1. 1st
ISSUE
JANUARY 2011
CROSS-BORDER
DISTANCE SELLING
IN UKRAINE: INFO DIGEST
DEAR COLLEAGUES,
My name is Valentin Kalashnik, President of Ukrainian Direct Market- 2011
ing Association (UDMA). For the 5th consecutive year I observe rapid
(20-30 % of market volume annually) development of distance selling
in Ukraine.
2010
This year we at UDMA decided to provide distance selling compa-
nies, having good success chances in Ukraine, information about the
market of 45 million potential customers. Bi-monthly we will publish
the Info Digest containing statistics, articles, and analytics (from our
Association and other sources) and send it to you.
2009
I am sure that once you find out more about our country and its possibilities for your business
you will understand that entering Ukrainian market is worth including in your development
strategy.
Ukraine is strategically located at EU borders. In traditional retail all product niches are well 2008
filled and presented whereas distance selling has lots of “free” offers. Ukrainians came to
know catalogues relatively recently, in mid-1990es when the first franchisers of large mail
order companies (mainly OTTO and Quelle) started to take orders in small shops. Second
“birth” of distance selling in Ukraine started in 2005 when Neckermann entered the market
with its first main catalogue using consignment for parcels delivery. Thereafter every year 2007
new brands from Western and Eastern Europe enter the market (see infogram on the right).
If one knows market peculiarities and develops accurate start-up plans the results could
be astonishing. This is what companies already present on Ukrainian market experienced.
Ukrainian customers are not spoiled and are loyal, especially when they sense attention from
mail-order companies. Their loyalty system does not allow them to order identical goods of
different colors and sizes in order to choose the most suitable one. They usually order only 2006
what they in fact are going to purchase. The percentage of goods returns and refusals is very
low and usually doesn’t exceed 10 %.
Ukraine offers already developed and ready for instant use instruments for cross-border dis-
tance selling assisting companies to send goods (with up to 200 Euro value) without paying
any customs taxes/duties and VAT. It reduces startup expenses and risks as the companies do
not have to be physically present in Ukraine. Using postal consignment and reliable partner in 2005
Ukraine all business processes including customers recruiting and servicing can be managed
from the country of company’s main business.
You will find more information in next editions of the Digest. If you are already interested
please contact us.
In this issue we will present you main information about country, provide data on population before
(incl. regional distribution), recent changes in Ukrainian legislation and economics. You will 2005
Bertelsmann
learn about most popular search requests in Ukrainian Internet segment and find out what
are the preferences of Ukrainian customer while purchasing online.
It is my pleasure to meet you and welcome to Ukraine!
Time infogram indicating key players
entering Ukrainian market
Valentin Kalashnik
2. CROSS-BORDER DISTANCE SELLING IN UKRAINE: INFO DIGEST January 2011
UKRAINE. GENERAL INFORMATION
Ukraine is a country in Eastern Europe, bordering the Black Sea, Poland, Romania, and Moldova in the west,
Belorussia in the north and Russia in the east
Total area: 603 550 sq km Population density: 75,9 people per sq.km.
(country comparison to the world: 45)
land: 579 330 sq km Cities with over 1 mln. inhabitants: 5
water: 24 220 sq km
GDP (Purchasing Power Parity)
Population of Ukraine is 45 808 893 persons (country com- 302.679 billion Int.dollars (2010 est.)
parison to the world: 28), more details see next page GDP per capita (PPP):
6,656 Int.dollars (2010 est.)
Age structure
70.3% Population income (monthly):
15.9% approx. 268 USD (real income on average 3-4 times higher)
13.8%
Currency:
UAH (Ukrainian Hryvna)
Quantity of mobile phones: 49 976 000
0-14 years 15-64 years 65 years and over
Internet penetration rate:
15,3 mln. regular users (June 2010)
LATVIA
LITUANIA
P OLA ND BELARUS R U SSI A
NETHERLAND
UK
GER M AN Y
BELGIUM
Kiev
CZECH REP.
