Digest uadm 3rd_2011

CROSS-BORDER DISTANCE SELLING IN UKRAINE: INFO DIGEST JA

NU

ARY

201

1

Dear Colleagues,Traditionally I would like to present you the third issue of our information digest of distance selling possibilities in Ukraine. We continue to inform you about Ukrainian market potential and are sure the most actual data will help you to take decision about developing your business in Ukraine.

In this issue you will read about Euro-pean investments to Ukraine, find out

where Ukrainians prefer to buy clothes and what share of their income is spent on food and beverages.

We also would like to remind you about up-coming interna-tional business forum Direct Marketing Days in Ukraine 2011. Details you will find below.

If you have any questions, comments or additional information please do not hesitate to contact us via e-mail or our Hot Line +380 (44) 495 7885

ValentinKalashnik, President of UADM

3rd Issue

APR

IL2

011

eCoNoMIC NeWs INvestMeNt froM europe: Who gIves More?Starting year 2011 Ukrainian business could notice interesting trends happening in investments coming from Europe.

According to the recently published data of State Statistics Services following the results of 2010 growth of direct foreign investments from countries of European Union in Ukrainian economy made up 3 bln 616 mln USD (total investments are 35 bln 255,2 mln USD)

Comparing investments made by each country the undisputed leader by reinvesting of Ukrainian capital is Cyprus (+909,3 mln USD – up to 9 bln 914,6 mln). Three remaining prize places occupy German (+475,3 mln USD – up to 4 bln 707,8 mln), Netherlands (+753,3 mln USD – up to 4 bln 707,8 mln) and Austria (+53 mln USD - 2 bln 658,2 mln). Once could also note activation of money flows from France. Taking fourth place (2 bln 367,1 mln of direct investments) by the annual level of its investments increase (+736,3 mln USD) this country is the second one after main leader.

During the previous year the following countries decreased its investments in Ukraine: Spain, Slovakia, Slovenia, Finland and Czech Republic. The main leader in investments run off became Great Britain. From January 2010 to January 2011 volume of its investments decreased on +8,7 mln USD – up to 2 bln 298,8 mln USD).

So, after the last change of supreme governmental authorities (and foreign policy priorities accordingly) in Ukraine process of direct foreign investments redistribution in favor of European counties taking “neutral” (Austria, Netherlands) or frankly friendly (Germany, France) position towards Russia (new main strategic partner of Ukraine) continues.

Source: intercredit.com.ua

Cyprus 9,915 bln USD gerMaNy

4,708 bln USD

NetherlaNDs 4,708 bln USD

austrIa 2,658 bln USD

fraNCe 2,367 bln USD

2

April2011Cross-borDer DIstaNCe sellINg IN ukraINe: Info DIGEST

the experts are CoNvINCeD: baNks profIt WIll CoNtINue groWINg

According to the analytical survey conducted by Foyil Se-curities. Ukrainian banks have already accumulated enough money to repay expenses and henceforth could continue in-crease its profit.

According to the data pro-vided by National Bank of Ukraine net profit of Ukrai-nian banks in January-Febru-ary made up 205 mln UAH. Within first two months of the current year bank net in-

terest revenue reached 9,1 bln UAH, that is 9 % higher than within the same period last year.

Analytics note that net commission income from trading trans-actions also grew 13% and 18% accordingly comparing to the same period last year. Deductions for credit costs coverage decreased 40% and made up 4,2 bln UAH.

“Development of bank sector is going on according to our ex-pectations. Great number of banks accumulated essential pro-visions to cover credit loss in 2009-2010. Decrease of deduc-tions in this sector is the main reason of its profitability growth. Therefore till the end of year we expect further increase of banks income” said Analytics department head of Foyil Securi-ties Agshin Mirzazade.

Source: finance.ua

Market NeWs Where ukraINIaNs Dress up: Clothes froM boutIques vs WorN-DoWN-Clothes Ukraine is listed as country where retailers are recommended “to go immediately.” Experts estimate that if Europeans spend only 14 % of their budget on clothing and footwear in Ukraine this figure reaches 22 %.

Portal finance.tochka.net found out which brands are pre-ferred by Ukrainians and how much they spend to look stylish and follow fashion.

