1. 6th
Issue
December 2011
CROSS-BORDER
DISTANCE SELLING
IN UKRAINE: INFO DIGEST
Dear Colleagues,
We, the Ukrainian Direct Marketing Association, are glad
to wish you a Merry Christmas and a Happy New Year.
We wish your business a very successful and prosperous
New Year 2012, and your achievements and triumphs to
inspire wonder of the public.
Valentin Kalashnik,
President of UDMA
MarKeT NeWs
Mail orDer aND e-CoMMerCe MarKeT iN uKraiNe
Ukraine still remains Terra Incognita for a large majority of Eu- Diagram 1. Capacity of the mail-order market in Ukraine
ropean companies specialized on the mail order. Meanwhile, in mln EUR, in 2003-2012.
it is the largest country in Europe (if not to consider Russia
40%
as European country with its greater part laying in Asia) with
462,5
undersaturated traditional retail markets as well as mail order
and e-commerce sales.
31%
330,4
The market of mail order in Ukraine is one of the most dy-
74%
namic and perspective. This segment even on the peak of
252,8
the global financial crisis showed a positive growth in UAH
8%
equivalent. The negative dynamic index of 2009 is connected 26% 11%
32% 151,7 164,0
with a sudden devaluation of Ukrainian national currency in 35% 145,4
28% 120,4
late 2008. But already in 2010 the market had stabilized and 91,2
showed the growth that made 74% in EUR equivalent. Ac- 67,4
52,6
cording to the experts’ predictions, an active growth of the
inside sales market (by 30% annually) will be observed in the
next 3-4 years. 2003 2004 2005 2006 2007 2008 2009 2010 forecast forecast
for 2011 for 2012
Capacity of the Ukrainian e-commerce market was approxi-
mately 383 mln EURO in 2010, according to the data Appleton Source: Ukrainian Direct Marketing Association, www.uadm.com.ua
STENDERS Company MILANA engaged in In the nearest two According to Econo- A third shop of
engaged in produc- sale of women’s foot- years MANGO com- mist Intelligence Unit American brand
oNe-liNe
NeWs
tion and sale of wear has decided to pany plans to intro- Kyiv entered the GAP, represented by
natural cosmetics is find partner franchi- duce on the Ukrai- rating of the best the company GAP
planning to open not sees in Ukraine. nian market shops of European cities for Ukraine LTD., will be
less than 15 shops in men clothes MANGO shopping-tourism, opened in November
Ukraine before the HE and accessories it took 27th place in Ukraine (Kyiv).
year 2015 thus bring- MANGO TOUCH. among 33 cities.
ing their total number
up to 25.
2. Cross-borDer DisTaNCe selliNg iN uKraiNe: Info DIGEST December 2011
Mayer. Meanwhile, according to the experts, the market shows It should to be mentioned that a DirectTV niche is almost free
20-30% growth annually. in Ukraine. Currently this segment is represented by ten compa-
nies, however only two of them, Studio Moderna and Telemedia,
Today there is more than a dozen big international companies which control near 80% of the market, firmly occupy top posi-
specialized in mail order, successfully working in Ukraine. And tions in this sphere. Such a conjuncture gives foreign companies
having analyzed the tendency of the last decade, we may con- wide opportunities to approach the TV-commerce market.
firm that 1 or 2 international mail order companies annually
come to Ukrainian market. But if we speak about the e-shops, irrespective of active devel-
opment of e-commerce in Ukraine, this market has not been
Most distance purchases make clothes and shoes (36.4%), saturated yet. Thus, according to the International career por-
books and magazines (23%), and electronic consumer goods tal hh.com.ua, in customers’ opinion, currently we have lack
(20.3%). Sales of cosmetics and body care products make of e-shops, offering food products (36.4%), clothes and shoes
9.1%, furniture and household appliances – 7.4%, the other (25%), household appliances (22.8%), gift products (18%),
kinds of goods – near 4%. books and leisure products (16.6%).