SLOVAKIA
UKRAINE
MOLDOVA
F R A NC E SWITZERLAND
AUSTRIA
HUNGARY
ROMANIA
ITAL Y BOSNIA
SERBIA
BULGARIA
MACEDONIA
ALBANIA
PAI N
TURKEY
GREECE
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3. CROSS-BORDER DISTANCE SELLING IN UKRAINE: INFO DIGEST January 2011
REGISTERED POPULATION
The table below presents detailed distribution of Ukrainian Regions with prevailing urban population are Dnipropetrovsk,
population by regions. Most inhabited regions are situated Donetsk, Zaporizhzhya, Kyiv, Luhansk, Kharkiv and Lviv (mainly
mainly in the East (Dnipropetrovsk, Donetsk, Luhansk and Eastern and Central Ukraine). Regions where rural population
Kharkiv regions). There is also Lviv region in Western part and prevails are Vinnytsya, Zakarpattya, Ivano-Frankivsk, Rivne,
Kiev region in central part. Ternopil and Chernivtsi (Western Ukraine).
As of November 1, 2010
Total urban rural
Ukraine 45 808 893 31 449 324 14 359 569
Autonomous Republic of Crimea 1 963 743 1 234 035 729 708
regions
Vinnytsya 1 643 298 814 295 829 003
Volyn 1 037 493 536 933 500 560
Dnipropetrovsk 3 339 422 2 787 621 551 801
Donetsk 4 438 035 4 017 023 421 012
Zhytomyr 1 280 672 741 304 539 368
Zakarpattya 1 247 083 463 393 783 690
Zaporizhzhya 1 802 759 1 385 925 416 834
Ivano-Frankivsk 1 380 043 596 940 783 103
Kyiv 1 717 984 1 052 893 665 091
Kirovohrad 1 011 862 626 178 385 684
Luhansk 2 294 444 1 988 963 305 481
Lviv 2 545 832 1 546 767 999 065
Mykolayiv 1 184 478 801 410 383 068
Odesa 2 388 391 1 593 847 794 544
Poltava 1 489 583 908 595 580 988
Rivne 1 152 685 551 012 601 673
Sumy 1 163 371 783 589 379 782
Ternopil 1 085 341 474 695 610 646
Kharkiv 2 757 333 2 206 628 550 705
Kherson 1 089 379 665 933 423 446
Khmelnytskiy 1 328 564 727 641 600 923
Cherkasy 1 287 235 721 464 565 771
Chernivtsi 904 423 380 799 523 624
Chernihiv 1 100 406 689 861 410 545
City of Kyiv 2 794 285 2 794 285 х
Sevastopol agglomeration 380 749 357 295 23 454
Source: www.ukrstat.gov.ua
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4. CROSS-BORDER DISTANCE SELLING IN UKRAINE: INFO DIGEST January 2011
CHANGES IN UKRAINIAN
LEGISLATION AND ECONOMICS
NATIONAL BANK OF UKRAINE: BY THE END OF THE YEAR
GDP TO REACH 4 %
measurement in November — December allowing to reach
GDP growth of no less than 4% by the end of year 2010” NBU
informs.
NBU experts also note that increasing of domestic consumer
and investment demand caused growth acceleration of
primary industries product index in autumn (9,3 % in October
and 10,8 % in September). This is notably higher than monthly
average growth in January-September (6,8 %).
According to data provided by regulator fourth month in a
row investment activities rally due to increased governmental
financing. “This is proved by increased investments in core
capital (4,5 % in 3rd quarter on an annualized basis) and
dynamics of building activities (growth 15,2 % in October on
an annualized basis though one can observe decrease at the
level of 9 % within 10 months).
According to the National Bank of Ukraine (NBU) growth of actual Moreover, NBU informs that stable increase of population
GDP in October was 5,6 % and 4,8 % — within 10 months of 2010. income stimulates development of domestic consumer
demand. Growth of turnover on an annualized basis in October
“Taking into account comparative base of 4th quarter 2010 was 11,8 % in retail, 9,3 % in consumer industry, and — 4 % in
we expect to observe certain slowdown in annual growth services provided.
