Who is the Czech consumer?
Written by: Jason Hovet, Tim Gosling, Monika Mudranincová
Photo by: Vojtěch Vlk
What are the main factors affecting the behavior of today’s consumers? The Prague Tribune spoke to leading retailers about the trends they follow, and asked some typical consumers to describe what’s in their wallet, or to show what’s in their trolley.
MORE MOBILE, more demanding and more experienced are the terms Tomáš Drtina, managing director at the market research firm Incoma, uses to describe today’s consumers. “They’ve gotten used to quality,“ he generalizes, “and as the quality of supply has increased, they are more satisfied.“ According to Gilles Berouard, who has been managing director at Euro RSCG advertising agency for the last 10 years and has witnessed the changes, “the transformations that affected the Czech consumer have happened much more quickly than the decades it took in the west.“
Income has also risen considerably for many, with the average salary doubling since 1998, and this has left extra money for more individualistic purchases. Baťa’s marketing director, Martin Dorotík, believes a shared trait among today’s shoppers is an emphasis on “individualism and the need to create one’s own style.“ This means shopping is now done more often and is seen more as a source of entertainment. On the other hand, in food retail, speed is becoming a bigger attraction, with more people – by a 2-to-1 margin – visiting a supermarket “several times a week“ rather than hypermarkets, which continue to dominate retail sales as a one-stop option for weekly shopping trips.
For grocery shopping, longer working hours are changing the way people go about it, and consumers seem to be split between two choices. The first is consumers keeping the fridge stocked with numerous grocery trips during the week, typically spending less and shopping quickly on the way home from work. Delvita is one retailer starting to recognize the busier customer. At the end of 2003, it introduced a new concept to fit in tight spots in city centers and established neighborhoods. Given the name Delvita City, it focuses on the busy customer who’s on the go. “People in cities tend to live faster and recognize the value of their time,“ says Delvita spokesman Petr Uchytil. “They can’t travel everyday to spend a lot of time in hypermarkets.“ The shops – currently there are three – are smaller and offer a range of higher-quality food items, including prepared food meant to save customers time in the kitchen also. Knowing that freshness is a priority for faster moving professionals, Delvita claims shops receive daily deliveries for fresh goods, with baked items being delivered several times a day. Uchytil says the formula works: sales – 80% of which are food items – have surpassed expectations.
Besides the busy customer, Uchytil also says the City shops are aimed at workers in nearby offices. In other words, bring the store to the people, which is a top demand of all shoppers, according to studies by Incoma. Lately, another major phenomenon has been affecting consumer behavior: discount chains. A good illustration is the recent arrival of Lidl, which has been expanding quickly and has created significant interest, especially among the elderly. “Older people usually shop in smaller shops,“ confirms Drtina of Incoma. His firm’s research shows this also, with discount chains and smaller counter stores being most popular among seniors and families with less spending power.
The second choice is of course the weekly hypermarket trip. Despite Delvita’s success, Incoma has found that the description of a professional – think young, male, high income – actually prefers hypermarkets and discount chains. “They are more time-oriented,“ notes Zdeněk Skála from Incoma. “So they prefer large-scale stores, car shopping and high-volume shopping.“ So the weekly trip to stock up on food saves them time. Younger women with higher incomes also seem to choose bigger stores, but for selection reasons. “These shoppers are more brand-oriented,“ Skála says. “They tend to try new brands, often impulse shopping.“
Younger people, much like everyone else, also tend to prefer shopping centers, a place that’s now the strongest part of the retail formula. However, when The Prague Tribune ran a similar story to this one in 1994, the picture was a little different. For one thing, instead of the weekly mall visit, the preferred shopping method 10 years ago was running to smaller shops during lunch or after work for the day’s goods. In fact, when this original story (Issue #6, April/May 1994) first hit the shelves, Prague was still months away from the opening of the country’s first shopping mall. Today, 50% of those surveyed in Incoma’s annual shopping mall study visit a shopping center at least once weekly (and another quarter every two weeks), with half of those staying 1-2 hours and a quarter up to three hours, and the average visitor will leave there about CZK 1,640. A big attraction for shoppers is that malls are primarily centered around hypermarkets, which are visited by 70% of mall-goers and is where the majority of money is spent, according to Incoma.
While it’s not black and white, Drtina says, the young tend to shop at malls, but not just for hypermarkets. According to Incoma, one in five shoppers – particularly younger people and households with higher incomes – visit specifically for the specialty shops there. Baťa’s Dorotík says retailers not looking at malls are losing customers. “This is the most significant player in the segment of shoes and accessories,“ he says, pointing also to Baťa’s experience abroad as evidence. Besides this segment, new retailers on the market in cosmetics (like Sephora) and clothing (like H&M) have set up shop in malls and have become prime destinations for younger women with extra money to spend, and who visit often.
For David Pažitka, director of La Halle chain, the shopping center’s rising popularity is a sign of one thing. “Czech shoppers are more orientated to quality,“ he says. Across the mall, C&A’s Aleš Drabek sees the same thing, saying it’s forcing retailers to continuously update their collections. “Consumers are now more familiarized with fashion trends,“ he says. Drabek believes there’s very little difference between the new Czech consumer and those further west, and to him, that also means Czech shoppers know the attraction of a good deal: meaning competitive prices and frequent sales.