Diagram 2. Chronology of international inside sales companies’ entry into Ukrainian market, 2000-2011
2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Ukrainian Direct Marketing Association, www.uadm.com.ua
and pricing. Indeed, irrespective of the general trend to the
Customer’s portrait growth of the value of ordered goods as well as people’s pur-
chasing capacity, the average salary in Ukraine, like in other
The Ukrainian customers of mail-order companies are mainly
developing countries is lower than in Europe and make ap-
women (57%). Herewith, Ukrainians 20 - 45 years of age most
proximately $ 350.
frequently become the clients of mail order companies. And
the older a client, the greater chance that he will become an
active client. An average check amount of a typical wage Ukrainian bears
witness of it. Thus, according to the data of Ukrainian Direct
It is noteworthy that from the soviet times when Ukraine was Marketing Association, during 2010-2011 each Ukrainian at av-
a part of USSR and experienced an acute product shortage, erage spent EUR 55.5 for purchasing of textile/clothes/shoes,
Ukrainian customers still have a habit to have trust in quality EUR 34.5 – for cosmetics, EUR 47.8 – for household applianc-
of products of European origin. At the same time, unlike Eu- es, and EUR 72.9 – for other products (electronic appliances,
ropean customers, Ukrainians take a long delivery term, which books, etc., which were not included into previous groups).
usually takes a month, with understanding and are more loyal
to the inside sales companies. Continuation of the article – in next issue of Mail order Di-
gest
But in the meanwhile, for successful work on Ukrainian mar-
ket an operator is to correctly select the collection of goods source: www.distanseselling-ua.com
CusToMers’ beHavior iN iNTerNeT
aND DevelopMeNT oF e-CoMMerCe iN uKraiNe
The Search system Yandex has made the analysis of custom- the web-site of the mail order operator Bonprix.ua (9%), Goog-
ers’ behavior in internet and development of e-commerce in le search engine (8%), Ebay.com (7%), Yandex and Price.ua (5%
Ukraine. The research can be conveniently divided into three each), Hotline.ua (4%) closes the top-10 rating.
parts: shops, the most popular goods, and competition.
Among the most crucial factors that influence the choice of e-
According to the company TNS, answering the question where
shop are its reliability and the feedback. The way and terms of
they will choose and purchase goods, in 33% of cases Ukrainians
name the shop Rozetka (household appliances and computers), delivery as well as the price occupy the second place. Novelty
more rarely – 17.14 and 10% accordingly go for Emarket.ua ( e- of goods and shop location play the last role. Even 16% of citi-
board of free advertisement), Aukro.ua (internet-auction), and zens in the capital, where there is a great number of shops, or-
Torg.ua (e-board of free advertisement). These are followed by der goods in other cities, in regions this number reaches 80%.
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3. Cross-borDer DisTaNCe selliNg iN uKraiNe: Info DIGEST December 2011
Almost a half of users come to the sites of e-shops via the
internet advertisements, on-line and off-line shops have direct
traffic, but only the high rollers who promote themselves in
the search systems have their search traffic (but they make a
low per cent).
Near 90% of users read the page about delivery, one in five
looks through the contact information, and 20-70% (depend- 20
ing on the shop) of consumers do not reach the end of good’s
ordering. 12
In the second part of the investigation the specialists studied the 15
most popular products. The diagram shows, what purchases, 30
both on-line and off-line, consumers made during the last year.
The major part of internet users chooses products exactly in
e-shops, and purchase them there as well. The construction 64 165
materials and bathroom fitments, which are more frequently
bought off-line, made the only exception.
The major part of “on-line customers” still prefers to pay in 40
cash. The electronic payments are less popular when purchas- 280
ing the construction materials, but the books, in the contrary, 60
are frequently paid for with a card.
In order to find out, which categories of products are selling
easier, the analysts counted the correlation “number of shops/
number of customers” (the figure in parenthesis near the product
category are the data of Yandex.Market). A red arrow means a
high competition but a low number of clicks, a green one means
a low competition with a high demand. It is interesting that the
number of shops selling vacuum cleaners and laptops are nearly
the same, but the demand for the latter is in 4 times higher. source: www.ain.ua
voluMes oF e-CoMMerCe TraDe
iN uKraiNe iNCreaseD THis auTuMN
During autumn 2011 Ukrainians more often purchased clothes, The most popular product groups*
footwear, computers and mobile phones in Internet.