Source: www.nbu.gov.ua
NATIONAL BANK HAS LEGITIMATED USING ELECTRONIC
MONEY (E-MONEY)
Legalization of E-money market in Ukraine has stared. be an analogue to WebMoney and “Yandex.Money”. The
Kommersant-Ukraine informs that National Bank registered difference is that electronic money would have real equivalent
two systems owed by banks. Up to now market with annual and they could be immediately converted in “real“ ones. This
turnover of 200 million USD operated semi-legitimately. business is developed for private persons only, not B2B” said
Pavel Krapivin, Board Chairman Deputy of bank “Kontrakt”. VAB
For the first time National Bank confirmed operational bank wasn’t able to provide any comment on license receipt.
instructions of two E-money banking systems. As it was provided So far none of two systems is actually operating.
in December by the regulator such companies as MoneXy
owed by small bank “Kontrakt” and VAB bank (system “Maksi”) According to its players E-money market exists in Ukraine semi-
received licenses for such activities. “Our system is going to legally for at least seven years now. In 2008 NBU adopted
Statement №178 according to which solely commercial banks were
allowed emitting E-money. Nonetheless many of the companies
continue providing such services without corresponding
permissions. “About ten companies are operating with E-money.
We have informed Ministry of Internal Affairs, Security Services of
Ukraine and Tax Administration about this fact but so far there
are no visible results” said Viktor Kravets, acting director of NBU
Payment Systems and Accounting Department. For the last two
years no license was issued to the bank due to strict requirements
to the system and consecutive documentation.
Players of existing market assess current market volume as
significant. “There is no E-money market in Ukraine officially.
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5. CROSS-BORDER DISTANCE SELLING IN UKRAINE: INFO DIGEST January 2011
Unofficially there are 4–5 companies that are present on requirements are rigid and I do not believe that the market
the market de-facto. Market volume in 2009 was estimated could exist under such requirements. This segment implies risks
approximately 100 million USD equivalent in UAH, the same and banks are usually very conservative” says Mr. Grishin.
estimations are for USD segment. For year 2010 we expect
that the market grew almost 2,5 times, as well as its main However, not every credit institution is interested in E-money
player WebMoney with the share of 80 %, said Aleksey Grishin, market. An alternative for E-money as bank transfers. “In order
director of the “Internet.Money”. However WebMoney said to use E-money it is not enough to have software. The market
that they are not engaged in E-money in Ukraine. emerged when bank transfers weren’t developed enough but
nowadays technologies allow using traditional money in all
In order to occupy some part of the market banks would have kinds of operations” noted Head of E-business department of
to strain itself: “The market is structured. It is growing very fast one major bank. Still companies that are operating E-money
and there is quite a number of competitors. To occupy any niche unofficially informed Kommersant-Ukraine that they had
on the market one has to take to account all technological, already passed their requests for E-money operating licenses
legal, financial, marketing and organizational moments. NBU obtaining to NBU.
Source: Kommersant-Ukraine
INFLATION IN UKRAINE TO BE LOWER THAN 10 % FOR
THE FIRST TIME SINCE 2003
At the end of 2010 for the first time over many years inflation in According to Nikolay Azarov (Prime Minister of Ukraine) in
Ukraine could be less than 10 %. Last time one could observe 2011 the tendencies will be fixed: estimated goal — 8,9 %.
one digit inflation in Ukraine at the end of 2003 (8,2 %). “This is a huge achievement and it would allow us to have
According to the National Statistics Committee consumer credit rates for production sector at the level of 10-11 %” said
prices during 11 months of 2010 grew 8,2 %. Inflation in Prime Minister. As it is well known inflation forecast agreed
November was 0,3%. During last 10 years there was not even with International Money Fund for 2010 is 12 %.
once such low indicator.
STATE EMPLOYMENT CENTER: RATE OF UNEMPLOYMENT
IN UKRAINE IS LOWER THAN IN EUROPE
Unemployment rate in Ukraine is lower than average in EU
countries. Such information was provided by State Employment
Center of Ukraine.
