To better understand the local and international implications of this phenomenon, we consulted with e-commerce expert Norbert Madar, senior advisor and partner at GKID. He shared insights from GKID's representative study conducted among 3000 online shoppers between January 15-17, 2024.

Amazon's Long Anticipated Dominance Over the Hungarian Market Never Materialized

The study revealed that:

* For nearly a decade, there was a looming risk of Amazon entering the Hungarian online retail market and "sweeping the floor" with competitors.
* As years passed without Amazon's entry, foreign-backed merchants and marketplaces on the Hungarian market successfully captured growth opportunities during favorable economic conditions, building brands and customer bases.
* Over the years, the number of consumers purchasing from abroad steadily increased. In 2020, 62% of online shoppers had made international purchases, yet this trend did not significantly siphon sales from domestic online retailers, with most considering AliExpress little competition.

However, several factors stalled the growth of international purchasing in 2020:

* Delivery problems during the pandemic.
* A shift in EU custom regulations, which temporarily dampened shoppers' enthusiasm and reduced orders from abroad.

Nevertheless, this lull proved to be temporary. As new, faster, and higher-quality shipping infrastructures emerged and Covid-related issues subsided, the base of international online shoppers began to rise again from 2022.

Shein Marks the Start of a New Era

GKID observed that from 2022, the Chinese fashion retailer Shein significantly contributed to the conquest of international merchants with its vast selection of products, appealing prices, and rapid shipping, all amplified by a strong marketing campaign targeting the more active online shopping segment women.

During the latter half of last year, as high inflation and surging utility costs prompted consumers to rethink and cut back on spending, they also started looking for cheaper purchasing sources. By last fall, 41% of international customers had made purchases abroad, and it was anticipated that the transformation in shopping habits would drive a resurgence in traffic to foreign online stores. Within just a year, Shein had become the second most popular foreign web store among Hungarian consumers, securing a 25.6% customer base right behind AliExpress, and surpassing eBay, Wish, and even Amazon. Yet at this point, few were aware that Temu, another Chinese online store, was entering the Hungarian market with a customer base that reached just 0.5% among international shoppers in September 2023.

Temu: The Conquering Newcomer

By autumn and winter, unprecedented developments unfolded. With a compelling marketing campaign, Temu's Hungarian-language, HUF-priced web store not only dominated the foreign store market but also significantly impacted local web stores' revenue.

Within just four months, Temu became the foreign store with the largest customer base by January 2024: 29% of international shoppers from Hungary had purchased from Temu in the last quarter of 2023, representing nearly 9% of the entire 3.9 million domestic online shopping base. For comparison, only eMAG had a higher domestic market share at 20%, making Temu not only the top foreign, but also the second-largest overall online merchant in Hungary in the last quarter of 2023 – all within the initial three months of entry.

During this quarter, Temu customers averaged 2.2 purchases each, roughly equivalent to that of other large international online stores during the same period. Seventy percent of Temu’s customer base ordered one or two times, an indicator that the platform is still in its "introductory" phase. Norbert Madar to Index emphasized:

"In the times of AliExpress, eBay, and Wish, the main motivation for international orders was price. One might think that hasn't changed in the Shein and Temu dominated market since, especially with Temu's stand-out offering in affordable gadgets. However, the larger selection, availability of otherwise inaccessible product ranges or brands, and improved delivery times have become just as important to consumers."

According to Madar, these factors together led to consumers not caring whether they are ordering from domestic or foreign stores anymore. The lack of language barriers and faster shipping have made these Chinese stores as relevant as domestic web shops. Indeed, in the last three months of 2023, Temu shoppers' total spending reached 18,000 HUF, closely aligned with the order values of other foreign players (except for those specializing in electronics). This spending is clearly missing from the cash registers of domestic e-commerce players too, and has significantly contributed to many Hungarian retailers not performing as expected in the 2023 season.

Customers who tried Temu were highly satisfied; on a 5-point scale, Temu scored a 4.3, while Shein scored a 4.6, comparable to the ratings of Hungarian retailers. GKID's leading advisor highlighted that these Chinese web stores have successfully reached a broad spectrum of consumers. Those who have tried them are satisfied, likely to return, and apt to share their experiences – from now on, all merchants must consider these stores as serious competition, seeing as they've become indispensable in the Hungarian market within mere months of their arrival. Furthermore, while foreign shopping used to be the privilege of an educated group who spoke foreign languages, today, with the rise of Shein and especially Temu, there are no demographic differences in their reach.