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CROSS-BORDER DISTANCE SELLING IN UKRAINE: INFO DIGEST It is not just another issue of Digest! This is a striking confirmation of the fact that Ukraine has a significant potential for market distance- selling. And it›s not just a random guess: every year we experience the evidence of this potential in practice: the emergence of new players from abroad at the Ukrainian market, improving market infrastructure efforts of Ukrainian companies, and, of course, consumption culture boost of the Ukrainians. This can be confirmed by the results of the trade mission in Ukraine for distance-selling companies. Now on these pages of the Digest, we present you with most interesting facts voiced by experts in Odessa. I am convinced that such meetings of the professionals will make Ukraine closer and more understandable for European and Russian companies and lay the foundation for the successful development of your business on distance-selling in Ukraine. In turn, service companies, and above all – logistic partners endeavor to comfort your business development in Ukraine. And today, being the head of one of the leading delivery services in Ukraine I can confidently guarantee good quality European service of logistics companies. I hope that every fact and every trend covered on these pages of Digests, will strengthen your faith in Ukraine as worthy of your presence market! DEAR COLLEAGUES! ESPECIALLY FOR DIGEST «Trade mission in Ukraine: 360˚ over distance selling market potential» had a great success. We’ve reached our objective and create a new communicational platform which gathered people from Germany, Switzerland, Russia, the USA, Kazakhstan and Slovakia interested in distance selling and e-commerce market in Ukraine. We hope that the first meeting with Ukraine in the framework of the Trade Mission made an impression of our country and in future our guests can find the right projects and the right people for their successful implementation. During Trade Mission Days our guests received deep view of our market that gave them an opportunity to understand our country better. Especially for Digest we published the most interesting and bright reports from Trade Mission Days, which you’ll find below. We hope that this information will be useful for you and create an opportunity to join our Trade Mission Team distantly and share our experience! 10 th ISSUE November 2012 Trade Mission in Ukraine for Mail Order and E-commerce companies was successfully held in Odessa on September 20-21, 2012. Basic information from the presentations about the willingness of the country to new market challenges you can find below on the pages 2-7. And see you soon in January – in Kazakhstan! HOT NEWS Sincerely, Viktor Kuchma, Director General of Financial-Industrial Group ROSAN Julia Pavlenko, Chief Executive Officer Ukrainian Direct Marketing Association
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Page 1: Udma digest 10th issue

CROSS-BORDER DISTANCE SELLING IN UKRAINE: INFO DIGEST

It is not just another issue of Digest! This is a striking confirmation of the fact that Ukraine has a significant potential for market distance-selling. And it›s not just a random guess: every year we experience the evidence of this potential in practice: the emergence of new players from abroad at the Ukrainian market, improving market infrastructure efforts of Ukrainian companies, and, of course, consumption culture boost of the Ukrainians. This can be confirmed by the results of the trade mission in Ukraine for distance-selling companies. Now on these pages of the Digest, we present you with most interesting facts voiced by experts in Odessa.

I am convinced that such meetings of the professionals will make Ukraine closer and more understandable for European and Russian companies and lay the foundation for the successful development of your business on distance-selling in Ukraine. In turn, service companies, and above all – logistic partners endeavor to comfort your business development in Ukraine. And today, being the head of one of the leading delivery services in Ukraine I can confidently guarantee good quality European service of logistics companies.I hope that every fact and every trend covered on these pages of Digests, will strengthen your faith in Ukraine as worthy of your presence market!

DEAR COLLEAGUES!

ES

PE

CIA

LLY

FO

R D

IGE

ST

«Trade mission in Ukraine: 360˚ over distance selling market potential» had a great success. We’ve reached our objective and create a new communicational platform which gathered people from Germany, Switzerland, Russia, the USA, Kazakhstan and Slovakia interested in distance selling and e-commerce market in Ukraine. We hope that the first meeting with Ukraine in the framework of the Trade Mission made an impression of our country and in future our guests can find the right projects and the right people for their successful implementation. During Trade Mission Days our guests received deep view of our market that gave them an opportunity to understand our country better. Especially for Digest we published the most interesting and bright reports from Trade Mission Days, which you’ll find below. We hope that this information will be useful for you and create an opportunity to join our Trade Mission Team distantly and share our experience!

10th ISSUE

No

vem

ber

2012

Trade Mission in Ukraine for Mail Order and E-commerce companies was successfully held in Odessa on September 20-21, 2012. Basic information from the presentations about the willingness of the country to new market challenges you can find below on the pages 2-7. And see you soon in January – in Kazakhstan!

