The year 2019 can be considered as a good year for Ukraine and for the Ukrainian retail market. Fears of destabilization of the country in the context the parliamentary and presidential elections, did not come true. The growth of the economy, though not as significant as we would like to see, continued. And the growth rate of retail turnover even exceeded last year's figures. However, trends in different retail segments were different. What was happening in the market in 2019 and what are the key events that have taken place in the past year that can affect the market development in 2020?
In the first 11 months of 2019, retail turnover increased by 10.4%. Thus, the growth rate exceeded last year's one. In 2018, the growth of retail turnover in January-November was 6.2%. At the same time, traditionally, the leader in the dynamics of growth was Kyiv region, where the turnover of retail for the 11 months of 2019 increased by almost 20% compared to the previous year.
It is worth noting that the revenue of the largest retailers of the country grew even faster than the average market.
For example, the EVA drugstore network in January-September increased its net income by more than 1.5 times compared to the same period last year. Of course, this growth was largely due to a significant expansion of the network, which remains one of the market leaders in terms of growth rate. However, the revenue growth in the company's existing stores was impressive.
Stagnation of the home appliances and electronics segment
Much less positive was the dynamics of sales in the segment of home appliances and electronics. According to GfK, in the third quarter of 2019, total sales on the Ukrainian HAE market decreased by 0.6%. On the one hand, the reduction is not so significant, and for the first 9 months of the year the market has still grown - by almost 7% compared to January-September 2018. However, the quarterly contraction in the market was the first time since 2016, and the growth dynamics in annual terms did not add optimism.
For comparison, in 2018, the market for home appliances and electronics has grown by 25%.
However, a decline in market performance was expected for all players. First, the reduction in rates was inevitable due to the increase in the comparison base. Over the past few years, the HAE segment has grown at a record pace. So, the current reduction can be explained by reaching a certain threshold. Many consumers have made all the planned purchases in previous periods. However, it is possible that in 2020, the Ukrainians will be more active in updating technology and market growth rates will again go up.
Much more unexpected was the slowdown in the Ukrainian e-commerce market. According to the EVO Group, which integrates Prom, Bigl and other projects, in January-November 2019, the e-commerce market in the country amounted to 76 billion UAH, which is 17% more than in the same period last year.
Yes, online retail growth is still outpacing the growth in "brick retail" sales. However, the negative dynamics compared to last year are obvious. A year earlier - in 2018 - the Ukrainian e-commerce market, according to the same EVO Group, grew by more than 30%.
In addition to reducing the growth rate, there is also a decrease in the average check. In the EVO Group marketplaces, it has declined by an average of 7-10% over the year.
Next year, the group predicts even smaller growth: Ukrainian e-commerce sales will grow by 15% in 2020 - up to UAH 87.2 billion. Among the most promising niches of online commerce, experts highlight the trade in motorcycle goods. This segment grew by 39% in 2019. In second place are gifts, books and hobbies, which added 31% during this period, and in third place - home and garden goods with a rate of 25%. However, most often they still buy clothes, shoes and appliances online.
Despite the slowdown in the e-commerce market, more and more classic retailers in Ukraine are opening their own online stores or going online through partners. For example, a separate online store in Ukraine launched the brand Zara of the Spanish holding Inditex, earlier followed by the Turkish brand LC Waikiki, the Polish LPP group and major Ukrainian players such as MD Fashion, Intertop and other offline networks.
Investing in the development of the online channel not only sellers of clothing and footwear, but also grocery supermarkets.
Most recently, delivering its products to the end consumer through a partner - Zakaz.ua, has launched a chain of Furshet markets. Thus, 6 major players, including Novus, Fozzy, Megamarket, Metro and Auchan, have partnered with the Food Delivery Service. The latter generally declares e-commerce - as one of the main directions of its activity.
It should also be noted the reverse direction - from offline to offline. In one way or another investing in the offline presence of Rozetka, which opens its own stores, Kasta, develops a network of points of delivery of goods and others.
Active development of delivery services
In 2019, food delivery services continued to actively develop in Ukraine. And not only international companies such as Glovo and Uber Eats but also local ones are expanding their presence in the country. For example, recently in Kyiv, Raketa express delivery service, which delivers orders from Kyiv restaurants, started operating in Kyiv. The operator also runs his own kitchens, the so-called dark kitchens. The first of them in the test mode is already operating in the Bessarabian market.
Among the stated plans of Raketa service is to occupy at least 30% of the food delivery market in Ukraine.
Another local player, eda.ua, was acquired by Menu Group, an international company that also operates in Armenia, Georgia and Belarus. In the next two years, Menu Group intends to invest at least UAH 100 million in development in the Ukrainian market. The company believes in the prospects of the Ukrainian market. And this is not surprising, given that its volume, according to Menu Group, is estimated at UAH 10-15 billion and this figure is growing by 20% annually.
Increasing logistics capacity
Another pronounced trend in 2019 was the expansion of logistics capacity by companies. Moreover, not only profile operators, such as Nova Poshta, but also the largest retailers, have invested in warehouse expansion. In particular, the ATB Group, which manages the country's largest chain of stores, has completed the purchase of a warehouse complex in the Odessa region with a total area of 37,800 square meters. m. The largest Ukrainian retailer in the drugstore segment, the EVA network, has put into operation an innovative distribution center in Lviv with an area of over 16,000 square meters. m.
EVA has invested more than UAH 175 million in opening a new warehouse. It is expected to serve around 300 stores and handle all goods imported from EU countries.
Expanding their logistics facilities and the largest online retailers such as Rozetka and Kasta. Retailers' investment in their own logistics is not surprising. As the market develops, the speed of delivery of goods to the end consumer, control of the supply chain and reduction of logistics costs can play a key role in competition.
Increasing staff hunger
One of the most negative trends in recent years is the outflow of staff abroad and prolonged staffing in Ukrainian retail. According to the observations of the biggest market players, last year it is difficult to call the personnel situation more optimistic: both highly qualified staff and line staff continue to leave the country. This problem, as one of the most important for the state, was noted in the management of the corporation ATB.
ATB CEO Boris Markov believes that the departure of Ukrainians abroad is a serious threat not only for the Ukrainian economy, but for the country as a whole.
The shortage of staff is forcing Ukrainian retailers to raise their wages substantially. According to research companies, in 2019, salaries in the retail sector in Ukraine increased by about 15%, which became a record for the market. Most likely, wage increases in 2020 will be even more significant. However, a salary race is unlikely to help solve the personnel problem, since the departure of Ukrainians abroad is not only related to the difference in the level of remuneration. Much more important are the overall standard of living, safety and social protection.
Investment in self-service and automation
In the face of staff shortages, retailers' investments in self-service terminals and process automation are a logical consequence. Therefore, in 2019 more and more retailers have intensified the introduction of self-service. For example, the Novus network of stores announced plans to invest more than $ 1 million in self-service cash desks. In total, the company planned to install more than 120 terminals in its retail outlets.
Self-service cash registers were also introduced by other market players, with large networks such as Silpo, Auchan and Retail Group as well as local players, including Pacco Holding and Bee Market.
Interestingly, some retailers went even further. For example, the Velmart Network has implemented Pick & Go technology for self-scanning and payment for goods using a mobile application. Another interesting project aimed at simplifying the purchase process was launched by online retailer Kasta. Together with Visa and PrivatBank, the country's largest online fashion retailer has introduced the KastaID product, a solution that allows you to pay for purchases using face recognition. Obviously, in the coming years, retailers will continue to implement experimental technologies to simplify the purchasing process, provide a unique customer experience and automate business processes.