British online store NEXT to try its luck in Ukraine

Photo: Reuters

One of the largest British online retailers Next is appearing on the Ukrainian e-commerce market. The company has already opened the local version of the website with prices listed in hryvnia. In addition, it organized direct and free of charge delivery of goods to Ukraine (for orders from UAH 250) over 5-7 days together with the DHL courier service.

Next spokesperson Rebecca Young told Capital that the company is currently seeking a PR agency to promote the brand in Ukraine. «That is why we cannot yet provide commentary,» she said.

The online retail association IMRG and ComScore company in their October report name Next the largest in the UK online player in the segment of fashion retail (clothing, footwear and accessories). In addition, the company is among the Top 10 online retailers in the UK. The number of active buyers through catalogues and the internet is around 4 mn and its products are delivered to over 70 countries around the world. The Next retail chain also has 500 of its own stores in the UK and Ireland and around 200 franchise stores in over 40 countries of the world. The company reported a total profit of US $5.8 bn in fiscal year 2013.

Ukrainians are ready to buy from abroad

Trans-border shopping is a worldwide trend that Ukrainian consumers are hooked on. According to data of GfK Ukraine, around 25% of internet users made online purchases abroad last year. The top five online retailers include American eBay.com, Chinese Aliexpress.com, Taobao.com (a part of the Alibaba Group) and the U.S.-based Amazon.com and 6pm.com (clothing store owned by Zappos.com). The Alibaba Group is currently considering the possibility of localizing its websites for Ukraine, which would increase sales in Ukraine, according to Capital’s information. Representatives of the group, however, did not respond to the publication’s request.

Head of the logistics company Mist Express Rostyslav Kisil says in December users in Ukraine will be able to have direct deliveries from 50 online stores from 12 countries, where Mist Express operates.

It is also impossible to calculate how much Ukrainians spend in foreign stores, says President of the Ukrainian Direct Marketing Association Valentyn Kalashnyk. «We can only draw conclusions based on the data of logistics companies,» he says. According to Ukrposhta, the number of packages sent from abroad to Ukraine increased from 0.9 mn to 2 mn in the period from 2011 to 2013.

Unstable market

The volume of the Ukrainian e-commerce market was estimated at approximately US $2 bn in 2013. Over the past five years, this figure nearly tripled. Fashion is among the fastest growing segments on the Ukrainian market. Market players asked by Capital say the sales of clothing, footwear and accessories are growing by 50-100% annually. However, in 2014 the sales of clothing in the dollar equivalent dropped, says Chief Operations Director of the Top Mall marketplace Yevhen Hanzha. He says the currency fluctuations and the complicated situation in the eastern regions of the country and in Crimea had a serious impact on this. Initially, TopMall worked in this segment. However six months ago the company’s management made a decision to concentrate on the category «Household Goods» as the most promising segment in Ukraine. «There are already market leaders in the electronics and clothing segments. In addition, the global players (for example LaModa with active promo on TV) are actively entering them. Meanwhile, the household goods segment is still in the process of formation,» says Hanzha.

At the moment, the volume of online sales of clothing, footwear and accessories in Ukraine, based on different estimates, ranges from US $80 mn to US $200 mn.

At that, the share of the internet in overall sales of these goods is insignificant. According to the Co-founder and Director of Prom.ua (which provides the market place for nearly 400,000 stores) Mykola Paliyenko, this figure is around 2-3%.

Local competitors

Shopping clubs, where registered users are offered to buy goods with large discounts (usually up to 70%), are the largest online vendors in the fashion segment in Ukraine. ModnaKasta and LeBoutique are the leaders in this segment. According to Forbes magazine, the earnings of each of these projects exceeded US $35 mn last year. Marketing Director of LeBoutique Pavlo Levchuk says the online demand for clothing, footwear and accessories offered at a discount price continues to rise due to the crisis. «Trying to economize on clothing, footwear and accessories people prefer to buy them at sale prices. The deeper the hryvnia devaluation, the more evident this trend will be,» he explains.

Traditional online stores also tried to capture a niche in this segment. For example, the sale of clothing and footwear was launched on Rozetka.ua in the spring. It is the largest online store in Ukraine, which initially specialized in household appliances and electronics. At the moment, there are over 40 footwear brands and around 20 clothing brands on the website.

Also, the online store Fotos.ua is gradually expanding its specialization. Last month the company added cosmetics and healthcare products to the list of goods offered for sale. This week the website moved to the abridged domain f.ua so that consumers would no longer associate it with the sales of household appliances and electronics.