30 complaints regarding e-transactions. “Most of the complaints are about the acquisition of computers, household appliances and clothes online,” the CRP specialists noted.
Gintare Jodikaitiene, e-commerce department head at Senukai, the largest store chain of construction, renovation and household goods, says Senukai’s e-trade has withstood the adverse impact of the crisis and continued to climb ever since. The department head says that, in the first half-year, compared to the same period last year, Senukai e-orders have risen three-fold, while the turnover has increased by two.

“We started our e-sales during the peak of the crisis, in March of 2009, however, our e-sales started picking up from the very beginning,” Jodikaitiene said.
A Senukai survey has revealed that 36 percent of its respondents opted for online buys because the goods’ prices are cheaper online, another 36 percent pointed to the convenience of being able to buy necessary goods without leaving home, while 7 percent stressed that the absence of a Senukai store in the vicinity triggered them to get online.
Though Senukai retail sales in its conventional stores, Jodikaitiene admits, so far make up the bulk, the increasing e-sales are chipping away at this.

Danas Arlauskas, director general of Lithuania’s Business Employer Association (LBEA), says that the rapid growth of electronic trade is determined by the consumers’ need to obtain cheaper goods.
“There is a little secret that there are only a few suppliers of electronic appliances, construction material, clothing or shoes in Lithuania. Due to the lack of them, there is very little, or no, competition among those in the market. Therefore, the products they provide  usually cost more than in Western Europe, allowing online sellers to freely juggle with their prices, beating the prices in the traditional stores,” Arlauskas said.

He also stresses the considerably less expenditures of running e-stores, which gives room for a further price decrease. “When setting up an e-store, no one needs to look for spacious premises, obtain many various permits and overcome endless bureaucratic hurdles – saying no to all this makes the e-store expenses low,” explained the LBEA director general. He also points to the large and rapid Internet penetration into the majority of Lithuanian households.

Arlauskas forecasts that e-trade will expand even more rapidly in the future, as this kind of sale is very convenient to customers. “Probably the only disadvantage of the trade is the inability to touch and feel a chosen item. Nevertheless, the more we live, the less important ‘touching’ becomes. Many goods, like cosmetics, washing powders, household appliances, are unified commodities, i.e. what we see on the shelves, TV screen or online seems to be the same and there is no need to touch,” the LBEA representative emphasized. He added though: “Sure, people still buy less shoes or clothing online, as the necessity to try on the items remains.”

Not only are online sales of those goods that you feel like touching are getting trendier, but also those that you, before opening your wallet, may want to sniff out – I am speaking about flowers. “Sure, online flower sales are a very specific thing, even within the e-market; however, they are rapidly increasing,” says Darius Laurinavicius, owner of flower e-store Myliugeles.lt.
He says he notices lately that not only young people, who make up the core of the customers, tend to order a flower bouquet, but also elderly people in their fifties or sixties brave up for the novelty. “It is not surprising to me, as more and more people, including seniors, use the Internet or open up Paypal accounts. However, our main customers are Lithuanian emigrants, in their thirties, who want to cheer up their loved ones at home or at work with a nice flower bouquet or some cinema-like acting, like a performance of a robber, lover or our violinist,” Laurinavicius said to The Baltic Times.

The online store owner says that his rendered services are gaining more popularity not only in the largest cities, but also in the provinces. “Nevertheless, most clients live in large cities, especially in Vilnius, Kaunas and Klaipeda,” the Myliugeles.lt owner says. In Lithuanian, “myliu geles” means “I love flowers.”
He says the competition in the segment is “huge,” especially due to the several international operators eyeing their chunk of the market. “There are several international companies, like Interflora or STD, which rake in fortunes in Lithuania from the flower e-business and our services as their business intermediaries. Though some of them are registered in Estonia, they operate in Lithuania without paying taxes here. It is something that needs to be addressed by the legislators,” Laurinavicius, who employs 19 people, says.

He admits “there is much room” for manipulation in the business, pointing to 3 or 4 times a week changing flower prices and the deceitful appearance of many flowers. “If you want to know what kind of e-seller you are dealing with, do compare the bouquet you saw online before placing your order, with the one you were delivered,” the flower geek advised.
He says that e-orders spur more walk-ins in his traditional flower stores. “Young emigrants like to swing by my conventional stores upon returning home. They are curious to see what the bouquets they had sent to their sweethearts look like on the shelves. They usually leave the stores with flowers in their hands,” the e-store owner related.

While many fear a relapse of the crisis, Laurinavicius says he prays for it. “The 2008 crisis saved my business, boosting the electronic sales dramatically. Now they make up around 30 percent of my entire turnover, and I am sure they will keep growing,” the Myliugeles.lt owner said confidently.