Change of Change of
As the editorial board of TradeMaster portal was informed, demand in offer in au-
according to the survey, held by the analysts of all-Ukrainian autumn 2011 tumn 2011
Product group
internet-auction Aukro.ua, the greatest number of operations in com- in compari-
during the autumn season demonstrated the same categories parison with son with
of goods which were active during the whole summer. summer summer
Three leaders, which have sufficiently increased the sales Clothing, footwear and
+39% +6%
volumes in the last three months, are the following catego- accessories
ries: «Clothing, footwear and accessories» – 39%, «Laptops Laptops and computers +31% +10%
and computers» – 31%, and also «Mobile phones and smart-
phones» – 29%. Mobile phones and
+29% +26%
smartphones
The category «Collecting» also showed a sustainable growth.
The sales volumes in this category grew by 20% in comparison Collecting +20% +10%
with the summer period.
* Data provided by Aukro.ua as of November 27, 2011.
Nevertheless seasonality has made allowances in general dy-
namic of the growth of sales in separate product groups. For Meanwhile, according to the expert, n comparison with coun-
example, in category «Sport, tourism» the level of demand re- tries of Western Europe and North America, where internet
mained unchanged, i.e. on the «summer» level. trade actively covers near 80-90% of population, Ukrainian e-
commerce segment in the nearest future will face a rash devel-
«E-commerce penetration rate to everyday life of Ukrainians is opment; there are all prerequisites for it.
best of all reflected by continuously growing demand behav-
iour towards almost all product categories, - Dmitrii DZYGOV- Consolidated figures for September-November and June-Au-
BRODSKYI, a head of Aukro.ua analytics department. – Today gust 2011 are compared.
one in two internet-users in Ukraine has purchased or sold in
Net at least once in life». source: www.trademaster.com.ua
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4. Cross-borDer DisTaNCe selliNg iN uKraiNe: Info DIGEST December 2011
WHaT FooTWear Do uKraiNiaNs buy?
Alexander Borodynya noted that last year 109 mln pairs of shoes
were imported from China, among them only 6% of genuine
leather. “It means that today 70% of footwear on the market
is from China and almost all of it is of artificial leather”, he said.
At the same time according to enquiry almost three fourths of
Ukrainians are sure that they buy footwear of genuine leather.
In this context the Footwear Manufacturers League called for
acceleration of the Cabinet of Ministers Decree introduction
concerning compulsory specifying of the leather type the foot-
wear was made of.
Today 70% of pairs of shoes in Ukraine were manufactured By the way. The Cabinet of Ministers of Ukraine has already
of artificial leather and imported from China. This was said by issued the Decree which envisages that a commodity manufac-
Alexander Borodynya, the President of the Footwear Manufac- turer must specify the material the footwear is made of. The
turers League, during the round-table talk on the topic “Pre- Decree will become valid in January 1-st, 2013.
vention of law on economic competition protection violations
on non-food markets”. source: www.proretail.info
uKraiNiaNs speNT For eleCTriCal gooDs
by 25% More THaN iN a previous year
According to the investigation made by GfK Ukraine in Q3 of drying machines, the product categories of large household ap-
2011 Ukrainian market of household appliances and electronics pliances showed their growth by 16%. The groups of freezing
has grew by 25% in comparison with the Q3 of 2010. “IT-sector chambers and washing machines have demonstrated the best
and the large appliances sector still provide the biggest sales indices of growth, equal to 34% and 23% respectively. The oth-
volumes, with its aggregate share making a half of total sales er groups were demonstrating almost identical dynamics: the
of household and electronic appliances. At the meanwhile IT- growth of sales made 11-20%.
sector continues to boost its share, which enables us to assume
its chance to take a leading position”, - the company admitted. The telecommunication equipment segment showed a mod-
erate increase by 15%. Mobile phones still remain the big-
The third quarter usually characterizes with a high sales level gest group on this market (with 60% share). At the same time
in the IT-sector, because August-September are the “back- smartphones are onwards and upwards at a great pace – their
share increased by 91.7% and makes now 37% that is equal to
to-school” months, when IT-products are especially popular.