HO

T

NEW

S

Sincerely, Viktor Kuchma, Director General of Financial-Industrial Group ROSAN

Julia Pavlenko, Chief Executive Officer Ukrainian Direct Marketing Association

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CURRENT SITUATION AND E-COMMERCE TRENDS IN UKRAINE – UNIQUE MARKET RESEARCHVadim Pilipenko, Deputy General Director on Strategic Marketing Aukro-Ukraine

According to experts, in three years the internet penetration in Ukraine is expected to be 45% and 80% of Internet users (about 16 million) shopping online. This would mean a growth for remote and distance selling market, since, according to the speaker, this year Internet penetration is 35% and only half of the users are buying on the net. At the same time, 2012 is char-acterized as the period of the market formation which in turn will lead to increased competition.

The required market demand exists, as a critical mass of buyers have been formed. Modern logistics covers 50% of the popula-tion and 75% of Internet users and the prospective growth in this segment can only be secured by offering improved service and coverage. As for the payments, the main limiting factor is the lack of confidence, which the entry of safe payment system is likely to overcome.

So far, about a third of payments for online bookings are made in cash upon delivery, and more than half of users consider it tone the best way to pay – compared with payment at the offices, by credit card companies, through bank transfers, pay-ment services and other means. And at the time when the in-habitants of cities, and internet users mostly own bank cards, about 40% of the first at least once bought with them on the internet and in the second case, the percentage is more than – 70%. But buying experience and a desire to make new acquisi-tions present in both categories – though the vast majority of urban residents and users.

Consumer mentality has changed: compared with 2009 in 2011, for most buyers, the main incentive to buy was the low-est price on the Internet (it is understood by 54% of consum-ers in 2011 while 42% – in 2009), fewer consumers think this way of buying to be risky (here there was a decline from 51% to 43%), and the consumer is experienced – less Ukrainians consider online shopping to be a difficult task (10% in 2011 vs. 13% in 2009).

Allegro Group Ukraine is the largest holding company in the field of e-commerce of the Ukrainian In-ternet space. As of early 2012, the holding includes eight large special-ized projects, each of which is a lead-er in its segment in Uanet:

Aukro.ua – a number one place to buy and sell on the Internet.

Emarket.ua, Slando.ua – the larg-est private boards of Ukrainians’ on-line advertisements.

Vcene.ua – one of the leading price comparison sites for goods.

PayU.ua – Ukraine’s first international processing center that enables online shopping easy, fast and safe to ac-cept payments from their customers through a variety of payment options.

Prom.ua – Ukrainian shopping cen-ter on the Internet.

Ria.ua – holding, which includes both print and online media.

ModnaKasta.ua – online shopping club.

All Allegro (GU) projects are fo-cused primarily on providing the best possible services and opportu-nities to the population in making reliable and profitable online pur-chases.

Total Allegro Group Ukraine projects attendance exceeds 6 million inter-net users a month!

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The total audience of Internet users today amounts to 15 mil-lion, 10 million of them are already online buyers or going to become one. At the same time, a monthly audience of 3 million customers and a monthly reach of any e-commerce is about 85% of Internet users.

Most of all online shoppers are interested in consumer elec-tronics and household appliances, mobile phones, computers, equipment, clothing, jewelry, books, music and films, cosmet-ics, various tickets, children accessories and toys, sports equip-ment.

Meanwhile, about half of the market, which is estimated at 928 million dollars, is occupied by online shopping (49%), as a busi-ness model in the segment of consumer goods and services. Then there are services for the general classification (general classified) (23%), online auctions (20%), services group dis-counts (5%) and shopping clubs (3%).

Online stores work in a format b2c and its market leaders are ROZETKA.UA (this seller owns about half of the market), FO-TOMAG.UA, ALLO.UA, FOTOS.UA, MOBILLUCK.UA, SOKOL.UA, BONPRIX.UA. This is a segment of the illegal circulation: phone orders and payment on the order. Most orders of con-sumer electronics and major home appliances, mobile phones, clothing, children’s goods, and jewelry.

For players in the segment of the general classification, which work in a format c2c are SLANDO.UA, EMARKET.UA (they cover about 80% of the market), as well as TORG.UA, RIA.UA, OLX.COM.UA. This segment is characterized by the sale of used goods, regional sales and minimum monetization transactions.

Among the most popular online auctions are AUKRO.UA, PROM.UA (taking about 75% of the market), and ABO.UA, TORG.ALKAR.NET, ARBOOZ.UA. The distinctive characteristics of this segment, operating in formats b2c and b2b, is the low average price and the fact that the very business model has not passed the stage of formation yet.

Among the services group discounts GROUPON.COM.UA, POKUPON.UA and superdeal.com.ua are ahead, and among the shopping clubs are such as MODNACASTA.UA, PRESTIGE.UA and LEBOUTIQUE.COM.UA. These market players can boast soaring popularity, relatively high marginality and links to off-line market.

Also important is the fact that most of the market leaders (in different models) are owned by foreign investors (AUKRO.UA, PROM.UA, EMARKET.UA, SLANDO.UA, MODNAKASTA.UA (AG), TORG.UA (Kinnevik Investments, AVITO. RU), GROU-PON.COM.UA, BONPRIX.UA ...) and only one of them belongs to the Ukrainian private owner – ROZETKA.UA.

