Chinese Temu Transforms E-commerce, with over a Million Hungarian Customers

The steady decline in purchasing power over the past two years and the rise of Chinese e-commerce have meant that there is still no sign of a recovery in Hungarian e-commerce. It is therefore no wonder that in this market environment, competition for online shoppers is becoming increasingly difficult for domestic businesses, writes Index.

According to a recent GKID-Mastercard Digital Commerce Survey, the number of online orders served by online shops in the Hungarian e-commerce market

grew by just under 7% last year to more than 83 million orders, with a total value of around HUF 1,474 billion (EUR 3.7 billion).

The share of e-commerce in total trade closed last year at 9.8%.

With this performance, the growth in online retail sales is only 8.5% higher than the base year 2022. Moreover, the spectacular loss of momentum that started after the hyper-growth of the COVID years continued in the first three months of 2024, with sales growing by only a further 6.1% on a year-on-year basis.

The e-commerce market is a key pillar of the digital economy, but in the current fast-changing, unpredictable times, the growth of the online sector is no longer a given, said Gergely Márkus, Director of Mastercard Hungary and Slovenia.

Norbert Madar, a consultant at the GKID’s research consultancy, noted that the market-shaping effect of Chinese retailers is most striking in the number of orders: although the number of online orders served by domestic retailers increased by only 7% in 2023, Hungarian customers actually ordered much more, just not from domestic or EU Hungarian retailers.

According to GKID data,

the total volume of e-commerce orders generated by Hungarian shoppers (domestic and international) increased by more than 32%, and last year exceeded 102 million units.

The firm also looked at the mood of domestic online retailers. The e-retailers surveyed in the framework of the research identified the biggest concern, apart from the loss of purchasing power and demand, as

• the rise in advertising costs (61%)
• followed by the continued rise in retail prices (45%)
• and the increasing role of foreign, Chinese retailers (43%).

Moreover, the Chinese takeover is expected to be accompanied by a further decline in demand and an increase in advertising costs.

According to Szabolcs Timár, senior analyst and partner at GKID, all e-commerce segments except the online FMCG (fast-moving consumer goods) sector are already feeling the traffic and shopper drain from Chinese online stores, but the fashion, toys, and home furnishings categories are the most negatively affected.

The research also focuses on the Temu phenomenon. The Chinese merchant launched in Hungary barely eight months ago in September 2023, and within weeks it had devastated the Hungarian e-commerce market with its advertisements and its range of products covering almost all product categories.

Temu’s Hungarian customer base exceeded 1.28 million in April 2024, with more than 1.5 million orders sent to Hungarian customers in the first three months of 2024.

Taking just three months into account, the total value of these is nearly HUF 22.5 billion (EUR 57.7 billion), which is 7% of the total online spending in this one online store. What is even more significant is that Temu was able to increase its online customer base from last year’s 3.9 million, which was growing very slowly, by around 200-250,000 active customers thanks to very intensive promotions and introductory offers.

While the traffic generated by Temu is noticeably missing from the revenues of Hungarian retailers, the rise of Temu and other global online retailers is also having a drastic impact on shopping habits: these online stores are initially driving customers to their mobile apps with exclusive offers and personalized deals. As a result, these apps are leading the download statistics in Hungary and globally as well.

Via Index; Featured image via Pexels