Sellers of household appliances and electronics are observing a decline in the number of consumers

Photo: Fotobank.ua

The plummeting volumes of consumer lending have worsened the situation on the household appliances market in Ukraine. Over nine months retailers sold 16.2% less household appliances in natural units than in January-September 2013, according to Head of the Assortment Management Group of the Eldorado chain Vyacheslav Sklonniy. In October the situation with sales has deteriorated. Sklonniy said that in the four weeks of October 25% fewer goods were sold compared to the same period last year. He said that in the dollar equivalent the market sank 41% and in hryvnia – by 6.3%. “In January-October the sales volumes in units decreased by 30%,” sums up Head of the Supervisory Board of the Foxtrot.Household Appliances chain Valeriy Makovetskiy.

Creditors let down

There are several reasons for the sales decline. “The prices in hard currency did not change, but they increased 60% in hryvnia due to devaluation of the national currency,” explains General Direct of the Eldorado chain Serhiy Tsybulskiy. Consumer preferences of Ukrainians are also changing. According to GfK Ukraine, the corresponding index dropped in September by 0.9 points to 53.8 points (based on the responses of the audience aged older than 16). The maximum indicator of the index is 200. In high time of consumer lending in 2007, the index in August reached 102.9 and in October – 94.9 (data of consumers aged 16-59 were taken into account).

Consumer crediting could have supported the market. However, according to the NBU, over nine months the volume of loans issued to individuals decreased from UAH 121.8 bn to UAH 113.5 bn. At that, as Capital wrote earlier, over the same period the portfolio of retail loans issued by PrivatBank dropped by UAH 1.25 bn to UAH 21.3 bn and Delta Bank – by UAH 326.6 mn to UAH 16.6 bn.

Work in the retail business demands liquidity in the category of bank loans, which financial institutions do not have, explains CEO of Investment Trust Bank Oleksandr Podolyanko. Moreover, such loans are the riskiest ones, while repayment of debts is a risky business, he adds. “In autumn last year around 40% of all goods were purchased on loans, while now the figure dropped to 25%,” says Makovetskiy. The same situation is typical of all other retailers, where the share of loans issued for purchasing household appliances amounts to 22-24%.

Illusive prospects

The volumes of New Year holiday sales will depend on the situation in the east of the country. “If no substantial changes happen, sales in the national currency in October-March will increase by 10% versus March 2013,” notes Tsybulskiy.
Next year will be more complicated for retailers. A similar situation was already observed in 2009, when the shelves of the stores selling household appliances and electronics were half-empty and the chains practically stopped offering goods in the medium and high price categories. The first signs of that are already being observed.

The general director of the Eldorado chain says that Ukrainians are not ready to spend more money for purchases in the national currency. “Just like last year consumers plan to spend UAH 4,500 on a washing machine. However, less functional equipment can be purchased for this money,” he explains. The share of the low price segment over the year grew from 70% to 75%, adds Makovetskiy.

Given this, retailers will be forced to reduce their expenses by closing unprofitable stores, letting go of employees, etc., Managing Partner of Retainet Oleksandr Lanetskiy is convinced. For example, this year Foxtrot closed 14 outlets and currently has 200 stores, while Eldorado reduced the number of its outlets by 13 to 153. Comfy, as Capital wrote earlier, is reforming its chain and reducing the space of its supermarkets from 2,000 sq m to 1,500 sq m.