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Who is the Czech consumer?
Written by: Jason Hovet, Tim Gosling, Monika Mudranincová
Photo by: Vojtěch Vlk

What are the main factors affecting the behavior of today's consumers? The Prague Tribune spoke to leading retailers about the trends they follow, and asked some typical consumers to describe what's in their wallet, or to show what's in their trolley.

Petr Sokol Physician, Age 41, married, 1 child Net monthly income including duty and overtime: about CZK 25,000. Monthly expenses: Rent: 1900 Kč Services: 500 Kč Transportation: 2000 Kč Food and personal hygiene: 8000 Kč Child: 2000 Kč Entertainment: 2000 Kč Clothes: 500 Kč Petr Sokol is an intern at Prague's Thomayer Hospital. He lives in an apartment house in Vršovice and is looking forward to the birth of a daughter. His wife Eva, an economist, is on maternity leave. Sokol has clear views on shopping. "It's nice that the market's development brought us choices, but my goal isn't to buy ever-newer things. People should buy what they need and not succumb excessively to consumption,“ he opines. When he shops he goes by the high quality for a good price rule. He wants goods that will last several years, but he isn't willing to pay too much for a standard product just be-cause the brand's well known. "For example, I wouldn't pay a few thousand crowns for jeans when I can buy a comparable product for under a thousand.“ On the other hand, he doesn't mind spending more for items needed for specific purposes. He usually searches the internet first, which he sees as a great source of information. Then he visits a few competing shops, and before he makes his final decision he examines the prospective purchase. He likes specialized shops, because the staff can provide lots of information and associated services. "You don't get that at hypermarkets,“ Sokol says. But he doesn't entirely avoid the new bastions of consumption, thanks to which his shopping style has changed in recent years. "It's nice that they have long business hours and everything's under one roof,“ he says happily, but he adds that one large shopping trip a week is plenty for him. "I see it as a necessary evil that denies individuality. Furthermore, I usually buy a few little things that I originally didn't want,“ he laughs. If he had the time and more money he'd like to invest in travels in Nepal, New Zealand, or fabled Machu Picchu. But the Sokols are awaiting the arrival of another dear investment - funding a good life for a baby they're very much looking forward to. Václav Krámek Teacher, age 29, single, no children Net monthly income: CZK 16,000 Monthly expenses: Rent: 4000 Kč Services: 3500 Kč Transportation: 900 Kč Food and personal hygiene: 2500 Kč Sports and entertainment: 3500 Kč Clothes: 1000 Kč Mathematics and physical education teacher Václav Krámek, who also coaches a juniors soccer team in his free time (four times weekly), spends the largest part of his salary on his rented apartment and everything associated with sports. "If I had a family the situation would be different,“ he acknowledges. "My values would change, and I'd limit some unnecessary expenditures. It's a matter of priorities.“ He drives to a supermarket twice a month for larger groceries purchases. "I don't mind going to shopping centers for items of daily consumption, but I'd never try to buy sports equipment or electronics there,“ says Krámek. "The staff doesn't have enough information, and if I want to buy skis or a camera they're unable to give me qualified advice.“ He isn't very motivated by advertising, instead choosing seasonal sales, particularly for clothes and sports equipment. He also uses the internet, but mainly for information, and he almost never buys anything online. "So far I've only bought air tickets over the net. It's convenient, but I don't believe electronic payments are sufficiently secure,“ he explains. Krámek makes a few extra thousand as a coach, so he's able to save some of his earnings. "I've never bought anything on credit, I always save up for what I need,“ he says, adding that the same applies to his planned purchase of a used car. If he didn't have to be careful with his money he says he'd buy his own apartment in Prague or nearby. "I can't afford a mortgage on my current earnings. It's complicated for a single person, but in the future it would probably be manageable for a couple,“ Krámek observes.

