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Not by IKEA and H&M alone - which other brands to enter Ukraine?

Author : Yuriy Hryhorenko

Since 2015, about 20 new brands enter the Ukrainian retail market annually
17:00, 12 October 2018

The arrival of IKEA and H&M in Ukraine has become the main event in the domestic retail market. The Ukrainians have long been waiting for these companies. Their arrival can push other retailers to enter Ukraine. Experts refer to companies that might soon open their stores in Ukraine, although there are no big names among them.

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Since 2015, about 20 new brands enter the Ukrainian retail market annually. According to UTG company, in 2017, 19 such brands have entered the capital market:

Cole Haan, men's and women's shoes and accessories (US)

Liu Jo, women's clothing, shoes, and accessories (Italy)

Rinascimento, women's clothing (Italy)

BraBraBra, lingerie (Belarus)

Baldessarini, men's clothing (returned to Ukraine) (Germany)

Xetra, women's clothing (Italy)

Hanro, men's and women's underwear (Switzerland)

Tоus, jewelry (Spain)

Golden Point, hosiery (Italy)

FYNCH-HATTON, men's clothing (Germany)

Saucony, shoes, clothing, and accessories for running (USA)

V.I.P.A, lingerie (Latvia)

Okaidi, children's clothing (France)

CCC, men's and women's shoes and accessories (Poland)

Lee Cooper, jeans wear (returned to Ukraine) (England)

Town Scotch & Soda, youth men's and women's clothing (Holland)

Under Armor, sportswear (US)

DJI, electronics (Quadcopters and Accessories) (China)

Xiaomi, electronics (China)

In general, according to UTG, in 2012, 25 brands came to Ukraine (including Dolce & Gabbana, Valentino, and KFC), in 2013 - 16, in 2014 - 16, in 2015 - 19, in 2016 - 17, including American Calvin Klein Underwear and Converse.

According to CBRE Ukraine, one of the important trends in 2018 is an intensification of retailers in the retail property market, represented by the growth in the number of brands that have entered the market in Kyiv and the regions.

During the first half of 2018, 11 new international brands entered the Ukrainian market, which increased investors’ interest in retail real estate assets and in the retail market as a whole. Of course, one of the most significant events of this year was the entry of brands such as IKEA and H&M to the market. And although IKEA has not opened its store yet, H&M is already working successfully (the store opened in Kyiv on August 18).

"The brightest and most anticipated event of 2018 is opening of the first H&M store in August in the LavinaMall shopping center, and in October, it would open its second store in the SkyMall shopping center. In 2019, most likely, this retailer might open its shops in other Ukraine’s regions,” Tetiana Markovskaya, deputy director of the retail real estate department at Colliers International (Ukraine), adds.

Related: Naftogaz-Ukraine forced to engage in retail as regional gas companies are not reporting full gas reception – CEO

As Yevgenia Loktionova, UTG director, notes, this year, the first stores of the American brand Under Armor, the Spanish group Inditex - Zara Home, as well as the Turkish Koton and DeFacto have appeared in the Ukrainian market. Importantly, some retailers are returning to our market – Lee Cooper, Hugo Boss, Baldessarini. Also, according to Markovskaya, in 2018, Liu Jo, Penny Black, All Saints, Scotch & Soda appeared on our market.

 

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The opening of the Under Armor store in Kyiv 

It is likely that the Ukrainian market, which is not fully filled with the international brands, is becoming increasingly attractive against the background of declining sales of large retailers in economically developed countries, despite the perception of Ukraine’s economic and political situation as unstable.

In the EMEA region (Europe, Middle East, and Africa) in 2016-2017, Ukraine ranked 34th and 35th in the list of the represented brands (with indicators of 29.6% and 28.7%, respectively). At the end of 2017, Romania, Greece, Hungary (from among EMEA countries) were higher than us but significantly lower than Slovenia, Serbia, Finland, and the Baltic countries.

Most expected brands for Ukrainians

In 2013-2014, GfK Ukraine company conducted research on Ukraine’s most awaited international retailers and catering establishments. In 2013, IKEA (46.8% of respondents), H&M (39.4%), Apple Store (30%), Hugo Boss (29.8%), and Walmart (25.8%) were the leaders. Pizza Hut (49.5%), Starbucks Coffee (39.6%), and Burger King (38.5%) are among the top three international chains of cafes and restaurants. The results of the 2014 survey looked like this: IKEA, H&M, Starbucks, Pizza Hut, and Walmart.

Everything is clear with IKEA and H&M, they have already come to our market. The situation is not that optimistic with the other brands. At the end of July, the first Apple Shop opened in Odesa on the basis of Citrus store, the area of the store was only 60 square meters.

Regarding Starbucks... in early 2018, Kyiv mayor Vitaly Klitschko made a statement that the company was studying the issue of entering the Ukrainian market. However, Starbucks denied Klitschko’s words. Therefore, Starbucks has prospects concerning the Ukrainian market, the company has no plans to do this, as it said in response to a request of 112.ua at the end of September.

Related: Retail trade in Ukraine rises to $8 billion in Q1 2018

In turn, Pizza Hut, owned by Yum!Brands Corporation, is already represented in Ukraine by the KFC network. The success of the latter could theoretically “motivate” Pizza Hut to enter our market, but so far nothing is known about such intentions.

Speaking about Walmart... by and large, the company has nothing to do with the Ukrainian market: the market is tightly occupied with “its own business.” In addition to the UK, Walmart does not work in other European countries, and in this case, the prospects for entering our market look pretty poor.