More and more Ukrainians understand the benefits of online shopping: the market has experienced buyer who learned through online stores to save money and time to buy. There-fore, in Ukraine shopping clubs and discount services are gaining momentum. They, as well as online auctions and tra-ditional online shopping, online ticket vendors, games, appli-cations and other models of commerce in the network have

any chance of rapid growth until 2015. Especially if you will be there to assist in the reform of taxation, interest in offline-business, having good players, the quantitative and qualita-tive growth of the user base, and other economic factors, which are already present in Ukraine, as well as their hopes for a more intense effect.

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ANALYSIS OF ONLINE AND OFFLINE MEDIA IN UKRAINE. DEVELOPMENT LEVEL. LEADERS. CASESLilya Gorelaya, Managing Partner Marketing Group OS-Direct

Off-line media are losing the battle to the internet in Ukraine. The market growth rate of advertising in the press and on the Internet can not be compared. Though growth is present in the offline and online but the latter is far ahead of his older rival.

This is accounted for the fact that the Ukrainians read too lit-tle (1.22 books per year), rarely visit cinemas (0.46 per year), but at the same time are very active on the Internet (especially blogging – 5th place in the world in Entries Account at Live-journal.com.

This accounts for the fact that the Ukrainians read too little (1.22 books per year), rarely visit cinemas (0.46 per year), but at the same time are very active on the Internet (especially blogging – 5th place in the world in Entries Account at Live-journal.com.

Meanwhile, in Ukraine, there are a lot of publishers that can boast some good circulation: UMH – 1398400, Mega-Press – 976 000, Burda – 927 000, Edipress – 690 000, Blitz-inform – 450 000, Independent Media – 365 000, PGL – 201 380. The most popular (also by circulation) editions, for ex-ample, for the entertainment of the female audience are: Natalie – 450 000, Yedinstvennaya – 265 000, Horoshyye sovety – 240 000, Otdohni – 200 000, Cosmopolitan – 185 000, Lisa – 160 000, Polina – 155000, Caravan – 140 000, Blik – 105 000, S toboy – 100 000. In the case of the male audience in front of all the publications Maxim – 88,000, Cool magazine – 70110, Men’s Health – 70,000, Kosmo news – 70 000. In the segment of tabloid leaders are the following ProTV – 451 000, TVweek – 341 600, Teleguide – 323 000, Telescope – 296 160, TVSeven – 118550, TV Park – 117 400, Weekly – 115 000, Serial – 106600, Programka – 105 0000, TV-Screen – 100 000.

Although, statistically, every magazine read by an average of 5 people, a quarter of Ukrainians say that they do not read the paper press, and only 40% regularly buy newspapers, sub-scribe to multiple editions or at least one. The rest buy it from time to time.

If we impose on the data specific figures the average cost of the tabs in the press, prices unaddressed distribution and per-centage of average it seems to be a fairly dubious picture of the success of advertising in the press.

Everything is totally different with the online market. Accord-ing to the data, about 20 million people access the network in Ukraine, including more than 17 million being regular users, and almost all of them are regular users of devices.

The majority (over 70%) surf the Internet from home, 14% – from offices, 8% – on mobile devices.

Separate role here belongs to social networks: Profiles in Vkontakte has 7,000,000 users, classmates – 5 million, and on Facebook – 2 million. Against this background, the adver-tising market is growing rapidly: in the year it has doubled and this year it will be about 800 million UAH (about $ 100 million, which is about one third of the advertising market in the press).

A vivid example of said above could serve a case of Bon Prix brand and its experience with the audience through a social network Vkontakte. Here are some facts about the achieve-ments of the page, that was launched more than a year ago – on the 1st of September 2011:

• 1.5 months – 2,500 fans (who found the page themselves);• mailing to the customer database brought 10,000 fans;• natural activity of a growth rate of 1000 fans in 20-25 days;• today the page has over 31,500 fans.

Details of the report can be found here.

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WHO AND WHY IS BUYING FROM CATALOGUES, THE INTERNET AND TV SHOPS IN UKRAINEYaroslav Pelykh, market analyst Consulting Company NSBK

In order to be successful in the market, it is necessary to thor-oughly examine its potential, including the consumer. This principle is true in the case of Ukraine, which population it is important to get to know with, to carefully respond to its re-quests in the field of catalogue and online trading.

Some words about a general portrait of the Ukrainian consumer.

Analyzing the structure of the population of Ukraine it is worth mentioning:

• the majority are women;• about two-thirds of Ukrainians – young and working-age

population;• approximately 70% of Ukrainians live in cities.