According to the study of sociological group “Rating” [TV1] overwhelming majority of Ukrainians (84%) still continue to dress at the bazars. One third of respondents buy clothes in small stores, 14% — in department stores and supermarkets, 5% — in stores of branded clothes. Despite the absolute lead-ership of bazars after the crisis Ukrainians began to pay more attention to product quality.

Experts observe a different approach to shopping in our fashion-conscious people. Between two extremes - boutiques and bazars niche occupied by so-called middle-price segment stores appeared. Among clothes and footwear retailers Ukrai-nian buyer prefers such brands as Marks & Spencer, Zara, Ben-etton, Intertop, Plato, Monarch.

In general recent economic crisis taught Ukrainians to save on clothes. Average sum of consumer receipt in Kiev as before ranges from 1000 UAH to $1000 but now people buy more items on for this money. “Before people were buying 4-3 items for this amount and pay no attention to the price for they just simply liked clothes and shoes. Now the buyers wait for dis-counts and sales. They want to buy something 100-200 UAH cheaper“ — shares her impressions Elena Tkachenko, a cashier of a shopping center in Kiev.

Source: finance.tochka.net

ukraINIaNs speND 51,5% of theIr INCoMe oN fooDAccording to the statistics Ukrainian people spend more than half of their income on food.

According to the official data in 2009 average Ukrainian spent about 50,4% of their income on food and beverages and in 2010 this figure grew up 51,5%.

Every 18th gryvnya was spent on wardrobe renewal, each 30th — on alcohol drinks and tobacco products and each 25th — on transportation. Currently average Ukrainian spends each 11th gryvnya on housing and public utility services and in near future this sum will grow.

Only 3,2 % of income in Ukraine is spent on health services people. It is less than amount of money being spent on poor habits.

According to the data provided by State Statistics Services total average monthly expenses of one family made up 3308 UAH (3440 UAH for families living in urban areas and 3012 UAH for families living in rural areas). Money distribution is very unbal-anced. Income of 10% of the most wealthiest people are 5,4 times higher than income of 10% of the poorest ones. At that 20% of wealth population made up 37% of total expenses.

Source: utro.ua

3

April2011Cross-borDer DIstaNCe sellINg IN ukraINe: Info DIGEST

INterNet NeWs INterNet peNetratIoN Is oN a rIsINg Curve Starting from 4th quarter of 2009 till 4th quarters of 2010 num-ber of Ukrainian people having Internet access at home grew 45%. At the end of year 2009 only 18% of Ukrainians had pos-sibility to use Internet at home. During 2010 percentage of “connected” people grew 26%.

The highest growth rate was fixed in Northern region of Ukraine in cities with population 51-100 thousand inhabitants (100% and 129% accordingly).

Still there is great distinction of Internet availability in villages and small towns and metropolitan cities. In last quarter of 2010 only 12% of village people and 25% of people living in town up to 50 thousand population had access to Internet at home compare to cities with population over 500 thousand people where Internet penetration index reached 38%.

HomebecomesaplaceofmainInternetaccess.

During the last year share of the people considering their home place as their main point of Internet access grew. At the end of 2009 66% of Internet users indicated home as main In-

ternet access point. During 2010 this share increased 11 % and made up total of 77%.

During last few years one could also observe tendency of Inter-net and mobile communication providers starting paying more attention to attracting consumers in middle and small towns. As a result in 2010 share of those who considered their home as main Internet access point grew in cities with population around 51-100 thousand inhabitants.

CommunicationinInternetshiftstosocialnetworks.

In 2010 for the first time of such researches conduction one can note tendency of decreasing of classic e-mail popularity. At the end of 2009 52% of Ukrainian Internet users were regularly using e-mails for communication. However in 2010 its share decreased to 48%. At the same time popularity of social networks grew almost the same percentage. 31% of users were using social networks on regular basis in 2009 and in 2010 their share grew up to 38%. Especially this tendencies took place among users aged 16-19 (57% said they are active users of social networks and only 48% considered e-mails on the first place).

Source: gfk.ua

soCIal NetWorks IN ukraINeExpert in social networks SarafannoeRadio has published TOP-20 rating of the most visited social networks in Ukraine.

1. 2. 3. 4. 5. 6. 7.

2 36 11,1 4 31 6,5 7 4 >0,4 8 6 >0,4 10 93 7,7 11 82 6,3 19 294 11,5

8. 9. 10. 11. 12. 13. 14.