MORE MOBILE, more demanding and more experienced are the terms Tomáš Drtina, managing director at the market research firm Incoma, uses to describe today's consumers. "They've gotten used to quality,“ he generalizes, "and as the quality of supply has increased, they are more satisfied.“ According to Gilles Berouard, who has been managing director at Euro RSCG advertising agency for the last 10 years and has witnessed the changes, "the transformations that affected the Czech consumer have happened much more quickly than the decades it took in the west.“
Income has also risen considerably for many, with the average salary doubling since 1998, and this has left extra money for more individualistic purchases. Baťa's marketing director, Martin Dorotík, believes a shared trait among today's shoppers is an emphasis on "individualism and the need to create one's own style.“ This means shopping is now done more often and is seen more as a source of entertainment. On the other hand, in food retail, speed is becoming a bigger attraction, with more people - by a 2-to-1 margin - visiting a supermarket "several times a week“ rather than hypermarkets, which continue to dominate retail sales as a one-stop option for weekly shopping trips.
For grocery shopping, longer working hours are changing the way people go about it, and consumers seem to be split between two choices. The first is consumers keeping the fridge stocked with numerous grocery trips during the week, typically spending less and shopping quickly on the way home from work. Delvita is one retailer starting to recognize the busier customer. At the end of 2003, it introduced a new concept to fit in tight spots in city centers and established neighborhoods. Given the name Delvita City, it focuses on the busy customer who's on the go. "People in cities tend to live faster and recognize the value of their time,“ says Delvita spokesman Petr Uchytil. "They can't travel everyday to spend a lot of time in hypermarkets.“ The shops - currently there are three - are smaller and offer a range of higher-quality food items, including prepared food meant to save customers time in the kitchen also. Knowing that freshness is a priority for faster moving professionals, Delvita claims shops receive daily deliveries for fresh goods, with baked items being delivered several times a day. Uchytil says the formula works: sales - 80% of which are food items - have surpassed expectations.
Besides the busy customer, Uchytil also says the City shops are aimed at workers in nearby offices. In other words, bring the store to the people, which is a top demand of all shoppers, according to studies by Incoma. Lately, another major phenomenon has been affecting consumer behavior: discount chains. A good illustration is the recent arrival of Lidl, which has been expanding quickly and has created significant interest, especially among the elderly. "Older people usually shop in smaller shops,“ confirms Drtina of Incoma. His firm's research shows this also, with discount chains and smaller counter stores being most popular among seniors and families with less spending power.
The second choice is of course the weekly hypermarket trip. Despite Delvita's success, Incoma has found that the description of a professional - think young, male, high income - actually prefers hypermarkets and discount chains. "They are more time-oriented,“ notes Zdeněk Skála from Incoma. "So they prefer large-scale stores, car shopping and high-volume shopping.“ So the weekly trip to stock up on food saves them time. Younger women with higher incomes also seem to choose bigger stores, but for selection reasons. "These shoppers are more brand-oriented,“ Skála says. "They tend to try new brands, often impulse shopping.“
Younger people, much like everyone else, also tend to prefer shopping centers, a place that's now the strongest part of the retail formula. However, when The Prague Tribune ran a similar story to this one in 1994, the picture was a little different. For one thing, instead of the weekly mall visit, the preferred shopping method 10 years ago was running to smaller shops during lunch or after work for the day's goods. In fact, when this original story (Issue #6, April/May 1994) first hit the shelves, Prague was still months away from the opening of the country's first shopping mall. Today, 50% of those surveyed in Incoma's annual shopping mall study visit a shopping center at least once weekly (and another quarter every two weeks), with half of those staying 1-2 hours and a quarter up to three hours, and the average visitor will leave there about CZK 1,640. A big attraction for shoppers is that malls are primarily centered around hypermarkets, which are visited by 70% of mall-goers and is where the majority of money is spent, according to Incoma.
While it's not black and white, Drtina says, the young tend to shop at malls, but not just for hypermarkets. According to Incoma, one in five shoppers - particularly younger people and households with higher incomes - visit specifically for the specialty shops there. Baťa's Dorotík says retailers not looking at malls are losing customers. "This is the most significant player in the segment of shoes and accessories,“ he says, pointing also to Baťa's experience abroad as evidence. Besides this segment, new retailers on the market in cosmetics (like Sephora) and clothing (like H&M) have set up shop in malls and have become prime destinations for younger women with extra money to spend, and who visit often.
For David Pažitka, director of La Halle chain, the shopping center's rising popularity is a sign of one thing. "Czech shoppers are more orientated to quality,“ he says. Across the mall, C&A's Aleš Drabek sees the same thing, saying it's forcing retailers to continuously update their collections. "Consumers are now more familiarized with fashion trends,“ he says. Drabek believes there's very little difference between the new Czech consumer and those further west, and to him, that also means Czech shoppers know the attraction of a good deal: meaning competitive prices and frequent sales.
Berouard, of Euro RSCG, sees competitive prices as the third stage of a consumer evolution that has gone from ideological (shopping as a freedom) to societal (consuming because one can) to the now economical stage: comparing prices. This is causing a tight situation for retailers, where consumer prices rise only minimally. Consumers watching prices now, Berouard says, is different than maybe 10 years ago when price "created a gap between what shoppers wanted and what they could afford.“
Most consumers now can afford the brands they want. Despite a rise in counterfeiting, brand names in clothing play an important role, and Factum Invenio, another market research company, found in a 2003 survey that 68% of people take a brand name to mean quality - particularly in electronics. According to Factum, about 54% of consumers prefer brand named goods in this area; by comparison, the majority of shoppers buying food choose unbranded goods, where price is key. Electronics shoppers are also going more often to specialized shops like Datart and Electroworld, where they feel they get better advice. For Datart customers "price isn't always an issue,“ says general director Pavel Sláma. "They will choose products more due to design or size.“ Still, with increased competition in electronics, Factum also finds the influence of price has grown in the last five years, whereas the issue of quality hasn't. On the flipside, Incoma has found that at supermarkets price is starting to play a less important role for items like juice, beer, wine or snacks.
Whatever someone is buying, the chances of them using a credit card is an increasing likelihood. In 1999, according to the Bank Card Association (Sdružení pro bankovní karty) the number of bank credit cards numbered around 6,500; today it's estimated to be around 400,000. MasterCard's general director in the Czech and Slovak republics, Jan Čarný, says most MasterCard holders (90%) use their card while shopping in hyper- or supermarkets and about half use it for other transactions like gas, shoes, or furniture - with average payments of CZK 2,300.
While every second Czech carries a credit card, Čarný believes the market is far from developed. For example, Euro-monitor reports that 84% of retail transactions are still in cash. Čarný also sees credit cards' potential in another area that might save shoppers more time. "Payments on the internet will see the biggest development,“ Čarný foresees, pointing to im-proved safety features for secure transactions as a new attraction for online shopping, which is still used minimally. Shopping online for electronics and white goods seems to be most developed, but it's still not enough. "The popularity is still not there,“ comments Sláma, from Datart, which has been looking at starting online services but doesn't believe the time is right. Drtina, from Incoma market research, shares this opinion. While it still gets a lot of attention in the media, he says, "it's not as big as it seems.“ Nonetheless, to put it in perspective: a pre-Christmas Factum poll predicted less than 2% of gifts would be bought online.

