Chinese markets focus on mobile consumers. The game is not fair, wrote Czech e-shop – Seznam Zprávy

“We want everyone who does business here to do business according to Czech and European laws, and we don’t care where they are from,” said the president. Electronic Commerce Association Jan Vetyška.

Recently, the association has been actively fighting for strict compliance with Czech laws, which they believe are being broken by some market players. They therefore contacted the Czech Trade Audit, ministries, the General Directorate of Finance or directly to representatives of the government and the Parliament of the Czech Republic.

Vetyška is careful not to point the finger at anyone in particular, but she noted that most rules are broken by global markets originating from China. He is one of the most active Chinese players in the Czech Republic Since a That’s all offers very cheap products. AliExpress is also active here.

She also welcomed the activity Jitka Dvořákovávice president CZC.cz and deputy director Mall Group in Slovenia and Croatia, which carefully drew attention to the problems on LinkedIn.

“In the spring, the increase in traffic costs was already very noticeable, and it would be quite right, because there is always someone who has a ‘rich mother’ and the resources for our online lunch. orange paint, for example. But it is not right – and please, in any business – if the avoidance of legal obligations increases these resources,” she said.

According to Vetyška, mostly foreign markets and sellers ignore the rules followed by local companies and “a situation has arisen where our market is distorted”.

It indicated the correct information in purchase contracts, information on consumer rights, payment of VAT and customs duties, payment of fees for the disposal of packages and electronics, provision of information on the composition of products or instructions therein the Czech as problematic points.

From his point of view, it is also difficult to get information about discounts. “Czech e-shops comply with the new rules and list the lowest prices for the last 30 days, but many other groups avoid this or bend this,” he said. According to him, it is also absurd when some organizations deliver millions of packages to the Czech Republic and at the same time, customers or Czech companies pay for the waste that comes from them.

About a year after several markets entered the Czech Republic, e-shops ordered more self-protection. The Kaufland marketplace was launched in January last year, and Allegro from Poland joined in May. And parcels from China flood the market of Chinese platforms AliExpress, Temu and Shein.

The competitive struggle has increased and it is clear to domestic e-shops that they need a fair environment if they are to succeed. On the other hand, it would be premature to talk about the success of the markets.

According to a study by the Boston Consulting Group (BCG), Chinese platforms Temu, AliExpress and Shein are successfully targeting mobile users and investing resources in developing mobile applications through which they trying to get long-term customers. This is what they are trying to do even at the cost of an initial loss.

For example, the mentioned Temu, according to the analysis, has 141 thousand active users of the mobile application per month, and Alsa.cz 217 miles. The leader of the Czechs has already passed the market Shein and AliExpress.

Temu is known for entering world markets very aggressively, he is afraid of competition, but also security in the US, where he is the main opponent of the American Amazon. Last year, it became the most downloaded app in the United States.

Amazon is preparing a revenge move in the US, which it wants to meet the demand for really cheap products. This will be a new section of the website with direct sales of goods from merchants from China. On the political level, there is talk of changing the duty free policy for smaller loads.

In 2023, despite a large investment in advertising, Temu’s profit was growing, and CEO Lei Chen talked about being ready for short-term sacrifices and a drop in profit. In August this year, PDD’s parent company, which also runs the shopping app Pinduoduo (Temu), reported slower quarterly growth than the market expected. The company said that high competition is putting pressure on income, however, it has a strong determination to conquer the global markets and will continue to invest heavily.

So far, it looks like Temu’s business, where customers buy products very cheaply, is losing a lot. According to an expert estimate with the Boston Consulting Group, it works with a net loss margin of around -27 percent. It is an estimate based on global results and the development of the market environment.

According to the BCG analyst, it can be in the Czech Republic David Antoš the situation of the markets is more complex, because the local market is unique. The leading player is the local player Alza.cz, which has “only” 12 percent of the e-commerce market share. In Poland, Allegro rules (39%), in Germany, Amazon (33%). The American giant is also a leader in Spain, Italy, Great Britain, France and Austria.

But Czech consumers are used to buying different products in different places in the online environment. Alza.cz dominates in one sector only – in consumer electronics, which customers look for first on Alza.cz.

But Zalando, in medicine, is for consumers the first stop for fashion shopping Dr. Maxin cosmetics Noticein garden supplies OBIin domestic consumption Datain Knihy Dobrovský books, in supplies for Super Zoo pets, in furniture IKEAin sporting goods DecathlonMall.cz is a leader in the toy and car and motorcycle sector.

The fragmentation of the Czech internet market, on the one hand, is an opportunity for foreign markets. They want to be a large department store where Czechs go for everything. “This is exactly what they need for their business model to work economically, but Czechs are not used to buying everything in one place. This is a new experience for them,” Antoš thinks.

In Germany, Poland and other countries, it is common for customers to find most product categories on Amazon or Allegra.

In any case, it is too early to assess the success of market centers on the domestic market. Only this year is the Czech online scene picking up after two years of decline.

According to marketing expert and operator of the advertising agency RobertNemec.com Roberta Le Veneura is the perception that some markets are failing, distorted by the fact that large foreign platforms use different metrics to measure advertising spend.

While most Czech companies strictly determine the cost of advertising as a percentage of turnover (PNO), while measuring efficiency with a quick payback, foreign markets ( as well as other companies) follow the CLV (customer lifetime value) metric and it is authoritative for them what value the customer will bring in the long term, in five, ten and fifteen years.

This is also why foreign markets are so prominent in the Czech Republic. Their foreign parent companies have capital and are responsible for investing it in acquiring loyal customers. In the short term it is a loss, in the long term it can pay off for them.

The problem is that Czech e-shops are often small enough to use the CLV model, which requires much larger “sacrifices” in the company’s budget. Capital-strong Alza.cz, for example, ran on this Western model.

“Most companies don’t have the money for that. Many small e-shops deal with advertising costs on a monthly basis,” says Le Veneur.

There are a large number of e-shops in the Czech Republic. Last year, there were 49,900 of them, leaving the Czech Republic first in the density of online shopping per population. According to Veneur, small e-shops should join forces to face strong capital players.