22 7 >0,4 24 2 >0,4 32 12 >0,4 48 1727 17,5 50 33 >0,4 67 140 >0,4 78 10186 97,6

15. 16. 17. 18. 19. 20.

91 37 >0,4 98 998 7,5 105 1582 10 134 2051 9,5 1102 5,5 206 21135 55,6168

Place in Ukraine

Ukrainian share

Place in world

4

April2011Cross-borDer DIstaNCe sellINg IN ukraINe: Info DIGEST

As you can see the most popular social network is Vkontakte.

Ukrainians continue occupying first place in the world by Face-book penetration growth rate.

As of January 1st, 2011 total number of users registered in Facebook stating Ukraine as their country of living was 1 020 320 people.

At the moment 2,25% of Ukrainians are registered in Face-book. Ukraine occupies 68th place among countries world-wide by number of Facebook users.

According to the statistics 50% of Ukrainian users are women and 50% — men.

Newcomer in rating is LinkedIn.com so-cial network actively wining popularity in Russia and Ukraine.

Source: sarafannoeradio.org

uDMa speCIal

Traditionally for spring on May, 26 – 27 2011 Dialog Marketing Days in Ukraine is going to take place. For 10 years now DM Days is the leading forum for experts in communications. This time the event is planning on not only to keep up with its pace but also engage a wider audience.

Rendering tribute to the revolutionary slogans but holding evolutionary way as DM Days 2011 slogan simple but compre-hensive one was chosen. Down with monolog, up with dialog!

Reason is obvious. Brands that fail to communicate with their consumers are in the past. Of course none forbids to bring your ideas by mass communication but if you want to be heard (meaning: bought, ordered, recommended) bare speaking is not enough. Listening, hearing and communicat-ing are important.

For classic DM specialists this is not a secret but time to relax yet didn’t come! New communication tools are constantly ap-pearing. Nowadays success of the real professional is in the ability to combine strong basis with the new opportunities.

DMDayswilltraditionallyconsistofseparateinformationalflows:

loyalty Day

The message is always the same! Love your customer just like you love yourself :) Don’t send spam, don’t call without reason, don’t text at night, take care, protect and give him joy – and the customer won’t look for anyone else but you. But if you have 5 customers and 10 account managers this is more or less possible. But when we talk about thousands – there should be a system.

What kind of a system? We will get to know!

CoMMuNICatIoN strategy Day

Is direct marketing style business possible? Yes, moreover, it is impossible to run it in any other way!

While many marketing people were leading towards personal communications, these tools have already come to take over. ATL weapon does not provide desired results. How to change your strategy – hear, discuss, understand.

Facebookagedistribution

5

April2011Cross-borDer DIstaNCe sellINg IN ukraINe: Info DIGEST

DM tools Day

Is mobile and social media marketing among the DM tools? Experienced DM specialists have no doubt about that. As they imply personalized communication. But does one understand the specific features of these instruments? Practice of applica-tion? Skills of effective application? Unfortunately, very often this is not the case. Let us correct the situation!

CoMpeteNCe Day

Knowing WHAT to do we can pass on to WHO and HOW. Literally – which competences and character features should modern marketing manager have? Does he or she have to be smart, good-looking? Should he or she take the lead of every-thing and everyone, be able to enjoy life and be always ready to create? And the main thing – how to fit everything into 24 hours…

DIreCt hIt Day

Practice, practice and practice! Implemented ideas, proven results. Source of ideas. Pride in the colleagues and envy of competitors – all this at the public defense of the season 2010-2011 best projects according to the competent jury.

МО Day

Pace of distance selling development and rising turnovers of this market imply confidence in its prosperity in near future. Of course there are still more obstacles to overcome and more issues to solve.

Theconferencewillinitiatethediscussionofthefollowingkeypoints:

1. Catalogue mail order customer: who is that? Psychology of the distance purchase and the ways of effective application of the collected data

2. E-customers engagement and retention

3. Responsibility of the distance selling companies to the cus-tomer

4. Online catalogue as an important distribution channel for traditional catalogue companies

5. E-merchandising: how to sell more and better via online catalogue

6. Loyalty programs for the distance selling customers

7. Mobile marketing as an instrument of distance selling com-pany

8. Social networks – new opportunities of customers engage-ment for distance selling companies

9. Organization of effective service at a distance selling com-pany

It’s already a tradition that the national post offices of Europe-an countries take part with presentations. The representatives of the national postal services cover the subject of distance selling strategies, development strategies and entering the in-ternational market. Thus, last year the program included the speeches of the Hungarian Post and Swiss Post delegates. In 2011 the Austrian Post and the Ukrainian monopolist Ukrpoch-ta have agreed to make presentations at the conference.