 

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Starbucks Coffee Shop

Among the list of expected brands, there is no PayPal payment service, but taking into consideration media publications and comments by the officials, this service is no less desirable than the above companies. The restrictions are the desire of the service itself to enter Ukraine and the “legitimate” requirements of the National Bank for registration of the system in Ukraine. Recently, PayPal opened the possibility of cross-border transfers for Ukraine through its subsidiary Xoom. But PayPal and Xoom are two different services, and the full-scale appearance of PayPal in Ukraine is not an issue.

We should also mention Ryanair low-cost airline, so loudly welcomed by the Ministry of Infrastructure. Even when negotiations on the arrival of Ryanair were stumped, they were continued at the insistence of the Ukrainian side until a compromise was reached (price terms for access to the infrastructure of the Boryspil airport). As a result, the Irish low-cost airline has been operating international flights since September and may even enter the domestic market of air travel.

IKEA as a factor of attractiveness

Several times IKEA tried to open its store in Ukraine. First, in 2005, then in 2007. It planned to open stores in the traditional format, owning its land and a large and separate building. Each time the company was asked a great sum for this land. But IKEA did not pay bribes and refused to pay “land payments,” which disrupted the negotiations. In 2016, the company once again declared that it plans to open stores in Ukraine, although it is interested in the market.

As a result, the company has not solved the land issue and would open its store in the newly built shopping mall Ocean Mall in 2019. The store will be relatively small - about 5,000 square meters. According to some sources, IKEA plans to open some bigger stores in other Kyiv facilities.

According to Kateryna Vesna, head of the commercial division of JLL in Ukraine, there are three main factors that allowed IKEA to start its work on launching the business in Ukraine: online commerce, the experience of well-known brands such as H&M and Decathlon, and stable positive dynamics of macroeconomic indicators in the country. 

 

Related: Polish retailer LPP expects to open 10 new stores in Ukraine in 2018

According to Markovska, IKEA and H&M undoubtedly serve as a positive example in the Ukrainian commercial real estate market, and the active expansion of such players might be a good example for the other operators.

Only major retailers, who are ready to invest very large sums, can afford to enter the Ukrainian market solely from the point of view of expanding their presence. The investment climate in Ukraine is not attractive; despite the arrival of large retailers, corruption goes off scale, investors do not trust our courts, and the income of the population is at a rather low level. Retailers come to sell their goods produced outside Ukraine, which has very little benefit to our economy. Expanding the ability of Ukrainians to buy high-quality and diverse imported goods is remotely related to the success of the country's economy.

Moreover, foreign brands often do not come directly, but by selling franchises to Ukrainian companies. “The launch and development of a foreign brand by a company-owner, rather than a franchise, is a more advantageous scenario for the market since it involves investing foreign capital in the country's economy. An international retailer is investing in the creation of new jobs and staff training, equipment, construction and development of a chain of stores,” Kateryna Vesna explains.

 

Related: Ukraine’s retail trade increases by 8.8% in 2017

Which other companies might come to Ukraine?

More and more international brands are exploring the possibility of entering the Ukrainian market and opening their first stores in the capital and regional shopping centers. According to CBRE Ukraine, in the future, such brands as Carter's (American children's clothing brand), Home & You (Polish brand of goods and home decor), Ralph Lauren (American premium brand), and Xti (Spanish shoe brand) will enter the market.

In 2019, the “finalization” of IKEA and the French network of sporting goods Decathlon issues is expected. Earlier, Decathlon announced the opening of its first store in the spring of 2018 and has already chosen its first location in the Retail Park Petrivka shopping center, but most likely we will see their first store in early 2019.

As Kateryna Vesna notes, in the next few years we can expect the appearance of Steve Madden, The Kooples, Ralph Lauren, Trussardi, Coin, Karl Lagerfeld, as well as the Eataly food restaurants.

Related: Why there is no Ikea outlet in Ukraine?

According to Anna Marsova, a senior consultant at CBRE Ukraine Group, Turkish brands are extremely interesting for Ukraine, since they have reasonable price and high quality. “So, the Turkish brands Madame Coco (household goods) and Soobe (products for children from 0 to 12 years old) are exploring the Ukrainian market with the prospect of opening their first stores. Turkish company Ziylan, which unites FLO Polaris, In Street, Kinetix, Lumberjack shoe brands, also plans to enter the Ukrainian market. Although some of these brands are represented in the Ukrainian market in multi-brand stores, we would still like to see them as mono-brand stores in Ukraine, because the range of these retailers is impressive," expert says. 

 

112 Agency

For her part, Tetyana Markovskaya points to a high probability of the release of new brands from large fashion groups such as MD Fashion, ARGO, ULTRA, CityModa, etc., which constantly replenish the pool of their brands and bring new operators to the market.

"Tesla Store might also appear here, it is already represented in 30 world countries, and in its stores, Tesla Lifestyle presents clothes and accessories for men, women, and children, as well as accessories for automobiles," Anna Marsova adds.

It should be noted that not all companies are ready to announce their interest in the Ukrainian market in advance. “We are really negotiating with several foreign companies that are not represented in Ukraine. Two of them will soon open their stores. Others are still at the decision-making stage. But, based on the terms of contracts, we have no right to disclose information in advance,” one of the consulting companies in the field of commercial real estate note.

In general, we can expect an increase in retailers at the Ukrainian market, in turn, it will confirm the growth in the volume and level of development of the retail market in Ukraine.

Read the original text at 112.ua.

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