821 million UAH (approx. $103 mln).
The segment of photo appliances also shows rather positive
growth (30%) while being one of the smallest segments of Irrespective of pessimistic forecasts that 2011 would be chal-
household and electronic appliances market. lenging both for retail sellers and customers, the third quarter
became a successful continuation of a current year. “A sufficient
The common market of household and electronic appliances growth is observed on all markets, starting from the absolute
had been gaining momentum since the beginning of the year leader – a sector of information technologies, than has grown
and now it constitutes near 11 billion UAH (approx. $1,4 bln). almost by a half. The market of household appliances and pho-
The sales of small household appliances in Q3 of 2011 made tomarket showed a considerable growth with their sales vol-
0.63 billion UAH (approx. $79 mln), that is by 13% more than in umes increased by one third. Basing on the positive estimation
Q3 of 2010. As before a customer is interested in coffee-making of a current situation it may be assumed that the year-end will
machines. From July till September the number of sold made be as successful as its beginning”, - the investigators confirm.
by 37% more than in the same period in 2010. Except for the
smallest according to the sales volumes groups of washing and source: www.delo.ua
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5. Cross-borDer DisTaNCe selliNg iN uKraiNe: Info DIGEST December 2011
uaDM speCial
uDMa Has esTiMaTeD THe MarKeT voluMes
oF DireCT MarKeTiNg iN 2011
Ukrainian Direct Marketing Association (UDMA) has estimated A sufficient growth will be also observed in the segment of da-
the volumes of direct-marketing (DM) in 2011 and represented tabases. It is predetermined, among the other factors, by stabili-
the forecasts for 2012. zation both after a «feverish» period of adoption of the Law of
Ukraine «On Personal Data Protection» and the increase of the
According to the Association, in 2011 the DM market in- cost per unit of addresses, contained in the personal information
creased by 20% in comparison with the previous year and databases, organized in a strict compliance with the said law.
made 1,141.90 million UAH. The sphere of Call-Centres (CC)
showed a particular development: its growth made 31%. It
Fore-
became possible owing to the opening of new CC-platforms Changes
Total in Total cast
and ramping-up of the volumes of regular market players. By in com-
2010, in 2011, for
quantity the segments of address and non-address direct mail parison
million million 2012,
demonstrated insignificant growth, but in money equivalent with
uAH uAH million
their volumes increased by 13 and 18% accordingly mainly due 2010, %
uAH
to the growth of postal tariffs.
Direct market-
ing, including
The growth of service providers’ and customers’ marketing
competence has positively influenced the «creative, consulting, Address
and management projects» segment, which increased by 35%. 230,4 271,50 +18% 305,00
direct mail
In 2011 experts admit that the market of address databases Non-Address
183 206,80 +13% 228,00
has declined by 31% that is mainly connected with fearfulness direct mail
of the market players and their incomprehension of a new Data bases mar-
Law of Ukraine «On Personal Data Protection» as well as ac- 5,94 4,10 -31% 5,70
ket
tive development of different partner projects, which enable
to build up a communication with potential customers without Creative, consult-
exchange of personal information databases. ing and manage- 37,6 50,60 +35% 60,50
ment projects
In 2012 the UDMA experts predict the growth in all DM direc- Call-Centres
tions. This will be promoted by the following factors. «First of 220 294,80 +34% 347,00
services
all, the «natural» growth of a demand for DM services, - Va-
lentyn Kalashnyk, the President of Ukrainian Direct Marketing Production of ma-
Association explains. – Secondly, the parliament elections and terials for address 238 276,00 +16% 308,00
Football Championship Euro-2012 will become additional fac- direct mail
tors influencing the use of address and non-address direct mail Attachments to
and call-centre services. Thirdly, there remains a sustainable printed publica- 32,7 38,10 +17% 43,50
tendency for new big European market players, who naturally tions
use the whole range of DM-services, to enter Ukrainian dis-
tance selling market. Meanwhile, the companies specialized in Total: 947,64 1 141,9 +20% 1 297,7
mail order that have been already working on the market con- *1 EURO = 10,4 UAH, 1 dollar = 8,00 UAH
tinue to boost their marketing powers (this applies especially
to the attachments to printed publications)». source: www.distanceselling-ua.com
legislaTive NeWs
THe CabiNeT oF MiNisTers oF uKraiNe
oFFers To regulaTe THe aCTiviTy oF e-sHops
The Cabinet of Ministers of Ukraine offers the Verhovna Rada to execute and store documents related to their business activ-
of Ukraine to regulate the activity of e-shops. A corresponding ity (including sale-purchase of goods).