Ester Mudranincová Retiree, age 79, widow, pension: CZK 8,234 Monthly expenses: Rent: 1867 Kč Services: 778 Kč Food and personal hygiene: 6000 Kč Contribution to church: 800 Kč All her life Ester Mudranincová had several jobs so she and her husband could raise a family. She sold tickets on trams, cleaned at the Parkhotel, and washed shirts for the legendary director Otakar Vávra and Senate chairman Petr Pithart. Nine years ago her husband died, so she had to economize. "I don't need much, I didn't buy anything for myself in twenty years, just some boots last year,“ says this grandmother of seven without a trace of regret. She spends almost all of her pension on groceries. Every week she bakes cookies and she likes making preserves, so she's always glad when sugar or flour are on sale. She likes a full pantry: "I have to know that I have everything at home that I need for cooking.“ A few years ago, when her health was better, she spent a lot of time shopping - she used to go to the Holešovice market for fresh fruits and vegetables. Today she goes twice a week to an Albert store across the street, and her sons take care of major shopping in hypermarkets for her. She doesn't put much stock in advertising, but she does use it for initial inspirations. "When I've convinced myself that a product's good, I'm willing to pay more. I'd rather buy less - I want high-quality goods, not junk,“ she says resolutely. She's never tried buying anything on credit. She recently bought a stove worth CZK 6,000, saving up for months so she could pay for it with cash. Now she's planning on having her apartment painted and wooden floors refinished, which she estimates will cost about CZK 10,000. Like many elderly, she doesn't long for vacations abroad or a better home entertainment system. "It's enough for me to get up in the morning without any pains, and to be able to cheer someone up with freshly baked cookies,“ she says with a smile.

