In 2015, e-commerce in Ukraine began to transform. The summer that year, the Ukrainian government worked with the Central Bank to implement a series of measures designed to liberalize and regulate e-commerce, both within the country and across borders. This allowed Ukrainian business and consumers to rapidly embrace the digital economy. Within the first year of these new measures, the transformation was clear: e-commerce turnover in the first half of 2016 was twice as much as during the same period in 2015.
Although economic and political instability has caused most segments of the Ukrainian economy to stall, the e-commerce sector grew by 35% last year, faster than any other European country. As Ukraine continues to follow in the footsteps of their neighbors in Western Europe, the potential of (and demand for) e-commerce is at an all-time high.
*Unless otherwise noted, figures in this article are sourced from:
- Total population: 46 million
- Internet penetration: 43% (20 million)
- Online shoppers: 18 million (91% of internet users)
- E-commerce sales: EUR 1.4 billion
- E-commerce growth: 35%
Ukraine is the largest country in Europe and highly populated, and cross-border merchants looking to do business in Ukraine need to understand these consumers. While internet penetration in Ukraine remains low at only 58%, 91% of internet users are online shoppers. More than half of these consumers are between the ages of 14 and 34, and more than a third of them live in large cities.
Drivers and Barriers
Driver: Government Intervention
The Ukrainian government has shown its commitment to opening up the country to e-commerce. Before 2015, all transactions needed to be completed on paper, including electronic transactions. This defeated the purpose of e-commerce as a quick and convenient alternative. When this law was changed, it allowed payment platforms like Payza to operate in Ukraine and allowed local consumers to send and receive money online.
More recently, in April of this year the IT Association of Ukraine joined the European e-Commerce and Omni-Channel Trade Association (EMOTA) to continue supporting the development of both local and cross-border e-commerce. These and other initiatives make Ukraine a very inviting space for international investors.
Barrier: Low Consumables Penetration
Globally, one out of every four online shoppers buys groceries online, but in Ukraine this figure is only 6%. The number is similarly low across all household consumables categories, since outside of the top four product groups (Fashion, IT & Mobile, Consumer Electronics, and Beauty & Personal Care), e-commerce penetration for just about every other category remains very low in Ukraine. Like in other markets in the past, it may take time for consumers to become comfortable enough with online shopping to start buying their basic everyday items online.
In Ukraine, the cost of mobile devices and 3G networks is decreasing rapidly. Within a year of the introduction of 3G, 10 million Ukrainians subscribed to the network. Of these, 44% now access the internet via their mobile devices and this is the primary point of access for 1 out of every 5 internet users. 39% of Ukrainians use their smartphones to research products before making a purchase, so merchants that focus on offering apps or mobile-friendly websites targeted toward Ukrainians can benefit.
Barrier: Local Re-sellers
Because so few international retailers operate in Ukraine, there have been a slew of online startups that purchase goods from over the border and resell it within the country. These unsanctioned re-sellers have had success because shipping from foreign stores is often cheaper than purchasing locally. Even though cross-border merchants must compete with this grey market of brand name products, this trend does reveal a high consumer interest in buying from foreign retailers and goes to show how little outside competition there is within Ukraine.
Ukrainian E-Commerce Facts
- The fastest growing e-commerce market in Europe.
- In 2016, e-commerce accounted for 3% of Ukraine’s total retail volume.
- Online shoppers spend an average of €286 per year.
- The most popular payment method is credit card, although e-wallets are growing.
- The most popular product categories are Fashion (56%), IT & Mobile (52%) and Consumer Electronics (50%).
- Top three e-commerce platforms in Ukraine are OLX.ua (40.4% of users), Rozetka.com.ua (32.5% of users) and Prom.ua (26.5% of users).
By expanding into Ukraine, cross-border merchants are investing in a long-term, high return market. Ukrainian e-commerce is still quite small, but growing very rapidly and is likely to achieve the level of Western Europe within a few years. Most buyers are young, urban-living and well-educated, embracing an omni-channel shopping experience and are likely to adopt e-commerce for more and more product categories. These include household consumables and fresh produce, following the same growth patterns we’ve seen in the west. Catching a blossoming market at this stage is a rare opportunity for retailers.
Expanding into a new cross-border market is always a challenge but can be very rewarding if done right. For the latest news and information about how to scale up your e-commerce enterprise into an international success, subscribe to the Payza Blog and follow us on Facebook and Twitter.