draft law “About internal trade” was approved by the govern-
ment on October 12. Otherwise strict punitive measures will be applied to them.
Here we don’t speak about storage facilities as those prod-
It offers to determine the peculiarities of organization of e- ucts for sale may be stored on the partner’s facilities, if, for in-
shops in separate article of a law. Particularly, it is determined stance, we mean such goods as household appliances, kitchen
for entrepreneurs to obligatorily have office, where they have tabletops, books etc.
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6. Cross-borDer DisTaNCe selliNg iN uKraiNe: Info DIGEST December 2011
Also there was developed a special norm in the Draft Law that
bans e-selling of medicines. Government Plenipotentiary for de-
regulation of economic activities Mikhail Brodsky admitted that
the greatest problem of e-selling lies in so-called one-day sites,
by means of which fids of rubbish and adulteration are “off-
loaded”. As a result of such a pseudo-business, absence of any
warranties and liabilities legally acting e-shops, which sell quality
products and pay all taxes are affected and, finally, they are not
able to compete with unfair business practices.
Currently the draft law is under follow-up revision in the Cabi-
net before it will be submitted to the Verhovna Rada.
According to the agency, the Ministry of Economy has admitted
the necessity to regulate by law activity of e-shops as far back
as March 2009. Andriy Blyzniuk, a Deputy Minister of economy
at that time, noted that internet trade was only regulated by
It is also planned to lay entrepreneurs under an obligation that the law “On protection of consumers”, and the Ministry of
they should provide customers with information about their Economy was drafting the law “On internal trade”, covering
name, location, state registration, availability of patent or licence, global approach towards the internet-trade regulation.
goods and terms of sale-purchase agreement by means of publi-
cation in catalogues, booklets, prospects, and in Internet. source: www.bin.ua
THe NeW TraDe legislaTioN Will eNable THe Major
oNliNe sellers To iNCrease voluMes oF sales
Before the end of the year the Ukraine is expected to alter sue. Only minor private traders, who nowadays normally keep
the regulations for virtual trade. The appropriate draft law is their stock at home, will have to conquer new expenditures
already registered in parliament. The internet-shops will thus
undertake to arrange for relevant offices and storage facilities
as well as to provide the buyers with all the information as to
licenses and patents. In the opinion of some experts the poky
online shops will have to close or work illegally.
At the same time the big networks will increase the volumes of
their trade and as a result will be able to lower the prices. In
this way, the manager of Internet project Rozetka, Mr. Vladislav
Chechetkin, believes, some enforcement of the state regula-
tion will definitely benefit the online traders. In a guess of the
businessman, the new principles will add up to a reduction
of over-the-top level of fraudulence in the network. Besides,
the representatives of major operators of the online trade be-
lieve that the prices may even go down in case only major and
medium-sized traders remain in the market. Reduction in the
number of online trade participants will lead to a fact that the
remainder internet–shops will increase their turnover since this
trade channel has already its own permanent audience who for a rent. Besides that, a major operator is to easier handle
will not go to nowhere. the functionality of his business. For example, there is always a
possibility for big internet shops to provide non-cash transac-
The remaining shops will have to deal with more orders, to tions with use of bank cards, while small traders mostly accept
carry out more discount actions, to order more products. And cash payments. The pricing policy in a new regulatory realities
with procurement of big wholesale batches of goods such an will mainly depend on business appetites and competition in
operator will be able get a more significant discounts from the market.