Jana Chlapcová Saleswoman, age 33, divorced, two children (14 and 7), net monthly income: CZK 8,000 Monthly expenses: Rent: 1400 Kč Services: 1600 Kč Transportation: 600 Kč Food and personal hygiene: 3000 Kč Children: 2200 Kč "I mostly go by price when I shop. The cheaper, the better,“ says Jana Chlapcová, a saleswoman and operator at an Albert supermarket in Holešovice. Every month this former seamstress and company cafeteria worker dreads the day when bills fill her mailbox, so she keeps her purchases to a minimum. "I have to buy food, but I don't care if it's imported or Czech, and discounts or brands don't matter. I usually buy what I can find, mainly if it isn't too expensive.“ She takes care of minor purchases daily near where she lives, while larger purchases are seen to by a friend who occasionally helps the family financially, at hypermarkets. She admits sometimes succumbing to advertisements and trying out a new cream or shampoo, but she doesn't limit herself to well-known brands - she likes to alternate products. With her pay she can't buy expensive items. Her friend recently paid for a desk, and she used a GE loan to buy a CZK 5,000 mobile phone. "With my pay I can't save anything; I don't even have a building savings account,“ she says with resignation. Sports, vacations, new clothes, or dinners in restaurants are luxuries this vital young woman can't afford. Her fourteen-year-old daughter Bára has serious health problems and is in a social care institution, to which the mother pays CZK 1,200 a month, and her seven-year-old son goes to first grade. "His schooling cost me CZK 5,000. Everything's terribly expensive - his pack, supplies, recreation, lunches, hobbies,“ says Chlapcová, listing the burdens on her fi-nances. If she were rich, she says she'd certainly give money to the institution where her daughter is. For herself, she'd like a better apartment so she and her son didn't have to be squeezed into a studio space.

Ljuba Hájková Businesswoman, newsstand owner, age 52, married, three children, net monthly income: CZK 30,000 (approx.) Monthly expenses: Rent: 5600 Kč Services: 5200 Kč Transportation: 5000 Kč Food and cosmetics: 10 000 Kč Entertainment: 3000 Kč Clothes: 3000 Kč Sports and rehabilitation: 800 Kč From her monthly shop sales Ljuba Hájková finances the costs of operating her newsstand business, such as purchasing goods and leasing a car. She can use only what remains for her personal consumption. The family invests in life insurance to save regularly. A lot of money goes into maintaining a cottage in northern Bohemia. He husband contributes a lot to the family's expenses. This smiling entrepreneur, who bought her shop in an auction ten years ago, claims to be conservative but, at the same time, a compulsive consumer. Even under communism she brought her cosmetics and personal hygiene products in from abroad. "Quality counts with me, I'm loyal to tried-and-true brands, and no advertising can win me over,“ she explains. She never buys from second-hand shops or Vietnamese markets, and she isn't the type to seek out seasonal sales or consumer loans. "I don't concern myself with numbers; when I like something I just buy it.“ She likes spending on healthy food, culture, and pretty clothes - sometimes she buys a few items in brand-name shops, but this elegant lady sews most of her clothes herself. Ten years ago when she went into business she was a very careful shopper. "I was afraid about my business going well, about repaying the loan, and the children were still in school. Now I'm much more relaxed,“ she laughs. It's usually enough to make one major shopping trip a week, and she prefers small shops. "We go to supermarkets only before weekends at the cottage,“ she says. The biggest burden on the family budget is their new Škoda Superb, CZK 850,000 on a leasing plan, and in the future they might buy an apartment. What would she do if she won the lottery? "My dream is to get to know Paris. I'd live there in a full-service hotel and see all the galleries.“ Conversely, if her funds were limited, she says she'd cut back restaurant outings and food-shopping. "I buy too much anyway, and then we throw it out,“ she laughs.

Kamil Janáček Banker, age 61, 2 adult children, net monthly income: CZK 80,000 (approx.) Monthly expenses: Rent: 4000 Kč Services: 3000 Kč Transportation: 5000 Kč Food etc.: 8000 Kč Entertainment: 2000 Kč Holidays (yearly): 50 000-100 000 Kč Sport and recreation: 2000 Kč Describing himself as a "conservative consumer“, Professor Kamil Janáček says that his family's spending habits haven't changed that much over the years. This may come as little surprise - as Chief Economist with Komerční banka, Janáček earns his monthly net income of around CZK 80,000 by analysing how money is earned and spent. Janáček is married with two children and one grandchild. Neither of his children live at home these days. His wife is also an income earner contributing to the major basic expenses of household and transport costs. Major purchases, such as the family car, are funded out of cash flow or savings, he explains, adding that borrowing is mostly restricted to the use of credit cards. Again describing conservative habits, the Janáčeks like to shop for certain brand name clothing in Prague or Paris, he says, while the family passion for wine is sated by buying directly from producers. Classical concerts and theatre performances are also enjoyed on a regular basis. Holidays are a luxury that bite quite a chunk from the family finances. "We like to spend two or three weeks per year abroad, either in the mountains or at sea,“ says Janáček, adding that these days the latter is more likely, should they not be visiting their cottage. The holiday home also demands small and regular expenditures on maintenance. At the end of the month, it's no surprise that Janáček the Chief Economist spreads his cash across a diverse range of saving options, including investment funds, stocks, a pension fund and a long-term savings account.