The Ukrpochta representatives will speak about the existing services and projects, special services for distance selling com-panies and other information, which cannot be found on the internet. Conference participants will have an opportunity to ask questions.

Thepresentationwillconsistofthefollowingparts:

1.Introduction about distance selling market by Ukrpochta

2. Ukrpochta as the major operator of the postal logistics in Ukraine, advantages of its infrastructure

3.Existing and potential services for distance selling companies

4.Consignment mechanism for distance selling

5. Safety of the information the company passes to the Ukrpochta

Please not hesitate to contact us or DM Days organizing com-mittee in you have any questions.

Organizing committee: +38 044 490-90-88; [email protected]; www.dmdays.com.ua

6

April2011Cross-borDer DIstaNCe sellINg IN ukraINe: Info DIGEST

prospeCts of ukraINIaN DIstaNCe traDe Market.expert opINIoN Igor suboW

Igorsubow

Head of Mail Order, ROSAN, Ukraine

Chairman of postal logistic committee at NAMO, Russia

Please describe in a few words dis-tance selling market in Ukraine?

Young, dynamic, perspective.

What is the main difference between distance selling market in Germany and Ukraine from your point of view?

German market has long history and high level of maturity while Ukrainian market has just begun its development 5–7 years ago. On average annually 370 EURO is spent on distance selling per capita in Germany, in Ukraine this figure is only 10 EURO. Though German market is growing up to 4 % per a year, the constant growth of the Ukrainian market is more than 30% per year.

What is the reason of such a rapid growth of Distance Selling market in Ukraine?

Most of Ukrainians are looking for products and services of European standards of quality. At the same time the supply of such products and services is bounded in Ukraine today. Therefore distance selling gives Ukrainian consumers a unique opportunity to get a wide range of goods of a high quality at affordable prices. This allows them to spend personal budget in more effective way.

Are there any limiting factors if distance selling growth?

Ukrainian market is very young therefore lots of consumers do not always trust buying products offered via distance way. People want to touch and see products. The majority of the consumers contact call-centers before making an order by catalog or Internet to verify the proposal seriousness. That’s why professional call-centres play an important role in devel-opment of distance selling in Ukraine.

What do you think are the similarity and the difference be-tween Ukrainian and Russian distance selling markets?

Similarity of both markets is first of all in mentality, language and rapid growth of distance selling — about 30 % every year.

Difference is in level of market development. In Russia about 20 Euro is spent annually on a distance selling per capita, in Ukraine this figure is only 10 EURO. There are two reasons for this: Russian distance selling market began growing rapidly 4–5 years before Ukrainian. World big players such as Quelle, OTTO, Yves Rocher, La Redoute entered Russian market with great investments about 4–5 years ago. All these companies already opened their representative offices and currently are operating using direct import scheme. Most of the European distance companies present in Ukraine operate using postal consignment and have no representatives in Ukraine.

What is level of Internet penetration in Ukraine nowadays?

Today coverage of broadband Internet is up to 25 %–30 %. But spreading of Internet service grows every year on 20–25 %. While mobile Internet, which covers all the territory of the country, became more and more popular. Young people will-ingly use Internet for searching and ordering necessary prod-ucts at affordable prices.

Which key trends do you see in the development of distance selling market in Ukraine?

In the next 5 years, distance selling market will show the most dynamic growth — not less than 30 % in a year. Due to growth of internet penetration, more consumers will use this channel to or-der the goods. The number of distance selling users, the number of orders per year and the average order value will grow.

Why should European distance selling company start its activ-ity in Ukraine?

First of all, I would like to mention the following points:

1. Rapid growing consumer market

2. The consumers want to have the wide range of goods at affordable prices

3. Rapid growth of internet penetration

4. Possibility to enter the Ukrainian market using consignment (minimum risks, lack of investments)

5. Low percentage of returned items

6. There is necessary infrastructure for distance selling (call-centers, fulfillment, and logistics).

Innextdigestyouwillfind:

Please feel free to write us at [email protected] if you want to decline or recommend digest to your colleagues.

© UADM, 2011