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Blowing up a new dotcom bubble

Following the American trend, thousands of Poles are making internet sales their main source of income, and companies here are flocking online to exploit new means of advertising and revolutionize telecommunication. Is Poland in for a new dotcom boom?

Even senior managers, with their internet phones, portable databases and numerous teleconferences, are behind the times. After all, their virtual communication is a tool serving real-world business. However, youths around the globe are heading in the opposite direction, spending real money on virtual goods.

Sony's recent move to establish a trade platform for users of its new video game signals a new era of e-trade. The gamers will buy and sell points or characters from the game, which are useless beyond the virtual world. One bizarre instance shows just how serious online gamers treat their virtual commodities. A Chinese online player recently stabbed another gamer to death after he borrowed his cyber sword in a game and then sold it for real money.

Considering the pace of development, it's little wonder Poland lags behind the times in IT. Two-thirds of adult citizens have never surfed the net, and have no intention of doing so. Sociologists talk about new forms of social inequality - job applicants are increasingly required to fill out an application online. The young have the greatest advantage, as over 70 percent of youngsters say they are connected. This group is also the one responsible for the majority of internet trade turnover, which topped zl.1 billion in 2004. From advertising expenditures to auction-portal users, all the statistics point upwards.

The digital divide
The 10-million-strong crowd of digitally savvy Poles is becoming more active, too. The average number of visits to websites per month hovers around 7.7 to eight billion. Despite that, 3.9 hours a week spent online places the country behind other EU members, such as Spain (11.2 hours), Italy (8.6) or even Hungary with an average of 5.3 hours. This, specialists say, might be attributed to the fact that a large number of internet users plug in using time-honored dial-up modems and still pay by the hour.

Despite this, it seems online business is bound to expand, as expenditures for advertising rose by 74 percent in 2004, reaching zl.87 million. According to the Internet Advertising Bureau, there are indications in developed countries that these numbers will continue to grow by leaps and bounds, doubling to some zl.167 million by next year. From the present share of almost two percent of overall promotion budgets, online advertising is expected to flatten out no sooner than in five years, when it could reach five percent of overall expenditures.

Judging by the number of shops, steady at 600-700 for a number of years, e-commerce is stagnating, though leaders in the sector, such as media store or travel agency, recently showed profits. For small and medium enterprises, however, the internet is a priceless tool to reach a staggering number of clients.

Small world for small shops
Natalia Gliwicka from southern Poland learned the construction trade, but that profession was merely a way to make ends meet. In 2003 she decided to launch, an extension to an existing shop selling cosmetics, natural soaps and Dead Sea mud imported from the Czech Republic. A year and a half since the start, Gliwicka claims the business gets better month-by-month and "you can make money out of it."

"We provide all possible ways of contact," adds the storeowner. Available at instant messaging service Gadu Gadu, at auction portal and on the phone, consultants give advice about products and client care. Gliwicka, satisfied with the internet trade, is already making plans for another niche shop.

With a monthly fee below zl.100 for the ready-made e-shop platform there is no need for additional zero-start funding, especially as small shops have less logistics to deal with. A little storage room down in the basement might be sufficient for that extra stock an e-businessperson has on hand.

The pattern that reveals itself when looking at such stores' address details tells a great deal about the nature of the trade. Internet sellers are scattered across Poland, as online trade eliminates geographical boundaries. Whether the business is on Warsaw's ul. Marszalkowska or hidden in a provincial town, it can still access the entire Polish market.

The biggest advantage over traditional retail? "A different effectiveness. The effect compared to costs is much better," says Tomasz Cynar from M-com, a hardware retailer from Gniezno, western Poland.

Although Cynar would not disclose the proportions, Gliwicka from admits some 75-80 percent of her sales are not made through the shop's site, but on and other auction portals.

Going, going ...
When the founder of eBay came up with the idea of an auction portal in 1995, not only was it a good way for his then-fiancée (now wife) to trade her collection of Pez dispensers, but also a landmark which helped to shape a genuine industry. On average, in the US one car per minute changes hands over eBay. The more practical Germans sell a tractor every seven minutes. Some 500,000 Americans have made auctions their additional or only source of income and, thanks to the launch of a few weeks ago, Poles have joined the community. Internet users turn to auction portals for everyday shopping, but also in search of hard-to-find products.

