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The changeover to two wheels: On yer bike, mate!

Budapest Business Journal, March 26, 2007

By Patricia Fischer,

A large number of messenger and courier service companies have been operating in Budapest; several companies that had worked with automotive vehicles have recently launched bicycle courier services in downtown Budapest. Although competition is fierce and several companies work with depressed prices, market players say that, with reliable and prompt service, their market position can be maintained.

"Like flowers in a meadow, courier companies have bloomed over the past few years," said Róbert "Buppa" Mozsolits, owner of Elit Expressz Kft (also known as City Cycle Banditos). "However, it is rather difficult for a new company to start operation these days: As a result of the government's austerity measures, most customer company wants to reduce its costs, so getting new clients is almost the most difficult task."

According to Gábor Kürti, managing director of Hajtás Pajtás Kft, the appearance of further players on the courier market, due to the low profit rate and the fact that this activity requires very experienced employees, can only occur via mergers or acquisitions.

"This market is a very confidential market, so the traditional marketing tools will not really help the market entry of a new company," said Kürti. "I expect several international messenger service companies to look around in Hungary in order to purchase existing firms; we have seen similar things in the region recently."

Csatári Csaba, owner of Pikk-Pack "A Futár" Kft, thinks that there is room in the market for new companies.
"This is a segment where our services will always be needed, so I think the set-up of new messenger and courier companies will continue. For example, I know of three of my former employees who just currently launched their own firm." The key for the success, say market players unanimously, is reliability and quality.

"A customer first looks at the price," said Mozsolits. "But if a client uses a certain courier company for some time and realizes that it is reliable and fast, then the client will not care for the price that much anymore." He also said that his clients never go to another courier company only because that other company offers cheaper services.

"I think all firms struggle for customers, but one can only keep them with continuously quality service," claimed György Mosberger, commercial director of De-Rent Pannon Parcel Service Kft. The company, besides operating a courier service, has also worked as subcontractor for UPS Hungary Kft for a decade.

"Being partners with one of the largest international express delivery companies has taught us discipline and a tight work pace, from which we also take advantage in our other activities," Mosberger explained. "We handle more than 40,000 parcels a month, so we have to be very well organized and prompt in order to maintain our market position." According to Mosberger, the De-Rent has achieved steady growth in revenue, number of packages and employees in the last few years.

"We need to provide complex services," said Kürti from Hajtás Pajtás. "We cannot afford to cover only Budapest with our bikers. Due to cooperation agreements with several international parcel services, we have become an international company ourselves."  After pondering the idea for some time, Elit Expressz, which had only bikes for seven years, started to operate a minivan: "We asked our clients if they required delivery of larger packages and, because it turned out that there is a demand for this among our customers, we decided to buy the minivan."

Another problem courier companies face is official registration of employees, a process made compulsory last summer. Those companies who complied with the regulation were forced to increase prices or reduce profit as a result.

"There are many companies that I know of which did not go with the law and still has many not officially employed couriers," said Mozsolits. "Of course, these companies can maintain lower prices, but I think this is a dangerous game, because if they get checked, they will surely go down."

According to Mozsolits, Elit had already begun to legalize employees even before the law was created: "It wasn't easy, because if we built our increased costs into our prices, our customers would probably have had heart attacks," he said. "So now we earn less money with harder work. But it seems that our couriers understood that it was necessary and realized that having legal status has certain advantages, like pension, paid vacation and sick leave."

Kürti said that the law caused some hard times for the company: "We needed to reduce our business profit, cut back on our management staff and reduce the salary of our couriers. We spend approximately half of
our revenue on tax and contributions. In spite of the difficulties, only 3%-4% of our customers fell off, but we succeeded in strengthening our position again and getting back on the path to growth."




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