Berouard, of Euro RSCG, sees competitive prices as the third stage of a consumer evolution that has gone from ideological (shopping as a freedom) to societal (consuming because one can) to the now economical stage: comparing prices. This is causing a tight situation for retailers, where consumer prices rise only minimally. Consumers watching prices now, Berouard says, is different than maybe 10 years ago when price “created a gap between what shoppers wanted and what they could afford.“
Most consumers now can afford the brands they want. Despite a rise in counterfeiting, brand names in clothing play an important role, and Factum Invenio, another market research company, found in a 2003 survey that 68% of people take a brand name to mean quality – particularly in electronics. According to Factum, about 54% of consumers prefer brand named goods in this area; by comparison, the majority of shoppers buying food choose unbranded goods, where price is key. Electronics shoppers are also going more often to specialized shops like Datart and Electroworld, where they feel they get better advice. For Datart customers “price isn’t always an issue,“ says general director Pavel Sláma. “They will choose products more due to design or size.“ Still, with increased competition in electronics, Factum also finds the influence of price has grown in the last five years, whereas the issue of quality hasn’t. On the flipside, Incoma has found that at supermarkets price is starting to play a less important role for items like juice, beer, wine or snacks.
Whatever someone is buying, the chances of them using a credit card is an increasing likelihood. In 1999, according to the Bank Card Association (Sdružení pro bankovní karty) the number of bank credit cards numbered around 6,500; today it’s estimated to be around 400,000. MasterCard’s general director in the Czech and Slovak republics, Jan Čarný, says most MasterCard holders (90%) use their card while shopping in hyper- or supermarkets and about half use it for other transactions like gas, shoes, or furniture – with average payments of CZK 2,300.
While every second Czech carries a credit card, Čarný believes the market is far from developed. For example, Euro-monitor reports that 84% of retail transactions are still in cash. Čarný also sees credit cards’ potential in another area that might save shoppers more time. “Payments on the internet will see the biggest development,“ Čarný foresees, pointing to im-proved safety features for secure transactions as a new attraction for online shopping, which is still used minimally. Shopping online for electronics and white goods seems to be most developed, but it’s still not enough. “The popularity is still not there,“ comments Sláma, from Datart, which has been looking at starting online services but doesn’t believe the time is right. Drtina, from Incoma market research, shares this opinion. While it still gets a lot of attention in the media, he says, “it’s not as big as it seems.“ Nonetheless, to put it in perspective: a pre-Christmas Factum poll predicted less than 2% of gifts would be bought online.
Retiree, age 79, widow, pension: CZK 8,234
All her life Ester Mudranincová had several jobs so she and her husband could raise a family. She sold tickets on trams, cleaned at the Parkhotel, and washed shirts for the legendary director Otakar Vávra and Senate chairman Petr Pithart. Nine years ago her husband died, so she had to economize. “I don’t need much, I didn’t buy anything for myself in twenty years, just some boots last year,“ says this grandmother of seven without a trace of regret. She spends almost all of her pension on groceries. Every week she bakes cookies and she likes making preserves, so she’s always glad when sugar or flour are on sale. She likes a full pantry: “I have to know that I have everything at home that I need for cooking.“ A few years ago, when her health was better, she spent a lot of time shopping – she used to go to the Holešovice market for fresh fruits and vegetables.
Saleswoman, age 33, divorced, two children (14 and 7), net monthly income: CZK 8,000
“I mostly go by price when I shop. The cheaper, the better,“ says Jana Chlapcová, a saleswoman and operator at an Albert supermarket in Holešovice. Every month this former seamstress and company cafeteria worker dreads the day when bills fill her mailbox, so she keeps her purchases to a minimum. “I have to buy food, but I don’t care if it’s imported or Czech, and discounts or brands don’t matter. I usually buy what I can find, mainly if it isn’t too expensive.“ She takes care of minor purchases daily near where she lives, while larger purchases are seen to by a friend who occasionally helps the family financially, at hypermarkets. She admits sometimes succumbing to advertisements and trying out a new cream or shampoo, but she doesn’t limit herself to well-known brands – she likes to alternate products.
Businesswoman, newsstand owner, age 52,
From her monthly shop sales Ljuba Hájková finances the costs of operating her newsstand business, such as purchasing goods and leasing a car. She can use only what remains for her personal consumption. The family invests in life insurance to save regularly. A lot of money goes into maintaining a cottage in northern Bohemia. He husband contributes a lot to the family’s expenses.
Banker, age 61, 2 adult children, net monthly income: CZK 80,000 (approx.)
Describing himself as a “conservative consumer“, Professor Kamil Janáček says that his family’s spending habits haven’t changed that much over the years. This may come as little surprise – as Chief Economist with Komerční banka, Janáček earns his monthly net income of around CZK 80,000 by analysing how money is earned and spent.