Experts note that unemployment rate among Ukrainians aged
15–70 years calculated by ILO methodology decreased from
8,6 % of economically active population for 9 months of 2009
to 8,0 % for 9 months of 2010. Decrease of unemployment rate
took place in all regions.
At the same time average level of unemployment in European
Countries increased from 8,8% to 9,6%. Namely, for 9 months
of 2010 unemployment rate in Poland was 9,7%, in Bulgaria —
9,9 %, Hungary — 11,2 %, Slovakia — 14,6 %, Estonia —
18,0 %, Lithuania — 18,1 %, Latvia — 19,9 %, Spain — 20,0 %.
Compared to 9 months of 2009 in 2010 number of unemployed
decrease by 153,6 thousand people and currently is 1,8 million
people. 71,6 % of unemployed is urban population (almost 1,3
million), the rest is — rural population (504,1 thousand). The
biggest decrease of unemployed took place in Donetsk and
Dnepropetrovsk regions and in Kiev.
Source: www.liga.net
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6. CROSS-BORDER DISTANCE SELLING IN UKRAINE: INFO DIGEST January 2011
MARKET NEWS
YANDEX PUBLISHED STATISTICS
OF THE MOST POPULAR INTERNET SEARCH REQUESTS
MADE BY UKRAINIANS
Yandex; in 53 % of requests they find what the searched for
with only one request.
Majority (44 %) of Yandex requests in Ukraine consisted of two
or three words in autumn 2010. The longest words searched
for are chemical elements and various phobias. The longest
word searched for was “гиппопотомомонстросесквип-
педалиофобия” (phobia on pronouncing of long words).
According to Yandex about 13 % of search requests from
Ukrainian users (in any languages) contain spelling mistakes
and misprints. The same percentage is observed all over the
world. The most frequent misprints are caused by users hur-
rying up or typing using wrong keyboard layout. Words are
missing letters or words contain incorrect letters order.
Yandex is Russian search engine that is widely used in Ukraine. About 1/3 of Yandex requests received form Ukrainian users
Major part of search requests in Ukraine go via Yandex, not are unique (typed only once a day). It shows users’ diverse
Google due to its early appearance. interests: request vary from “purchase oil heater DeLonghi
771225” to “Kiev Marusya, wise girl, the sweetest fairytale
Yandex published statistics of the most popular requests ac- hero”. The most popular requests are submitted over
cording to which Ukrainians type less purchasing requests than 10 thousand times a day (they make about 7 % of the general
average Yandex user. Share of such requests is about 2 % in requests flow).
Ukraine and almost 4% of general request flow, informs TECH-
NO bigmir)net. There is a share of specific regional request among the most
popular ones. Samples include “weather Lutsk”, “job position
Users from Ukrainian segment generally type in research re- Sevastopol’”. General thematic of top requests in regions al-
quests in two languages: Ukrainian and Russian. The number most exactly corresponds to the top of All-Ukrainian requests.
of requests in different languages depends on geography: Exception is Crimea where people looking for more informa-
much more requests in Ukrainian come from West than from tion about poems and text messages (“Blok’s poems Night lan-
East of Ukraine. The biggest requests share in Ukrainian was tern street “or” text message wishing good night”).
received in Ternopol (33 %) and Ivano-Frankovsk (30 %) re-
gions; the least number — in Crimea. Requests share in Ukrai- Almost 3 % of users’ requests from Ukraine are submitted as a
nian according to Yandex was only 3,7 % in Crimea and 6 % in question (contain interrogative word); the most popular ques-
Donetsk region. tion is “how?”, the least – “where from?”.
On week days Ukrainians submit about 10 million requests in According to earlier formed most popular search requests rat-
Yandex search. Users’ search activity decreases on week-ends ing of 2010 Ukrainians were mostly interested in President’s
and makes an average of 9,3 million requests. Ukrainian use election, brothers Klychko (famous Ukrainian boxers) and bi-
on average three search request attempts while searching via zarre case with wreath happened with the Ukrainian President.
Source: ТЕХНО bigmir)net.
