You're reading: Private postal firms doing laps around state’s Ukrposhta

The rapid growth of e-commerce in Ukraine, mainly through online retail shops, that sell everything from headphones to boilers, have colluded to create a lucrative market opportunity for innovative postal services.

State-owned Ukrposhta, a huge postal service of 13,000 outlets, most of them overcrowded in the the middle of the month when people come to pay their utility services, seems to be satisfied with serving as an eyewitness rather than an active participant of Ukraine’s fast growing e-commerce market.

The value of Ukrainian e-commerce rose from $0.73 billion in 2010 to $2.37 billion in 2013, and is projected to rise to $5.65 billion by 2016, according to Morgan Stanley, an American bank.

Private postal service companies have sprung up in response.

Nova Poshta

Kyiv-based Nova Poshta dominates e-commerce deliveries and is a leader in growth terms, doubling its postal market share for the past four years to almost 20 percent. Founded in 2000, the company has more than 1,500 outlets around Ukraine. An estimated 60 percent of their post volume is related to e-commerce. Last year revenue exceeded $100 million.

Meest-Express

Lviv’s Meest-Express shifts a lot of big cargo to and from abroad. Having located most of its 350 outlets in western oblasts, it bets on cooperation with Ukoopspilka, a government-run retail chain founded yet in 1920 that is in a poor business condition but seeks for revival. Ukoopspilka claims to have as many as 10,000 retail outlets.

Meest-Express grew out of the Meest, meaning “bridge” in Ukrainian, an international cargo company founded in Toronto, Canada back in 1989 to deliver care packages to relatives of the Ukrainian diaspora.

Nochnoi Express

Nochnoi Express, originating from Zaporizhya, focuses on overnight deliveries between towns and cities, and has grown mainly in the south. Meanwhile, Autolux delivers packages along the bus routes the company services, CAT works mainly in the business-to-business segment, In-Time does a little bit of everything.

Ukrposhta

Ukrposhta has been unable to take advantage of this commercial opportunity because of bureaucratic inertia and a lack of money and vision to invest in new postal technologies. This negative assessment comes from the general director of Ukrposhta himself, Mykhailo Pankiv, who was appointed to the position in April after heading Meest-Express. The state-owned deliveries operator used to control half of the postal market in 2010 and now its share shrank to 42 percent.

Ukrposhta tries to attract those who send light packages, offering substantially lower prices for packages under 2 kg, $1.2-2.5 against $1.6-3.5 at Nova Poshta, However, deliveries up to 10 kg are on average 16 percent cheaper with Nova Poshta.

Moreover, Ukrposhta does not actually deliver packages to a home address. Rather, the addressee receives a hand-written message, informing him or her that the delivery can only be collected from a specific local Ukrposhta outlet. This can be inconvenient, especially since private operators usually call in advance and schedule a specific time when a customer is going to be at home so he could or she could receive the delivery.

A Nov. 14 tender to buy automated sorting machinery for Ukrposhta was canceled because of “violations,” reported the business daily Capital. Mail is still sorted by hand there. However, the company still made almost $500 million in revenue last year.

Olena Lytvynenko, a translator in her 30s who lives in Kyiv, says Nova Poshta is more convenient as one doesn’t have to fill in any documents while making an order, because managers do this. “This one time I needed to send a document to my sister in Kirovograd through Ukrposhta… They have special templates to fill out and you never know how,” she said. “So you have to consult with the employees and they are almost never polite.”

Moreover, Lytvynenko says Nova Poshta delivers her packages the next day, while for Ukrposhta it usually takes longer.

Global rivalry

The Ukrainian companies are little concerned about their famous global rivals. “The ‘big 4’ postal companies – DHL, UPS, FedEx, TNT – focus much more on international deliveries,” says Nova Poshta’s director of development Serhiy Kovalenko, “and so they aren’t as strong as competitors as they might be.” Also, they charge much more than domestic rivals and their clientele are more often multinational corporations.

And there is room for serious growth. The average Ukrainian sends no more than 10 letters and 1.5 parcels per year, whereas, in the European Union this figure is 10-20 times higher, according to the Ukrainian business website Dsnews.

Kyiv Post business journalist Evan Ostryzniuk can be reached at [email protected].