Given these data and the steady growth of GDP per capita, it seems quite favourable to do business in Ukraine. More de-tailed studies led to such results in the individual categories of consumption:

A consumer of distance-selling companies might be:• a woman (75-80% chance);• living in a city with a population of less than 100 thousand

people, PGT, village (probability – 50-55%);• on average, make 2 purchases per year;• the average bill per order is 45 euros.

The main reasons for buying in this segment are inability to realize their consumer opportunities (due to poorly developed regional retail) and the desire to buy something unique.

As for the use of the Internet by Ukrainians, about half of the population of large cities use it for selling and buying purposes. Other purposes of surfing online can be referred to as multimedia consumption, studying resources search, in-ternet calls. Also of interest is the steady Internet penetration increase into the country, where more than 15 million regular users are over 16 years old.

The consumer online shopping portrait is the following:• man aged 26-41 years old (55-60% chance);• living in Kiev or any other million inhabitant city (probability

– 50-55%);• the average bill per order is 30 euros.

Basic buying motive in this case is the desire to buy a unique product, at a lower price, avoiding visiting traditional store and delivery of goods, availability of detailed information about the product and its properties.

A separate category is TVshopping consumers, which the company NSBK sees as:

• woman aged 35-45 years (60-70% chance);• living in Kiev or any other million inhabitant city (probability

– 50-55%);• make repeated purchase (30% probability);• the average bill per order estimates 80-100 Euros.

The main motives for the purchase of goods from TVshopping is an impulsive decision to buy a useful thing for the household and health care here and now.

More information about this study can be found here.

UKRAINIAN LOGISTICS MARKET IS IMPROVING EVERY YEAR OUTGOING ITS NEIGHBOURS Dmitry Seleznev, Strategic Development Director «PGK GROUP»

Big leap in world ranking logistics efficiency of the World Bank (Logistics Performance Index) Ukraine has implemented over the past two years. The country shifted from 102 place in 2010 to 66 – in 2012. At the same time, the nearest neighbours of Ukraine, Belarus and Russia fell in the rankings and occupied 91 and 95 places respectively.

Obviously, in Ukraine this growth is due to the gradual elimina-tion of typical logistics market problems in the FSU. This lack of development of the network of roads, lack of modern cargo terminals, a high level of deterioration of road, rail and other transport component, as well as increasing its obsolescence.

At the same time, the turnover of Ukrainian market of e-com-merce increased by an average of 60-80% yearly, and in some product categories – by 150-200%. And it is, according to analysts, more than $ 1 billion. Acceleration of market growth could contribute to the determination of procedures for han-dling electronic money, the availability of cheap credit for the development, improvement of tax and customs codes.

* World Bank of logistics efficiency (Logistics Performance Index)

World ranking of logistics efficiency of the World Bank (Logis-tics Performance Index) is based on the following criteria: ef-ficiency of customs clearance procedures, infrastructure, trans-port logistics, the logistics industry expertise, and the ability to control the international supply procedure.

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PERSONAL DATA PROTECTION IN UKRAINE. WHAT IS TO BE EXPECTED BY BUSINESS?Dmitrij Yovdij, Partner Law Company «Leetas»

The Law of Ukraine on personal data protection , which en-tered into force on 1 July this year, and can not but influence the market distance selling. In the current edition of the docu-ment it is determined as:

• formal approach;• strict requirements for processors of personal data;• lack of mechanism to implement the Act;• availability of provisions that are not feasible in the realities

of the business processes.

The law as amended, requires a written or any documented form of consent to the processing of personal data. At the same time, the draft of changes to the law offers any possible form, which enables to confirm such consent.

Consent to the processing of personal data for the conclusion and performance of the contract as amended is required in all cases, and in the amendment to the Act it is required for the conclusion or performance of a contract, the party, which is the subject of personal data.

It is required that personal data written notification of the sub-ject to the inclusion of their personal data (PD) at the base of personal data (BAP) under the terms of the law, is amended by PD handler during 10 days in all cases without exception, and it is only in writing. Meanwhile, the draft amendment to the Act provides that such a need is not required for the conclusion or performance of a contract which is the subject of personal data and is carried out in any acceptable form.

Under the Act, as amended, personal data check in the public register is required in all the «PDB» and draft amendments to the law insists that it is not necessary to register ‹human’ PDB.

Regarding the possibility for self-regulation in the field of per-sonal data protection law, as amended provides for the crea-tion of corporate codes of conduct on the processing of per-sonal data in certain areas. Meanwhile, the draft amendment to the Act provides for the harmonization of codes of conduct by the authorized body, effectively giving the codes of con-duct of official status.

Obviously, these innovations are creating more favourable conditions for work in Ukraine, where both local companies as well as those who are attracted to this promising market will benefit.

TAX ASPECTS OF CORPORATE DISTANCE-SELLING FOR NON-RESIDENTS IN UKRAINE. THE SEARCH FOR OPTIMAL LEGAL MODELDmitrij Yovdij, Partner Law Company «Leetas»

There are several basic options for the distance-selling com-pany’s business for non-residents of Ukraine:

• through the registered in the territory of Ukraine legal en-tity or representation;

• through the use of business entities being on a simplified system of taxation;

• without business registration in Ukraine.