"I just bought a cable for my GPS device, which was otherwise unavailable," says Bartlomiej Mrozewski, a computer specialist from Enter magazine. Small-scale retailers flock to the net, and often offer better deals than those in the store on the corner. Mrozewski recommends buying electronic appliances, which in small amounts are often brought from across the Atlantic in travel suitcases and thus not charged with customs fees.

Despite the increasing popularity, the e-market remains more of a curiosity than a trading alternative in Poland.

"According to our reports, 10 percent of internet users participate in transactions. Those are not figures which could change the shape of any market," claims one IT expert. In the region of five percent of site visits result in transactions of some type, while in the US, one in five visitors decides to buy. In Poland e-commerce is developing gradually, as a growing number of internet users see from their own experience how it is generally safe to buy online, despite numerous e-scammers.

Updating common sense
If you have doubts about the seller of your dream bedside lamp, the easiest way to screen him would be to check the opinions others post regarding successfully completed transactions. In most cases the opinion system works, however, claims Mrozewski from Enter: "It is far easier to cheat online than in reality. It may be a matter of seconds." Insincere traders 'breed' tens of accounts and post positive opinions for one another. Others boost credibility by selling small-value items for lowered prices to trap their enthusiastic customers when selling more expensive items. The tech-savvy ones simply break into top traders' accounts and exploit their position in the community. Some have managed to rob up to zl.120,000 over six months.

Internet scams are no petty crime, as they result in up to eight years in prison. Specialists advise reporting to police even small losses, which would help the authorities discover a pattern behind a thief's moves and eventually help make an in flagranti capture. Simple steps might protect auction clients from having anything to report to the police, however.

"You have to update your common sense," says Mrozewski, who quotes an insider joke, or, in other words, think before you click and back out at the first suspicion. But despite the perceived anarchy on the net, it is more and more becoming a part of the corporate world.

Commercials don't give a break
A report published recently by American Center for the Digital Future states that over the past decade Americans have been switching from TV to the WWW during their free time. Advertisers noticed immediately and followed their customers. In Poland, revenues from online advertising jumped by 74 percent last year and were valued at zl.87 million. Although this amounts to just under two percent of the advertising market, researcher IAB Polska predicts robust growth until the end of the decade, when the online share of the pie could stop at around five percent.

Operators of commercial sites often face a dilemma over putting advertising on their sites, namely: Do they miss out on profit opportunities or risk clients' anger? Polish portals have so far largely chosen the latter, bombing visitors with whole page banners, side skyscrapers or sponsored links popping up from every corner of the screen.

"The mistake of aggressive advertising is [that it causes] discouragement," says Mrozewski. From watermarks displayed in the background of a portal, to the most unnerving interstitials, which take up the whole page for several seconds to play a TV-type commercial, attention-gripping techniques are limitless. Meanwhile, sending e-mail advertisements allows advertisers to pick a very detailed target group, because free e-mail users can be easily sorted by gender, age, earnings, interests and place of residence.

Another type of more conscious commercials is gaining popularity, however, and already accounts for almost 40 percent of US online advertising revenues. Small, less invasive ads placed next to search results, as on Google. Those classifieds are usually relevant, as they automatically adjust to the searched topic, and in the long term might prove more efficient.

Among the 813-million customer base of internet users on the globe, a 10-million Polish online population is not yet a force to be reckoned with, but it could prove a fertile ground for local businesses.

Making the connection
Internet use in Poland shows a mixed picture. While Poles as individuals have one of the lowest levels of e-activity in Europe, according to new figures released by the EU's Eurostat information bureau, businesses with more than 10 employees are in a relatively healthier position.

In the first quarter of 2004 just 29 percent of 16- to 74-year-olds used the internet in Poland, compared to the EU25 average of 47 percent. Greece recorded the fewest number of internet users with just 20 percent of the surveyed population logging on, while Hungary occupies the penultimate position with 28 percent usage. Lithuania and Portugal tied with Poland in the third-worst position.

The highest levels of use were recorded by Sweden (82 percent), Denmark (76 percent) and Finland (70 percent).

Meanwhile, Eurostat's figures show a brighter picture for business use of the internet in Poland with 85 percent of firms logging on - just four percentage points off the EU25 average. Denmark and Finland scored the highest use (97 percent), while the lowest level was recorded by Portugal, where 77 percent of companies are wise to the ways of the world wide web.

(WBJ 23.v.05)

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