You're reading: E-commerce turbulent due to hryvnia drop

Due to hryvnia devaluation the volume of online sales in Ukraine rose from Hr 16 billion in 2013 to Hr 21.7 billion in 2014, but in dollar terms it actually dropped from $2 billion to $1.4 billion, according to e-commerce.com.ua.

The most profitable on the market are home appliances and electronic gadgets, reaching $1 billion in sales. Clothes sales volume is $150 million and is considered harder to sell, as clients usually want to try clothes on before purchase.

Other segments of e-commerce, like online concert tickets retailers, slumped in 2014. “There were always many concerts in Crimea, Luhansk and Donetsk and their share in sales was quite big. Now there is nothing – no clients, no events,” says Maksym Plakhtiy, founder of Karabas.com, an online ticket seller.

Ukraine’s e-commerce includes over 100 companies and thousands of employees. This is only two percent out of the general retail industry volume, but the forecast is that it will grow to more than 8 billion dollars in 2018.

Rozetka was the pioneer among online retailers in Ukraine. It works with many suppliers and sells goods by setting its own prices, which are usually 20-30 percent higher than those of its competitors. Despite high pricing policy, Rozetka is still the industry leader, said Oleksandr Romanishyn, an expert at EY.

In November 2014, it had almost six million website visitors, e-commerce.com.ua reports, which is over 30 percent of the Ukrainian internet users.

Despite the leading position, the company, just like its peers, faced a sharp drop in the number of website visitors throughout 2014.

“The core problem is the ongoing anti-terrorist operation (against the Russia-backed separatists), which cut (eastern) regions of delivery,” Vladyslav Chechotkin, chief executive officer of Rozetka, says. “While many small online retail players tried to deliver to Luhansk, Donetsk and the annexed Crimea, we stopped doing that to keep the positive economic effect,” he continues.

Chechotkin believes that the war and hryvnia devaluation are the two factors that impeded the market, while the low internet awareness and mistrust to online sellers from the clients’ side are permanent problems on the Ukrainian online retail market.

“People tend to look for the product online, but prefer to buy it in the offline stores,” Chechotkin explains. That also adds to the gap between the online payments and cash on delivery. In Rozetka e-payments stand at just 35 percent, compared to 65 percent of cash on delivery payments.

Mykola Palienko, chief executive officer at Prom.ua, another e-commerce firm, says that 2014 showed growth in terms of new clients and sales.

Despite the current crisis in the Ukrainian economy, that impacts e-commerce too, new services will continue to emerge, since this segment offers the biggest capitalization and growth opportunities, Palienko believes.

“To start buying online, one needs to buy online at least once,”he says. “The comfort of the purchasing experience defines whether the client will trust the service and come back,” he adds.

Karabas, the leader among online ticket retailers, lost around $100,000 in revenue last year due to the crisis in the east, known for active concert-going. Overall turnover reached $11 million. It also lost 40,000 active clients out of its 100,000 client base.

Allbiz, a global online retailer operating in Ukraine, sells goods from 90 countries. Ukrainian market is less than a third of its sales. In 2015, the company hopes for growth in Asia, especially India, China and Kazakhstan as both supply and demand from the Asian countries grows.

“As for Ukraine, we have quite a negative forecast in macroeconomic prospective,” says Dmitriy Lisitskiy, chief executive officer at Allbiz’s Ukrainian branch. “We, however, expect growth in dollar equivalent as in bad economic conditions everyone is interested in selling more and we help producers to do it.”

According to Lisitskiy, e-commerce businesses will continue to develop anyway. “There is no need to be a super genius to understand that when there are products and there is demand for them, then there will be consumers, who will look for the most convenient way to buy them,”he says.

Kyiv Post staff writer Bozhena Sheremeta can be reached at [email protected]The Kyiv Post’s IT coverage is sponsored by AVentures CapitalCiklumFISON and SoftServe.