Meanwhile, there are some disadvantages and risks encoun-tered by the legal entity with registration in Ukraine:

• a significant tax burden on economic entities of Ukraine;• fiscal approach of the tax authorities, aimed at filling the

state budget;• the litigation tax payer and tax services in 9 of 10 cases of

tax benefit;• frequent tax audits (usually with additional taxes and pen-

alties);• the complexity of registration (especially for offices).

A list of current Ukrainian taxes includes:• 20% import VAT + customs duty under the Customs Tariff

of Ukraine;• income tax:

– by 31.12.2012 – 21%; – from 01.01.2013 to 31.12.2013 – 19%; – from 01/01/2014 – 16%;

• income tax expense for the permanent missions – 15%;• unified social contribution – 37% of the RFP Fund;• 20% VAT on the sale of goods to consumers.

Activity with the use of Entrepreneurs group also has its disad-vantages and risks.

Entrepreneur pays single tax flat tax in the amount of: – up to 20% of the minimum s \ n (1st and 2nd group) – the

maximum annual amount of revenue – up to 1 million UAH; – 5% of revenue (third group) – the maximum annual rev

enue of up to 3 million USD; – 10% of revenue (Group 5) – the maximum amount of rev

enue up to 20 million USD.

Without registration in Ukraine legal entities have their advan-tages.

Prerequisite for this is the import of goods into Ukraine only through international postal items!

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There is also an opportunity to completely lift the burden of the taxes payment to the country of incorporation.

There is no VAT and customs duties on importation of goods by international mail under the conditions:

• the cost of the goods up to 300 Euro;• product comes from one sender to one recipient no more

than once a day;• the range and quantity of the goods should not look like a

«bulk purchases»;• when goods cost more than 300 euros – 20% VAT and

import duty is 10%.

Operating without registration in Ukraine entity provides for the formation of the tax credit on export VAT by the export of goods from the country of registration. When using consign-ment schemes it is real.

Key terms of customs clearance as follows:• main problem – the rationale that the imported goods are

international mail;• registration of international mail marked «consignment» is

on the letterhead of the Single Administrative Document (Cabinet of Ministers Resolution № 450 from 21.05.2012);

• in a single customs declaration form on a single administra-tive document up to 999 products may be declared.

When operating without registration in Ukraine there is a risk of a legal entity the application of the permanent mission of a for-eign legal entity in Ukraine: a permanent representation – a fixed place of business through which all or part of economic activ-ity is non-resident in Ukraine, in particular: a place of manage-ment, a branch; office, factory, workshop, and any other place of extraction of natural resources, warehouse or premises used for the delivery of goods. For tax purposes, the term «perma-nent establishment» includes residents who have the authority to act on behalf of non-residents, which gives rise to a non-resident

of civil rights and obligations (contract (contracts) on behalf of non-residents, maintain (store) stocks of goods belonging to a non-resident , warehouse that supplied the goods on behalf of non-residents, except for residents with the status of a temporary storage warehouse or a customs bonded warehouse) – 14.1.193 sub paragraph 14.1 of Article 14 of the Tax Code of Ukraine.

Fixed place of business solely for the purposes of non-resident activity of a preparatory or auxiliary character – not represent-ative (paragraph 14.1.193 paragraph 14.1 of Article 14 of the Tax Code of Ukraine.

In this case, there are more ways of protection. The contrac-tual relationship between the company and a non-resident and the Ukrainian company-contractor (or representative) shall be made to perform certain types of work, from the content of which is clearly evident that these works are for non-resident subsidiary to the core business of a Russian legal entity – trade.

Opportunities for Russian DS companies to work through the registered legal entity in Ukraine:

• liberalized customs and trade laws between Ukraine and Russia in connection with the signing of the Treaty «On the free trade zone» of the year 18.10.2011 (ratified by Ukraine and Russia);

• introduced duty-free export and import of goods between states;

• zero VAT and no customs duties on the export of goods from the territory of the Russian Federation in relation to goods sent by international mail (paragraph 11 part 1 of Article 131 of the Federal Law of the Russian Federation on November 27, 2010 N 311-FZ «On Customs Regulation in Russian Federation»);

• ability to minimize income taxes due to costs of advertis-ing and market research (marketing), as well as pre-selling products.

MODERN LOGISTICS FOR DISTANCE-SELLING MARKET IN UKRAINE Vasyl Zhuravel, First Deputy of General Director JV «ROSAN»

Ukraine is a very promising and interesting market for e-com-merce companies. Today we observe a relatively low satura-tion of the market of goods offered for sale by postal services. The competition remains at a low level compared to the de-veloped markets of Western Europe and the U.S.. And this is a good starting position to win the trust of buyers in a country

with 45 million people. Especially, recent studies promise the market growth of 20-30% per year.

