8-9 years ago internet-shops in Ukraine were something new and unfamiliar for Ukrainians, thus considered risky. However, with active development of demand, in 2006-2007 the sector of internet trade bloomed, and in 2011 its trade volume was estimated at 2 billion euro, meaning the growth by 30-50%, comparing to 2010 with the trade volume of one billion dollars.
Indeed, this market develops regardless of negative influence of the world economic crisis, experts say. And the key reason is lower prices than in standard shops, as for our fellow citizens the price, not quality, remains the main criterion of a purchase. For the moment there are about eight thousand commercial internet-shops functioning in Ukraine. ForUm has decided to find out how and in what directions the internet trade industry develops in our country.
What goes off better
Executive director of TA Venture fund Viktoria Tihipko notes that this sector of trade already takes 1% of the retail goods turnover, though there is definitely a room for improvement: in Russia, for example, it takes 2%, and in the US - 4%. "It means our domestic internet traders have a great potential of growth. Moreover, our country is the most dynamic internet market in the Central and Eastern Europe - other countries lag behind in the growth rate of users," the top manager says. Thus, in 2011, the number of Ukrainian internet users increased by 11%, rising beyond 15 million people. Deputy executive of the internet association of Ukraine Tetyana Popova confirms that the share of active Internet users in the country has reached 30% of the population. In Europe, it makes 60% of the population, and Ukraine can reach this level in one year and a half. 48% of users are people over 15 years old.
However, let's go back to the e-trade. The data of the Appleton Mayer company shows that the most popular segments of internet trade in our country are computers and office machines (including component parts), household appliances and books. Moreover, having conducted a survey, the company has reported that 27% of respondents buy online (one time or more) mobile phones and accessories, 22% - various tickets, 16% - souvenirs, 12% - food and drinks, 11% - goods for children, 9% - stationery, 8% - photo and audio equipment.
Specialist on internet trade Oleksandr Voronov adds that purchasing online is not only cheaper, but also more convenient (a possibility to choose among the variety without leaving the house, plus home delivery). According to the specialist, "the competition growths respectively, though the crisis has also hit the internet market. As for the segments, there are goods people would hardly buy through internet - milk, bread, bathroom tissue, etc., though there are internet-shops selling this kind of goods.
Among other actively developing segments, there is online sale of train and plain tickets. Thus, Ukrainian railway company "Ukrzalisnitsya" is now introducing this system, while low cost airlines have already been using online ticket sales as the basic form of work with passengers for years.
Another actively developing segment is the service of "collective purchases", meaning discount coupons with limited duration term. There are several similar projects being realized in Ukraine now. New head of the Groupon office in Ukraine Tengiz Tkeshelashvili estimates the turnover of these projects at $2.5 million monthly. According to the expert, "in a year the figures may show $200 thousand daily. Such growth is possible thanks to the development of goods categories, not available through other discount services. Thus, 20-30% of growth can be provided by tourism segment, including for foreigners. Another 30% can be provided by not yet developed segments as restaurants, tickets (for concerts, cinema, theatres), promenades, conferences. These are very profitable categories."
How they attract buyers
Sellers try to attract buyers not only with wide range of goods, various promotions and discounts, but with advertisement through social networks. Many people first go to a supermarket of equipment to choose a model with the help of 'living' consultants, then write down the series numbers and go to buy it through internet. Such manipulations help to save 800-1000 hryvnias when buying a laptop, or up to 500-600 hryvnias when buying a simple washing machine.
Among the reasons of fast development of the internet-market, there is not only high demand, but also relative easiness to enter the business. Voronov says that "internet-shops of souvenirs, small appliances or other inexpensive goods can be opened with $1000-500 start-up budget only.
However, the success also depends on the selected segment and aggressiveness of "entry". Finally, the operator must create convenient and available means of payment (from cash to WebMoney) with minimal fees for customers. In general, experts distinguish seven factors of internet business success:
1. Straightforward interface: good online shopping must be easy and fast. A client must understand at any point what stage of purchasing he is at and what he should do next.
2. Price policy: in order to earn the trust of customers, operators must provide information about the total cost of purchase at early stages of process. Users will leave a website, which does not immediately report the cost of delivery, order process and other additional payments.
