Hungary - Distribution and Sales Channels Hungary - Distribution & Sales
Distribution and Sales Channels
Not only have Budapest and its surrounded area become a preferred location for multinationals to establish headquarters in Central and Southeast Europe, but other locations throughout the country have multinational companies present as well, including the cities of Debrecen, Gyor, Szeged and Szekesfehervar. While Hungary’s retail and wholesale distribution operations are improving compared to Western Europe, some weaknesses remain. For example, the trading company structure is relatively undercapitalized, and usually combines both retailing and wholesaling. In 2018, the overall volume of retail trade in Hungary increased by 6.0% compared with 5.7 percent in 2017.
Unlike the rest of Hungary, Budapest's retail sector has many prestigious superstores, shopping centers, hypermarkets, and supermarkets. The most successful distribution companies in Hungary are wholly-owned subsidiaries of international chains such as Auchan, Tesco, Lidl, Aldi, DM, Rossmann, OBI, Praktiker, and IKEA just to name a few. The typical distribution channel in Hungary is for importer-wholesalers to service retailers and end-users directly. B2B and B2C are rapidly expanding. Hungarian agents or distributors usually look to and rely on foreign partners to share the marketing and promotion expenses and to provide training and financing. Until recently, small, independent, family-owned shops dominated Hungary’s retail sector especially in the less populated parts of the country. Thousands of these shops continue to serve rural populations, posing logistical challenges for distributors and suppliers. However, medium-sized, financially well-established heavy-discount chains are making headway in Hungary’s retail sector with retail units present in smaller villages and other settlements. Such chains include Real grocery stores having close to 2,300 shops and CBA with approx. 3,100 outlets nationwide. The second largest retail chain in Hungary is Coop supermarket with approx. 3000 stores. Both CBA and Coop is fully Hungarian owned and expanded into the neighboring region. Discount food chain stores are also present in the market. Lidl has 169 stores nationwide, Aldi 128, Penny Market 213 and Spar/Interspar operates close to 549 stores.
Shopping malls expanded rapidly until 2012, when the “Plaza Ban” law came into effect, and the shopping mall concept went through changes in 2015. This law requires all retail developments of more than 400 square meters to be personally approved by the Minister of National Economy prior to planning permission is granted. The legislation was purportedly introduced to maintain the stability of the market. However, opinions differ widely, and some view it as a protectionist measure. At the end of 2017, 41 malls operated in Budapest, and another 81 outside of Budapest around the country. The largest malls in Budapest are Allee, Arena, Arkad, Mammut, MOM Park and WestEnd.
The use of cash is still largely dominant in Hungary but the number of retail transactions with bank or debit cards (Visa, Amex and Mastercard) has grown significantly in recent years. In 2018, the domestic value of debit card usage grew by 23% percent compared to 2017. Particularly in cities, consumers tend to use bankcards in malls, hyper- and supermarkets, petrol stations, restaurants and paying for accommodation during holidays. Card payments account for roughly 38-40% of retail payments in Hungary, compared with 75-80% of purchases across Western Europe. Hungarian consumers pay by bank cards three times more frequently than by cash, still the value of cash withdrawals is three times as big as that of card payments. All commercial banks in Hungary replaced the magnetic bank cards with the chip-based bank cards and have been offering no-fee cash withdrawals twice a month to their clients since 2015.
Checks are not used at all. A wide and reliable network of automatic teller machines (ATMs) operate throughout Hungary. The use of these ATMs has also been favored by Hungarian consumers.