The challenge and opportunity of e-commerce in the Ukraine

May 5, 2015, 9:20 AM

By Adrien Henni Chief editor, East-West Digital News

Lamoda, an online fashion retailer backed by Germany's Rocket Internet, began selling in the Ukraine last year amid the turmoil of war. General manager Andrzej Malinowski describes the personal service—his phone number is on every parcel—that's helped the retailer gain a foothold.

In 2014 — three years after successful launch on the Russian market — footwear and clothing online retailer Lamoda entered the Ukrainian market. In spite of the political and economic turmoil, the Rocket Internet creature has asserted itself as one of the country’s main e-commerce companies.

Its general manager, Poland’s Andrzej Malinowski, unveiled his strategy in an interview with Ukrainian online publication iGate in Russian language. Here are the main translated excerpts.

How is your business developing now in quantitative terms?

Based on end-2014 results, we ranked fourth in terms of web traffic, trailing only Rozetka.ua, Eldorado.ua and Bonprix.ua. In November, the site was visited by more than 1.3 million people.

In recent years, the average check increased by about 15%. This year, we expect that growth will be less. It is determined by the appreciation of the dollar and an increase in the number of items in the order. Meanwhile, we’re preparing new projects – one or two will be unveiled later this year.

How have developments in the country affected your business?

The year of our market entry coincided with the tragic events in the country. Now the economic situation is far from ideal. But, as surprising as it might be, we do not notice many negatives. Despite the fact that eastern Ukraine, where purchasing power was at the level of Kiev, has lost its position, and orders from the Crimea were lost only three months after our launch, the entire Ukrainian market is still quite attractive. In any case, it will develop. Now is just a period that we must survive through, carefully look at costs and expect that next year the economy will improve.

Which categories of goods are most in demand in Ukraine?

When you come to Ukraine, it becomes very evident that people here place great value on appearance. Despite the situation in the country, you can see a lot of beautifully dressed people in the country’s cities – particularly women, who account for 80% of our audience. The most popular categories are dresses, outerwear, boots, sweaters and cardigans, and sports shoes.

Are there any specificities in Lamoda’s offer in Ukraine, compared to other markets across the CEE region?

There are some differences. For example, in Ukraine the premium clothing segment is not really well represented, unlike Lamoda in Kazakhstan. The reason is because we are importing products from Europe. On the basis of international treaties there is a limit value of a per-unit commodity imported to Ukraine – it should not exceed 150 euros.

Who do you consider as your main competitors?

Our competitor is any shop – even very, very small – that sells clothing. The market’s most experienced and powerful players are Leboutique and ModnaKasta. These shopping clubs existed on the Ukrainian market before the launch of Lamoda. We have a different business model. Lamoda is not a shopping club, whose key advantage is to offer discounts. We are a classic online store offering only part of the product range at a discount. We offer new collections, a large selection of brands and high-level customer experience.

Moreover, we constantly analyze customer care for service improvement. I’ll talk with customers myself; each parcel has the phone number of my direct line.

One of the most important aspects of any online store is logistics. Do you plan to create your own delivery service, as Lamoda did in Russia?

In the future we will create our own courier service in order to maximize control over the logistics and delivery processes. But while the country remains in crisis, our own carriers are not a priority.

How is business different in Ukraine compared to Europe?

I have been in Ukraine for nearly five years. The most negative thing I saw during this time is the legislative framework, the behavior of government agencies and their interaction with the business, the instability of the economic situation and the opacity of where we’re going.

I can compare the current situation in Ukraine with what was happening in Poland in the 1990s. There, the social order changed and the people decided they were part of Europe. Links with the post-Soviet space are in some way artificial. The approach to life and business has become more liberal, which has led to the development of small and medium-sized businesses that are now the foundation of Poland’s economy. Polish businessmen understand that they are under the rule of law and the not the officials. Ukraine does not have this.

This article first appeared in Ukraine Digital News, an English-language web site that covers the digital and IT industries in that country, and is reprinted with permission.