Hungary’s market leading e-commerce company is now reinforcing its position by selling new product categories such as furniture. the ﬁrm has accelerated its regional expansion after the engagement of a foreign investor.
As compared to shopping preferences one and a half decades ago when people would buy only well-known standard accessories in online stores, web-based shopping has by now become so common that customers unconsciously add to their virtual basket products that they used to purchase in person. Particularly in case of hard-to-handle goods. Balázs Várkonyi, managing director of Extreme Digital Zrt., who started the business by dealing with second-hand computers in the mid-90s, explained that they have just embarked upon the distribution of dog food and diapers. In fact, these are typically online products: they are heavy or bulky, while most people are inclined to favour well-tried brands.
In late 2015, it came as a major change in the life of the largest Hungarian online store when the South African-based Steinhoff International Group acquired a majority stake of 50.8 percent in the company. ‘They have proved to a liberal-minded partner with no intention to impair our autonomous operations, yet with a strong global presence,’ comments Balázs Várkonyi on the transaction. The partnership with Steinhoff – also owning furniture chain Kika – means a great deal more than the integration of a new segment (i.e. furniture and home accessories) into the product range. They cooperate with Kika in the ﬁeld of marketing, in respect of lease agreements concluded with shopping centres, and they also have the chance to mutually capitalise on free warehouse capacities.
But the partnership offers much more than that: the business is moving up a gear. They have managed to allocate ﬁnancial sources to open showrooms and logistics centres on two signiﬁcant markets, Romania and Croatia, as well as to set up a business in Austria already in 2016. Through their continuous growth, they are already present in ﬁve countries of the region, typically pursuing a mix of ofﬂine and online business models, whereby ofﬂine operation is carried out by conventional stores and showrooms. This is largely due to shopping habits peculiar to the Central Eastern European region: not only are local customers highly sensitive to prices, but they prefer to take personal delivery of products as well as to previously check them to this day. 95 percent of customers visit the stores from online surface (with 13.5 percent using smartphones), but half of all sales takes place by way of personal delivery.
Extreme Digital operates Hungary’s largest web shop. While retail sales in electronics have increased by only 16 percent, at the same time the portal edigital. hu has nailed a growth of 60 percent in this narrow ﬁeld. Domestic e-commerce is expected to grow by another 15-20 percent in 2016, while the market is undergoing a period of concentration as well. According to a study conducted by GKI Digital, the ten most dominant players had a share of 34 percent of all sales, amounting to a total of 92 billion forints. The Hungarian company has a bright outlook also on the domestic market. In the rather brisk regional competition, the partner’s equity investment and business network (in particular the furniture chain Kika) comes in useful to Extreme Digital when aspiring to higher grounds in its already very proﬁtable and impressively growing business, over which the company has retained its complete freedom of management.