importers or manufacturers. Moreover, for the major opera-
tors the availability of warehouses is not an out-of-the-blue is- source: www.ua-retail.com
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7. Cross-borDer DisTaNCe selliNg iN uKraiNe: Info DIGEST December 2011
iNTerNeT NeWs
WebMoNey Has sTarTeD To aCCepT
payMeNTs THrougH TerMiNals, baNKs
aND iNTerNeT baNKiNg iN uKraiNe
Now any website connected to the WebMoney system may amount deposited is not enough to pay for the acquisition, the
accept payments from any payment terminals in Ukraine. After customer will receive SMS noting the amount necessary to pay
choosing the payment through terminal option on a website to the same account number.
a customer will receive SMS with a payment code. Then he
should choose WebMoney on any payment terminal and enter WebMoney underlines that the benefit of this solution is the
the received code instead of the purse number. After deposit- typical program interaction between a website and Web-
ing the seller will receive a message about the accepted pay- Money: web shops and sites where WebMoney acceptance is
ment. Payments may in the same way be accepted through already connected may start accepting money from terminals,
partner banks` cashes. cashes, Internet banking without any adaptations. It is enough
only to turn on the relevant option in the settings.
“This will infinitely extend the payment audience of a website
as a customer will need no WebMoney registration”, the com- For seller the acceptance of such payments looks absolutely
pany says.
the same as the acceptance of payments from WebMoney
purses except for some peculiarities. Besides, this method may
The customer will pay the acquisition cost plus terminalbank
commission fee. The commission fee differs depending on the be used to pay only for the acquisitions which may be invoiced
chosen method, therefore it is recommended to pay 10% more in UAH (WMU). The payment is accepted to the seller`s U-
of the cost just to be on the safe side. If the amount deposited purse. The payment may be made only in Ukrainian terminals
is more than the acquisition cost + terminalbank commission (any ones), cashes and Internet banking of the banks listed.
fee, then the change will be credited to the WebMoney Check
and may be used for online acquisitions. And vice versa, if the Source: www.ain.ua
CHilDreN gooDs, WHiCH are NuMber oNe
iN iNTerNeT aMoNg uKraiNiaNs
owadays, a growing number of requested children products. From among the toys parents
Ukrainians who have children most often buy interactive games, educational toys, namely
order all necessary goods for sorters and playing carpets.
them in e-shops. Exceptionally
high percentage of purchases Sterilization installation for feeding bottles, heating device for
is accounted for by regions. feeding bottles, yoghurt maker and blander belong to the
Where there are few shops of- most popular household appliances searched by parents in
fering a wide range of children Internet.
products from distinguished
manufacturers. It is worth to be mentioned that consumers of children e-shops
are the most active participants of discussions of products on
The price comparison system the web-sites. One in two users who bought a children prod-
Vcene.ua carried out an in- uct in the net scurry to share their opinion on a children prod-
vestigation among its users uct with others.
and studied out, what children products are most frequently
bought in Internet. Reference: The price comparison system Vcene.ua belongs to
the group of companies Allegro (aukro.ua, emarket.ua, prom.
According to investigation data the most popular categories ua, slando.ua), the biggest holding in the sphere of electronic
of children products among users of the price comparison sys- commerce on UA.net. Today Vcene.ua occupies a leading
tem are baby carriages and accessories to them, children feed- position among price comparison sites operating in Ukraine.
ing chairs, and playpens. Near 100 thousand people visit the site Vcene.ua every day. A
key purpose of the system is to give users an opportunity to
The most popular models of carriages, which were searched compare prices for goods, to estimate the operation of every
by parents on web-site Vcenе.ua in September 2011 were Ta- e-shop, to study comments on goods and to make a successful
koJumper X, AnmarZico, and Roan MARITA. purchase.
Diapers, bins for them, and wet wipes are the most frequently Source: www.e-commerce.com.ua
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