In this context, the role of local companies that can help new partners to be successful in the market of Ukraine. For exam-ple, the joint venture «ROSAN» can offer a ready logistics in-frastructure – both external and internal. The company has suf-ficient resources (transport and human) to serve its customers, and works closely with market players such as Lufthansa and Kuehne & Nagel.

JV «ROSAN» as a postal operator is actively working with na-tional postal operators of European countries. In particular, we have the existing agreements with the national postal opera-tors in Belarus, Russia, Moldova, Germany.

JV «ROSAN» – is the only private postal operator that deliv-ers parcels to Ukraine from the UIS countries. The company also provides postal parcels return, legal return of reclamation goods sent by mail. Existence of its own IT platform makes it easy and fast:

• connect to any client server;• provide reliable tracking of items;• simplify the paperwork.

At the same time, its own call center ensures effective commu-nication with customers. As individual benefits of working with JV «ROSAN» is the ability to trade without a representative office in Ukraine, without bearing additional costs.

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MARKET NEWSCATALOGUE COMPANIES AND ONLINE SHOPS ARE POPULAR AMONG UKRAINIANS

Over the first half of this year a record high amount of cloth-ing and footwear was imported into Ukraine – for nearly $ 700 million. But retailers have low chances to sell these goods: store traffic decreases as well as citizens’ desire to overpay for second-rate collections. Meanwhile, selling by catalogue companies, online boutiques and improvised shopping clubs which allow to dress edgy without spending a fortune increase turnovers.

Despite obviously not shopping moods of citizens, Ukrainian market attracts more and more networks. This year in Ukraine the first brand-name stores of such clothing, footwear and accessories TMs as s.Oliver (Germany), Furla (Italy), Weekend Max Mara, Marina Rinaldi (Italy), LC Waikiki (Turkey), Michael

Kors (America), HAPPYLON (Russia) are being opened. And in 2013 the first stores of large clothing networks such as H&M, C&A, Deichmann, Peek&Cloppenburg and Debenhams are ex-pected to appear. So the competition will only grow that is unlikely to increase retailers› profits.

However, the main threat to boutiques is not even a mass opening of competing outlets. Not wanting to feed the sell-ers and buy models of an economy class for the price of de-sign ones, more and more Ukrainians with the average and high level of income are looking for alternative ways to dress up. Catalogue selling companies (Otto, Bon Prix, and etc.) say that their sales rose by at least 15% in the last year. And this happened due to comparatively lower prices: the difference in comparison with store-bought counterparts can exceed 30%.

Even cheaper clothes and shoes actually could be bought at websites of western online shops and catalogues, which have not been officially represented in Ukraine yet. The best selec-tion of shoes and bags is considered in American 6pm, clothes – English George, Italian Matalan, Lasenza, and etc. At the peak of seasonal sales collections are sold at bargain prices – from $ 3-10 per unit.

Until recently, Ukrainians were restrained by troubles with plac-ing order: it was necessary to open a special foreign currency payment card, to be registered in the database, etc. But today the Internet is replete with declarations of middlemen who are ready for a small fee (5-7% of the purchase price) to take over these troubles. Many fashionistas unite in a sort of buying clubs and buy large quantities of goods, which helps them save on shipping. The number of Internet sites selling stock clothing of world famous brands has also increased over the past year.

BASED ON DEPO.UA REPORT

NEW PLAYERS TURNED UP IN THE FIRST HALF-YEAR IN FASHION-RETAIL SEGMENT OF UKRAINEIn the segment of fashion-retail major operators were most rapidly developing represented by brands of international net-works (Inditex Group and LPP SA Group), and Russian («Sports-master», «TsentrObuv») and national networks (MTI, ARGO), the press service of the of CBRE informed, says Building.ua.

In addition, I half-year of 2012 was marked by the Ukrainian market of new brands in the segment of luxury goods such as Prada and Valentino. The first stores of average price segment were opened: such as Italian apparel brand OVS, Portuguese W52 Jeans, as well as Russian footwear network operators Kari and department store lady & gentlemen CITY, and Polish shoe retailer Wojas.

At the same time, some operators, particularly the world-fa-mous network of fast-food Subway, Burger King, a network of natural cosmetics L›Oreal Body Shop, etc., have not reached the market in Kiev. First of all, this is due to the complexity for potential franchisees to meet the exacting requirements of the parent company by the number of stores opened each year due to lack of quality retail space, and in addition, the limited

financial resources of potential local partners.

SOURCE: BUILDING.UA

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November 2012CROSS-BORDER DISTANCE SELLING IN UKRAINE: INFO DIGEST

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UKRAINIAN MARKET IS INTERESTING FOR ONLINE RETAILER LAMODA Ukraine appeared on the list of the countries where Lamoda intends to develop. This was enabled due to one of the big-gest deals on the Russian e-commerce market. JP Morgan in-vestment division has invested in the development of online retailer Lamoda from $ 55 million to $ 80 million, becoming the owner of a minority stake on the company.

