E-Commerce is an important part of the IT industry in the Czech Republic. The sector experienced growth of 5.2 percent during the past year, and this trend is expected to continue. In comparison with domestic information technology investments and GDP, the Czech Republic averages the same rates of growth as Western Europe. The market is very competitive, with high standards U.S., European, Asian, and increasingly, Czech firms. Strong competition and low Czech purchasing power means that companies must keep prices low to win business. Lower exchange rate can make U.S. companies more competitive than their European counterparts. The Czech Republic’s EU accession gives the Europeans slight edge in tariff rates. U.S. companies with niche products and services will continue to find good opportunities, and few market barriers. The best market entry strategy continues to be working with a local partner, either an agent or OEM. Selling to Czech government is possible, even though it takes a long time for the process to be completed.
The Czech Regulatory Authority of Telecommunications and Broadcasting is the regulating authority in this country. It follows EU directive: http://ec.europa.eu/internal_market/e-commerce/indewx_en.htm, Most products, computers, printers, scanners, electronic signatures products and multimedia applications are imported. The major global players present on the Czech market include U.S., German, Japanese and South Korean firms. U.S. products are highly thought of, and are popular.
There are no trade barriers concerning import of hardware or software to the Czech Republic. As a member of the EU, the ‘Weee/RoHs’ compliance legislation may have impact on US sales. From August 2005, companies selling a broad range of electrical goods in the European Union must conform to WEEE – the Waste Electrical and Electronic Equipment, and as of July 2006, those same companies must also conform to RoHS (restriction of Use of certain Hazardous Substances Directive). Only one specific requirement needs to be met. Non EU countries are required to comply with the CE Mark –‘Conformite Europeene’. Conformite Europeene is a stamp confirming (after completing the required tests) non-European products conform to the required EU standard.
Market Overview (e-commerce)
The development of e-business is strongly effected by access to the web, telecommunication tariffs and the legal environment. Access to the Internet is well developed in the Czech Republic, and competition is strong. The e-Commerce sector has developed rapidly over the last few years. Lower prices and new sales strategies for PCs, especially installment payment plans for computers with Internet access, have led to a large increase in the number of home PCs. The need to ‘keep in touch’ through e-mail, instant messaging, etc., also plays a major role in increasing demand. The Czech government supports a ‘Computer Literacy’ strategy.
The vast majority of Czech companies, 97 percent, have access to the Internet. During the 2009, the number of households having Internet surpassed 54 percent, 44 percent households use Broadband. The growth is rapid, compared to 2008, when only two fifths of households reported having Internet.
The following three factors are influencing the growth of e-commerce: high speed and high quality access to the Internet, a good legal environment, and well developed payment and goods delivery system. The major clients are corporate business, multi-national companies, banks and increasingly, sport and wellness spas. The public sector includes mainly ministries, transportation and state owned companies dealing with development and education.
The most important e-business market segments are B2B (Business to Business) and B2C (Business to Customer). Implementing B2B strategy enables a company to become part of the ‘new economy’; the whole transaction is processed electronically.
While most Czech consumers still do not regularly shop online, interest in e-commerce is growing and in increasing numbers of Czechs are surfing and buying on the Web. During 2009, e-commerce in the Czech Republic grew by more than 13 percent, reaching almost USD478.8 million in B2C sales and USD427.6 million for B2B. According to the periodical ‘Czech Ekonom’, the number of Internet users with e-shopping experience currently exceeds 3, 138,952 and rose steadily during the 2009.The younger generation has much higher exposure to e-commerce, due to their computer literacy and penchant for on-line banking and shopping.
Another important trend having a positive effect on e-business in the Czech Republic is the strong growth of electronic banking. The growth is supported by a number of factors. Credit card use is rising, and lower telecommunication tariffs have prompted more Czech consumers to get online. Ceska Sporitelna, a major Czech bank, was the first banking house to introduce secure e-commerce transactions online to retailers. Now, all the major banks provide secure e-commerce transactions.
E-Commerce in the Czech Republic comes under the jurisdiction of the Ministry of Interior. Further information can be found at: http://www.mvcr.cz). The purpose of the E-Government Act is to create optimal conditions for electronic communications, both, between the citizens and the authorities, and also among the public authorities themselves. Communication inside each public authority will be solely electronic. As a result, only documents, not people themselves will be circulating amongst the authorities. Measures are being taken to make written documentation and electronic - forms of documents officially equal. Authorized conversions of written documents into their electronic form and vice versa has taken place. These tasks are performed by notaries and regional and local authorities using electronic signature. This process saves time and money, and no further amendments to the existing electronic communications law are required.
