Polish On-line Consumers: Promising Growing Market

UNCLAS SECTION 01 OF 02 WARSAW 001117

SIPDIS

SIPDIS

DEPARTMENT FOR EUR/NCE, EUR/ERA, EEB/CIP
EUR/NCE FOR DKOSTELANCIK, BPUTNEY
USDOC FOR 4232/ITA/MAC/EUR/JBURGESS, JKIMBALL, MWILSON
TREASURY FOR MGAERTNER

E.O. 12958: N/A
TAGS: ECPS ECON EINT EINV PL
SUBJECT: Polish On-line Consumers: Promising Growing Market

REF: Warsaw 00735

WARSAW 00001117 001.2 OF 002


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Summary
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1. With high speed internet access becoming ever more common in
Poland, the proportion of those with access making purchases
increasing, and buyers overwhelmingly reporting positive online
experiences, it comes as no surprise that the Polish consumer online
market is doing well. U.S. companies should find plenty of
opportunity in this segment of the e-commerce market as it matures
and is able to support increasing numbers of niche market players.
End Summary.

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SETTING THE STAGE
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2. As mentioned ref, by the end of 2006, 37% of Poles had access to
an internet connection. Of those with internet access, almost 25%
made a purchase online, an increase from 17% in 2005. Meanwhile,
Polish salaries grew 4.8% in 2006 and unemployment dropped 2.7% from
17.6% to 14.9% - providing an increase in disposable income that
should further improve online market prospects. Buyers purchased 4
billion zloty ($1.4 billion) worth of goods and services in 2006,
supporting more than 800 internet stores and representing 2% of the
retail market. Online purchases should see continued robust growth
over the next few years, with estimates reaching 16 billion zloty
($5.4 billion) - or 5% of the retail market - by 2010.

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SHOW ME THE GOODS
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3. Polish consumers can now buy almost anything online. A review
of newspaper articles and online research indicates that the most
popular categories are books, with 14.2% of online consumers
indicating they made such a purchase; followed by clothing, 12.4%;
cell phones and accessories, 9.0%; computer equipment and
accessories, 8.9%; radios/televisions 8.7%; music, 7.8%; and
cosmetics, 7.8%. In those categories, popular items included
children's books, cell phones, laptop computers, computer and
console games, GPS equipment, DVD movies, MP3 music and players, and
perfume. Other purchases included digital cameras and flat screen
LCD televisions. Some interesting items in other categories
included furnishings and appliances, such as fridges, washers,
sinks, and fittings, which are common purchases in Poland because
new houses and apartments typically are purchased unfinished. When
it comes to other interests, purchases include air guns and
automotive tires.


4. Given the above, the most common items sold online appear to be
those favored by the segment of Polish society that is mobile,
urban, and independent. However, an interesting finding about
Polish online purchasing habits is that some well known brand names
are not as popular online as they are in brick and mortar stores.
Amongst electronics, Apple's IPod accounts for only 3% of the MP3
players purchased; among fridges, Indesit and Siemens brands are not
widely purchased; nor are LG, AEG, and Miele washers,or Firestone
and Bridgestone tires.


5. The fact that some well known brands are not leaders in the
online marketplace suggests two explanations: first, some companies
less well known in the overall market have been able to quickly and
successfully establish a popular online brand; and second, Polish
consumers still strongly consider pricing when making purchasing
decisions. For example, in Apple's case, IPod's brand awareness and
"cool factor" is not enough for Poles to accept IPod's relatively
high pricing over other lower cost brands.

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WHERE THE MARKET IS HEADED
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6. As the online market grows, existing online companies are
broadening their offerings - for example, a spokesperson for leading
online store Merlin.pl, with more than 60 million zloty ($20.3
million) in sales, explained that the firm is diversifying from
books to music, toys, and electronics. In addition, new players
have appeared over the last year, specializing in the various niches
that a larger market can support. These players include hoopla.pl,
specializing in appliances; komputronik.pl, computers and software;
travelplanet.pl, travel and tour services; and gadugadu.pl, a voice
over internet telephony service.

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7. As the number of players in the market increase, comparison
sites that allow consumers to perform side-by-side comparisons of
products offered by different sellers are becoming increasingly
popular. The comparison leader is ceneo.pl, which has one sixth of
the monthly visitor traffic (344,000 visitors) of market leader
Merlin.pl. Other popular comparison sites include skapiec.pl
(235,000) and kupujemy.pl (147,000).


8. While almost everything can now be purchased online, there are
still some market niches that are not developing quickly. A
leading newspaper reporter on technology matters gave us one example
- internet grocery delivery services. While this service is
available in Warsaw, outside of the capital the lack of sufficient
logistical and transportation networks makes it difficult to
establish reliable delivery services of fresh produce. The Polish
public also remains reluctant to accept these services where they do
exist due to concerns about leaving groceries unattended on front
doorsteps.

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PLUSES AND MINUSES
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9. Consumers appear to be largely satisfied with Polish e-commerce
firms, with surveys of online customers reporting that 82% had
positive online purchase experiences. According to internet
research and comparison firm Ceneo.pl, among those reporting
positive experiences the most important factors cited were: ease of
ordering, mentioned by 57% of respondents; site design and
professionalism, 34%; low prices, 25%, and customer service, 17%.
When it came to delivery, consumers indicated that online stores
should deliver goods within 3 days of placing the order.


10. Among the 18% reporting neutral or negative experiences, 72%
mentioned the length of time it took to deliver the order; 23%, the
fact that the goods appeared to be available online but were out of
stock upon ordering; and 20%, poor or unavailable customer service.

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Comment
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11. The Polish online consumer market appears to have reached a
critical mass in terms of consumer demand, number of players, and
public acceptance over the past two years, and is definitely here to
stay. Post believes the Polish online consumer market will continue
to grow over the next few years and become increasingly more
diversified as the market becomes large enough to support niche
players. There are still some areas where the market has been less
successful, with companies having varying levels of success
translating a popular brand to a successful online presence.
However, there continues to be opportunities for U.S. companies and
products as the market matures.

ASHE