JP Morgan Asset Management, the investment division of JP Morgan Chase & Co, has taken part in the next round of fund-ing online retailer Lamoda, working in Russia and Kazakhstan.

The parties refused to disclose the amount of the transaction. According to a source familiar with the negotiations, it could be in the range of $ 40 million to $ 80 million. As it is stated by the co-founder of Lamoda, Nils Tonzen, the total transaction amount «exceeds the investment into similar projects in our industry».

Attracted investment Lamoda will let to increase the range, add to the portfolio of new products, brands and categories, as well as to expand its presence in other emerging markets besides Russia – in Kazakhstan, Ukraine, Azerbaijan and Bela-rus, said Nils Tonzen.

Since launching Lamoda (December 2010) such venture capi-tal market participants as AB Kinnevik, Holtzbrinck Ventures, Tengelmann Group have already invested to the project, re-calls Mr. Tonzen.

Lamoda project was launched by the German startup incuba-tor Rocket Internet (among startups receiving its support are Zalando, eDarling, Groupon (formerly CityDeal), TopTarif, Pay-leven). Lamoda sells clothing, shoes, accessories, household products, cosmetics and perfumes, offering products of 700 international brands. Its range is about 500 thousand items of clothing, shoes and accessories. Financial results have not been disclosed. SOURSE: KOMMERSANT.RU

RESEARCH: UKRAINIANS ARE INCREASINGLY WILLING TO BUY FOOD ONLINEIn the new study of Nielsen Company is stated that over the last two years number of consumers willing to buy food and drinks online increased by 44%.

A quarter of global respondents (25%) is going to buy food and drinks via electronic devices with Internet access (com-puter, mobile phone, tablet, etc.) in the next 3-6 months. In

addition, 61% of global respondents use the Internet to search for information when buying food / non-food items.

Nielsen global study on the Internet impact on purchasing of food / non-food items showed that growing interest in buying goods via electronic devices is marked in such product categories as: cosmetics and skin care (+3% to 25% compared with 2010), software (+18% to 29%), tickets to entertainment events (+10% to 30%), computer hardware / game consoles (+6% to 25%), video / music – CD, VCD, DVD (+5% to 23%), car / motorcycle and accessories (+4% to 11%) and, finally, clothing / accessories / shoes / jewelry (+1% to 37%). One in five (20%) of respondents is planning to buy an e-book or to purchase online subscription.

Trends in Russian and Ukrainian consumers’ behavior are very similar to global ones. Thus, Russians prefer to buy via elec-tronic devices tickets to entertainment events (35%), consum-er products (34%), computer hardware / game consoles (34%) and clothing / accessories / shoes / jewelry (33%). First among Ukrainian consumers preferences are home appliances (49%), then come clothing / accessories / shoes / jewelry (39%) as well as mobile phones and accessories (36%).

BASED ON KORRESPONDENT.NET REPORT

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November 2012CROSS-BORDER DISTANCE SELLING IN UKRAINE: INFO DIGEST

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FOREIGN RETAILERS INTEREST IN THE UKRAINIAN MARKET IS EXPECTED TO INCREASE IN THE NEAR FUTUREAnd the market will have something to offer, as the number of quality retail space required for international operators com-ing out, is growing rapidly, not only in Kyiv, but also in the regions of the country.

Also, according to E.Loktionovoy, Director of UTG, foreign operators prefer to work with only those brokers who have a good portfolio of completed projects and has the experience to bring new players into the Ukrainian market.

Head of Strategic Consulting Company UTG Victor Oborskyj noted that the real estate market in Kiev in the near future will significantly increase proposal by entering new areas.

The second half of 2012 in Kiev announced the opening of seven shopping centers with a total leasable area of about 223 thousand square meters, which will increase the total market supply by 28% to 1026 sq. At 2013 m from nine declared for the opening of shopping centers only six total area of 292.8 thousand square meters will most likely to open.

According to V.Oborskyj, the unprecedented new competi-tive and successful supply in the coming years will be the ob-jects corresponding to a number of marketing, architectural and commercial aspects: location, size commercial facility, professional concept, positioning, modern architecture, set demanded by the target audience of commercial operators, competent management.

At the same time, in a poll on the topic: «The most promising area of Kiev for the construction of shopping mall», conduct-ed by the portal Building.ua, 15% of visitors have called Desn-yanskiy and Darnitskiy areas as the most promising. 14% of

the votes scored Caves area. Shevchenko and Goloseevskiy – scored 10%. Podolsky, Obolon and Svyatoshinsky – 9%. Dnipro district got 6% of the votes of site visitors and Solomensky – 4%. In the vote on the «most promising area of Kiev for the construction of shopping mall» participated 220 people.