Better protection of personally identifiable information (PII), date of births, social security numbers, tax returns, business registry etc., will be achieved through e-Identity. Electronic identity offers the opportunity of markedly upgrading the protection of citizen’s privacy and personal data during their contact with the authorities. Clerks are no longer entitled to look into agendas and data not directly connected with the performance of the activities they are empowered to discharge. This process will enhance the overall transparency of administrative decision–making, reducing the possibility of abusing the data. Each citizen will be required to fill out a form only once. The Czech Republic’s list of birth certificate numbers will be exhausted by 2053. Consequently, a special identifier is being prepared. This will be quite unique and its source will be inexhaustible. Furthermore, this newly conceived electronic identity will be made secure and cannot be tampered with. Authorities will be under citizen’s permanent control, and everyone will be able to check how well is the official business being handled. Electronic data boxes will be set up not only for the individual authorities, but also for companies where authorities will send their decisions and notices. Each citizen will also be able to set up a safe e-mail box, and will no longer have to go to the Post Office to collect official letters from authorities.
Best prospects include:
Software system solutions
Electronic signature products
E- government products
Multimedia applications / training, entertainment
Complex IT solutions supporting the Internet
Application service providing
Digital signal processing
Safety & Security equipment
Data service equipment
Germany is the Czech Republic’s largest trading partner, followed closely by Netherlands. United States, as the fifth largest trading partner has a strong position, and U.S. products are sought after. As the market is small, American companies are very competitive in this sector.
Operators of public networks
Private businesses, corporations
Large production companies
The Czech Republic, as a member of EU since 2004, harmonized its customs and market access conditions with EU. CR has adopted a tariff code with an average IT rate 4,6 percent. Czech Republic adheres to WTO rules on custom’s valuation, therefore, applies the same rules as used by U.S. customs for imports into the United States. The Czech Republic adheres to many international agreements, addressing protection of intellectual property rights. According to the Czech Ministry of Interior, the Czech Republic has one of the lowest software piracies in Europe. 3 years ago, the Ministry formed a specialized Police department dealing with copyright piracy.
Industrial applications are governed by quality norms, e.g. ISO 9000.ISO (International Organization for Standardization) is the world’s largest developer and publisher of International Standards. ISO is a network of national standards (institutes) of 157 countries, one member per country, with a Central Secretariat in Geneva, Switzerland. The Secretariat coordinates the system. ISO is a non-governmental organization that forms a bridge between the public and private sectors. Some members are part of the governmental structure, or are mandated by their countries. Other members represent private sector, recommended by national partnership of industry associations. Although the norms are not laws, they are considered as standards for application in foreign markets.
The Czech Republic is geographically small, with a 10.33 population and most decision makers concentrated in the capital city of Prague. The country has a well developed, European style distribution system and a strong network of professional sales agents and distributors. It is a market where good personal relationships are crucial, and everyone seems to know everyone else. U.S. firms should concentrate first on building a close network of contacts and relationships; this requires face-to-face meetings with the goal of finding and supporting a Czech partner, agent, or distributor. A distributor with existing distribution system and good network can offer coverage of the entire country. In general, agents or distributors will expect exclusivity.
Upgrading the Czech Republic's infrastructure, specifically telecommunications
and transportation, is important for continued economic growth and development.
Although recognized as a priority, the massive nature of these projects will
require time and capital. Resources to finance the country's extensive
development plans for the telecommunications industry include foreign direct
investment as well as major loans provided by the European Bank for
Reconstruction and Development (EBRD), European Investment Bank and large local
and foreign banks. The Dutch-Swiss consortium Telsource holds a 34.5 percent
stake of the Czech telecommunications leader, Cesky Telecom, which is upgrading
and expanding the telephone system. Cesky Telecom's last remaining monopoly,
over fixed lines, ended in July 2002 with the introduction of carrier choice by
dialing a prefix. Cellular phone market penetration is also growing rapidly,
with over 8.5 million cellular phone users recorded in December 2002.
The infrastructure for e-commerce is slowly improving. There are currently 19
internet service providers, which cover a majority of the Czech Republic.
Statistics on homes with internet access vary widely, ranging from five to
fifteen percent of the population, but all concur the availability of internet
connections through a variety of options is on the rise. The legal
infrastructure to support e-commerce, as well as the development of internet
banking, will help improve the prospects for e-commerce.
While Internet sales represent a small fraction of the Czech market, they are
increasing rapidly, reaching $90 million in 2002. Business-to-business sites,
virtually unknown as recently as three years ago, are experiencing geometric
growth and are becoming increasingly important and trusted. While most U.S.
firms should not place full reliance on web-marketing strategies, web-sites may
supplement traditional marketing efforts.
Total local production
Total imports from the U.S.
E-commerce in the Czech Republic continues to grow. Potential for U.S. exports
is strong in both services and equipment. Investment opportunities are also good
in business to business investment that represents over 80 percent of total
investments. Internet penetration also increased from last year resulting in a
stronger market for e-commerce. In addition, most banks now offer on-line
banking and many Czech Internet sites accept payment using this method.
Electronic signature is also being accepted in the Czech Republic for the first
time and finally, a number of public portals have been launched and more are
expected. All of these new e-commerce additions will create opportunities for
U.S. e-commerce companies.