What you need to know before expanding to the Ukraine

The Ukraine may not be on most direct retailers’ radar, with many considering international expansion opting instead for more tried and tested regions such as France, Germany and the Netherlands. But, according to a new report by the Ukrainian Direct Marketing Association, the Ukraine is not yet saturated with mail order and ecommerce sales and could hold great potential for a cross-border retailer looking to establish itself as a market leader.

According to the organisation’s estimation, there are more than a dozen big international companies specialising in distance selling successfully working in the Ukraine. Having analysed trends from the latest decade, it says that one or two international mail order companies enter the Ukrainian market every year.

Ukraine mail order shoppers are fairly evenly split, though women aged 20 to 45 are the most prolific customers. Most distance purchases are for clothes and shoes (36.4 percent), books and magazines (23 percent), and electronic consumer goods (20.3 percent). Cosmetics and beauty products make up 9.1 percent of total direct sales, while furniture and household appliances account for 7.4 percent. During 2010-2011 each Ukrainian spent around €55.5 (£46.42, $71.37) on clothes and shoes, €34.5 (£28.85, $44.36) on cosmetics, and €47.8 (£39.98, $61.47) on household appliances. That may not sound like much, but then consider the average monthly wage in the country is just $350 (£224, €269).

Go east!
Social media is extremely popular in the Ukraine, according to the report. It says 54.2 percent of the country’s population accesses social networks every day, with around 25 percent using paid services on these sites. But companies looking to target the Ukrainian market via social media are advised not to use Facebook and instead to use Russian social network Vkontakte as more than 40 percent of the population is registered with it.

In addition to social media, other popular means of customer recruitment in the Ukraine include sending minicatalogues or inserts in magazines; advertising in the press and online; pay-per-click and other online marketing tactics; inserts in product despatches; cross-mailing and cold direct mail.

The most popular way of paying for goods bought online or by mail order in the Ukraine is cash on delivery, which is favoured by consumers living in small settlements where a post-office is nearly the only way to receive orders and pay for them. Another reason, according to the Direct Marketing Association, is that online payment systems are still in their infancy in the Ukraine and not fully trusted by consumers. Some Ukrainians equally have a distrust for online order processing systems and 60 percent will call a merchant’s telephone order line to confirm the status of the order placed online. Opening a call centre to handle customer enquiries is therefore essential for any business considering expanding to the Ukraine, though the chart below does note the growing popularity of the internet as an ordering channel.

When it comes to returns in this Eastern European country, the rates are low with only 5-14 percent of all clothes and shoes, 1 percent of all cosmetics, 2 to 4 percent of all household appliances, and around 3 percent of all other products that were bought in 2010 being returned to the retailer.

Order of preference: the channels of choice in the Ukraine