By Vicki Matranga, Design Programs Coordinator
Wednesday, June 18, 2014
Eva Krejčová has worked in the trade business since 1991, after she completed her study of economics at Russia’s St. Petersburg State University.As import/export manager at UTC, Ms. Krejčová procures products locally and sells products into the Central and Eastern European region. UTC is the parent company of ACTION, the Czech retail chain. ACTION has 23 stores with more than 4000 SKUs of home and housewares products. UTC reaches Estonia, Latvia, Serbia, Slovakia and Kazakhstan through four subsidiaries, supplied through a central warehouse in Prague. In more than 22 years of operation, UTC has introduced many key housewares brands to the Czech market.
Geography and Demographics
Czech Republic population = 10.6 million. Prague has 1.2 million residents.
Brno, Ostrava are cities with more than 300,000 citizens; Plzen, Olomouc have populations greater than 100,000 citizens.
Land Use: Nearly 70% of the territory is used for agriculture, forests, rivers and lakes. The eastern region produces excellent quality white and red wines. Families continue national customs for growing vegetables and fruits in their home gardens.
USD $1,200 average income/month. Unemployment varies per region and averages close to 8%.
Aging population; average age = 41
20-30% of monthly income spent for housing and utilities
19% spent on food and non-alcoholic beverages
High savings rate
Few bank and religious holidays (10 days) with little impact on sales. Shops stay open to 9 or 10 pm seven days/wk. Stores are closed for only two days –Christmas Eve and January 1.
“Cucumber season” = May through August. Poor sales season as people spend time in forests collecting berries and mushrooms and harvesting their gardens. Sales pick up in September heading into Christmas.
Retail Market Segments and Issues
Supermarkets 42%: 680 supermarkets owned by Ahold, Rewe-Billa and Tesco
Discounters 39%: 640 discounter stores – 4 disount chains: Penny Market, Lidl, Norma and Coop
Hyper markets 19%: 300 Hyper stores, 5 hyper chains – Tesco, Kaufland, Albert and Interspar; Globus was the first hypermarket in 1996
4,900 villages with fewer than 1,000 inhabitants have small shops
In towns of 30-50,000 inhabitants, 45% of consumers go to hyperstores, stores are 3,000 sq. meter size
1.8 million people control 57% of market.
First department store, Bila Labut, opened in 1939 on Prague‘s main street. It continues to occupy the unique building with a distinctive glass entrance.
In 1975 the state-run Maj store was purchased by Kmart in 1992; owned by MY Tesco since 2009.
In 1998 IKEA built the first shopping mall at edge of Prague. It is accessible by free shuttle from nearest Metro stop. Popular for families to spend whole day at the cinema and restaurants.
VAT 21% tax
Products must be verified and comply with regulations. Recommend D-TEST agency that independently tests products and offers free legal services in trials for subscribers. Sellers are obligated to provide a two year warranty for hidden defects.
Biggest problem in retail: 18-35% bonuses that buyers demand from suppliers to stock the product.
After the Soviet system collapsed, Czech citizens did not have the capital to build their own stores and foreign investors established the chains. Now Czech entrepreneurs are trying to take on the opportunity to purchase stores operated by chains that are departing because they were unable to fulfill their management expectations.
It’s important to know the language to understand the heart and soul of the Czech consumer.
Czechs are very price senstive and lower priced private label products are popular. Most stores offer loyalty programs.
Credit cards are not popular for online purchases because of security fears. Consumers prefer online payments with cash on delivery or personal pickup at distribution points. Brick and mortar stores operate their own internet shopping sites. Consumers are ready to pay for quality products, becausethey think, “I‘m not so rich that I can buy cheap products; I’ll spend for quality and value to buy long lasting, durable products.“
Consumers sell their own products on Internet auctions on sites similar to ebay.
Marketing Information Sources
TENDENCE – Holešovice Prague exhibition September 11- 14, 2014
Zboží@prodej – household magazine specialized for goods and sales
Since 1991 UTC offers products for kitchen, garden and home. 5000 SKUs are often refreshed. We must offer novelty, as best-selling items are often copied by competitors for private label products. We must be ready for that so suppliers should not expect us to keep items a long time in our assortment.
Domestically we operate 25 shops; two new ACTION shops opened last month. Four subsidiaries conduct operations in other countries.
UTC has 80 employees, 12,000 sq. meter warehouse; we own domestic transport and have reliable external transport partners.
We have well developed logistics. Our office in China controls quality and keeps an eye on logistics, can bring us goods from any part of the world.