UKRAINIAN INTERNET ADVERTISING
MARKET “EARNED” 280 MILLION UAH
“This year market instruments developing and new skills obtaining. Indicative
showed results of tendencies of 2010 are popularity of social networks among
280 million UAH. It is advertisers whereas growth rate of Ukrainian audience engag-
quite an increase and ing in social networks except of Facebook is decreasing. This
provides great pos- network is only at the beginning of its development in Ukraine.
sibilities for the ad The advertisers became more interested in international re-
agencies to involve sources, mainly Russian ones” says Mr. Zabolotskiy (acting di-
these resources for rector of Ukrainian Internet Advertising Association).
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7. CROSS-BORDER DISTANCE SELLING IN UKRAINE: INFO DIGEST January 2011
Prognosis of Aleksandr Olshanskiy, Deputy President of Ukrainian vertising money in the Internet is the most important for its future
Internet Association advertising market will grow because as ad- development. It is expected to grow about 60 % annually.
Source: www.mmr.net.ua
CONTACT CENTERS: 7 CONTACT-CENTERS MAKE 70%
OF MARKET VOLUME OF OUTSOURCING SERVICES
“During research conduction we have developed informa-
tion gathering and analyzing methodic. It is very important
for the estimation to compare different indirect factors
which at the end give us possibilities to check data authen-
ticity. We mainly oriented on information provided by com-
panies’ decision makers, mass media publications, analysis
of secondary sources. The results, of course, have inaccura-
cies but already we have some ideas how to minimize them
and to improve the further research“, — affirms Valentin Ka-
lashnik, President of Ukrainian Direct Marketing Association
(UDMA).
The OCC services are actively used in the following industries:
11,5 % 9,7 % 8% 6,2 %
Ukrainian Direct Marketing Association together with Club
“Hot Skills” conducted research of outsourcing call-centers
market of Ukraine. It lasted for 6 months and is conducted for
the first time in Ukraine.
marketing tele- automobile
Such research allows to understand more deeply processes finance and advertising communications business
taking places on this market and also to learn main agencies
Ukrainian outsourcing call-centers market (OCC) is quite young. It is important to note that marketing and advertising agencies
The first company was established only 15 year ago. Currently are working as intermediaries and resell OCC services increas-
market is very active and its development rate is amazing: ing total share of industries using OCC services.
• more working places appear every day
• new OCC are created UDMA estimates that the volume of Ukrainian OCC market was
• already existing OCC open new sites in regions $25,3 million in 2009. There are seven leading companieson the
• quantity of industry sectors using services of OCC grow. market: Teleperformance, Adelina, GlobalBilgi, Beeper, eCall, OS-
Direct, Contactis. These companies provide 68,6 % of market
Despite such activities the market itself stays closed. The very gross income. The rest 31,4 % is filled by 35 companies.
few are ready to provide any information. Number of clients,
working places, agents and sometimes event OCC location is Positive market factors are:
considered as commercial information. Nonetheless analyzing • low costs of labour resources compared to other countries,
information from different sources and indirect indicators the • growing trust toward services outsourcing,
researchers could manage to estimate approximate market • increasing demand on OCC services.
volumes.
Source: www.dmdays.com.ua
«DC UKRAINE» IS GOING TO OPEN 60 SHOPS IN 2011
Company “DC Ukraine” retail chain selling cosmetics, per-
fumery and personal hygiene products and pharmacy “DC”,
(drogerie format) is going to open 60 shops in Ukraine in 2011.
The company already opened 40 shops in 23 cities in 2010.
Currently retail chain “DС” consists of 200 shops and 28 pharmacies
in 61 cities of Ukraine. First DC shop was opened in Kiev in 1997.
Closed joint-stock company “ASNOVA Holding” (Kiev) owns 35 %
of “DC Ukraine”. Since 2006 the company is a member of Interna-
tional Corporation ASWatson. ASWatson Corporation was estab-
lished 1828. It consists of more than 8,3 thousand of retail shops in
34 countries of Western and Eastern Europe, Asia and Philippines.
Source: www.retailstudio.org
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