BASED ON RETAILSTUDIO.ORG REPORT

LEGISLATION NEWSCUSTOMS CODE STIMULATED ALMOST 2000 COMPANIES TO DO BUSINESS

From June 1 – the date of entry into force of the Customs Code, customs asked 1,700 new businesses in order to allow the accreditation of foreign economic activity. UNN this to the press service of the State Customs Service.

During the same period 1.8 million customs declarations were issued. In addition, the new Code fully resolved the issue of determining the customs value.

This is evidenced by the fact that in June, 85% of the goods were issued at the price indicated by the importer. In July and August 2012, the figure is about 90%.

The new Customs Code the customs clearance of one import-export operations reduced from 24 hours to 4 hours. But now the time for customs clearance single import transaction is only 1 hour and 25 minutes, and export – up to 43 minutes.

SOURCE: UNN.COM.UA

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November 2012CROSS-BORDER DISTANCE SELLING IN UKRAINE: INFO DIGEST

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ONLINE STORES OF UKRAINE WILL BE CLOSER TO THE INTERNATIONAL STANDARDS OF CUSTOMER SERVICEState Tax Service plans to force all online retailers to introduce cash registers, and couriers are obliged to issue the client checks. That is how tax personnel want to increase the tax liability of shops to those selling legal products.

Vendors have already said that after such innovations no cheap goods will be seen on the web any longer. The owner of the online store Bohdan Slatin said the courier service a few stores at a time, so they will have to carry a large amount of cash registers.

If you add to the cost price of the goods themselves to cash registers, product automatically increases of 10-15%. In SOT say, that ten items› cost is only a couple of cents.

Price certified in Ukraine portable cash registers range from 1500 to 3 000 UAH. According to the director of the compa-ny-manufacturer «Excella» Vladimir Krasnov, the demand for cheaper models is bigger. They are often bought for the Park-ing lots and by owners of small shops. The tax office said that not everyone will have to purchase them: small entrepreneurs will not. On the other hand, online shopping can turn into sites with prices for reference only.

As tax claim: for the first offense owner paid UAH, for the sec-ond – the full cost of the goods. And every additional penalty will be 5 times more expensive than goods. «In order to not raise the price too much as the competition at the market of online stores is extremely high, the traders will have to partially reduce their profitability. «The prices are expected to rise, but not for 20 or 16 % for all goods – for some it may be only 10-12 %», – said the economic expert Andrew Novak. SOURCE: BIZ.LIGA.NET

A NATIONAL SYSTEM OF CYBER SECURITY IS TO BE CREATED IN UKRAINE

One of the steps in the development of the information society in Ukraine should be a nationwide system of cyber security. Such an amendment, among others, is offered by National Communications Committee to the law on the ba-sic principles of the information society in Ukraine for 2007-2015.

Such changes, according to the Commission, are necessary because rapidly developing internet services, broadband, mobile phones in Ukraine and the legislation is lagging be-hind this growth. Among other amendments proposed, for example, to develop a system for evaluating the develop-ment of the information society in Ukraine and establish the Presidential National Council for Development of the Infor-mation Society. Recalling that early in February some govern-ment websites in Ukraine were attacked by unknown and remained offline, , for example, site of the President, Ministry of Interior, the NBU. These attacks were linked to the closure of file hosting EX.UA.

SOURCE: AIN.UA

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November 2012CROSS-BORDER DISTANCE SELLING IN UKRAINE: INFO DIGEST

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INTERNET NEWSON AVERAGE UKRAINIANS SPEND ONLINE ABOUT 27 HOURS PER MONTH

In the first half of 2012 Ukrainian Internet users spend online on average about 27 hours per month. This is three times higher than in 2008 (8 hours per month). This information is presented in the study of Mail.ru Group (data by TNS).

At the same time Ukrainians spend around 12 hours per month (on average) for printed media, about 22 hours for radio, and in recent years these figures are falling down. As before most of the time Ukrainians spend watching television (about 71 hours per month).

SOURCE AIN.UA

UKRAINE IS 9TH IN EUROPE IN TERMS OF INTERNET AUDIENCE VOLUMEAccording to information of consulting company «GRT & C» Ukraine is the ninth in Europe in terms of the Internet audience volume with 15.5 million of Internet users at the beginning of the year.

Meanwhile due to online audience correlation to the total population Ukraine has worse position and the figure corre-sponds to 33% (for comparison, in Russia it is 44%).

As of early 2012 there were approximately 2.2 billion of Inter-net users and 500 million of them lived in Europe. It is foreseen that within a few years Internet audience will grow to half of the whole world’s population (over 3.5 billion).

Let’s recall that according to TNS company research Ukrain-ians spend on average 27 hours per month online. Compared to 2008 (8 hours per month), time spent by citizens of Ukraine in the Internet more than tripled.

SOURCE: FINANCE.UA

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