3. Item page: every page of an item must contain detailed information and high-quality photo. Ratings and customers' feedbacks may also be of use.
4. Basket: the "Add to basket" button must be easy-to-see on the screen to attract attention. Users often use the basket to compare goods, thus operators must make this process as simple as possible (with the help of preview pictures and links to detailed information). Basket interface must allow editing its content, as well as to proceeding to the order or further shopping.
5. User's profile: the system should know to remember users to make the next visit even easier. It concerns the delivery address, payment parameters, etc. Users should also be able to restore the forgotten password without leaving the website or interrupting the shopping process.
6. Delivery: clients want to know all possible variants of delivery before providing information about payment data. Thus, customers must have a choice among several ways of delivery with terms and prices of this service. The cheapest way of delivery must be used automatically.
7. Confirmation: the last page of the shopping process must contain the confirmation of the order, summary of the purchase and approximate terms of delivery. The page must be available for printing out and/or e-mail delivery.
Further prospects
Further development of the internet-market is backed by large national industrial holdings. Thus, in the beginning of 2012, the investment and consulting group EastOne completed the deal on entering the business of collective purchases Pokupon. According to EastOne director general Genandiy Gazin, "this is a part of group's strategy, aimed at development of works in the segment of internet-commerce. This is our first serious step into the internet-business in Ukraine, and we plan to use the opportunity for launching other projects."
In this respect, it is rather interesting that Ukrainians buy 10 times more often than sell through internet. Only 8.2% of trade internet-requests contain the words "for sale" or "to sell". Economists believe it is a large field for further development. The same concerns regional lay-out: online trade is more developed in Kyiv and other large cities, while in provinces the online trade is poor or does not exist at all due to lack of internet cover and logistic infrastructure for delivery. This also means wide possibilities for market expansion.
Summing up we dare to say that in the next years the sector of internet-trade will grow rapidly, by 50-80% annually: large retail chains keep creating internet-platforms, e-payments keep developing and improving, the number of internet users keep growing. Moreover, the competition among market operators keeps increasing, which results into improving of service quality.
Andriy Boyarunets
Indeed, this market develops regardless of negative influence of the world economic crisis, experts say. And the key reason is lower prices than in standard shops, as for our fellow citizens the price, not quality, remains the main criterion of a purchase. For the moment there are about eight thousand commercial internet-shops functioning in Ukraine. ForUm has decided to find out how and in what directions the internet trade industry develops in our country.
What goes off better
Executive director of TA Venture fund Viktoria Tihipko notes that this sector of trade already takes 1% of the retail goods turnover, though there is definitely a room for improvement: in Russia, for example, it takes 2%, and in the US - 4%. "It means our domestic internet traders have a great potential of growth. Moreover, our country is the most dynamic internet market in the Central and Eastern Europe - other countries lag behind in the growth rate of users," the top manager says. Thus, in 2011, the number of Ukrainian internet users increased by 11%, rising beyond 15 million people. Deputy executive of the internet association of Ukraine Tetyana Popova confirms that the share of active Internet users in the country has reached 30% of the population. In Europe, it makes 60% of the population, and Ukraine can reach this level in one year and a half. 48% of users are people over 15 years old.
However, let's go back to the e-trade. The data of the Appleton Mayer company shows that the most popular segments of internet trade in our country are computers and office machines (including component parts), household appliances and books. Moreover, having conducted a survey, the company has reported that 27% of respondents buy online (one time or more) mobile phones and accessories, 22% - various tickets, 16% - souvenirs, 12% - food and drinks, 11% - goods for children, 9% - stationery, 8% - photo and audio equipment.
Specialist on internet trade Oleksandr Voronov adds that purchasing online is not only cheaper, but also more convenient (a possibility to choose among the variety without leaving the house, plus home delivery). According to the specialist, "the competition growths respectively, though the crisis has also hit the internet market. As for the segments, there are goods people would hardly buy through internet - milk, bread, bathroom tissue, etc., though there are internet-shops selling this kind of goods.
Among other actively developing segments, there is online sale of train and plain tickets. Thus, Ukrainian railway company "Ukrzalisnitsya" is now introducing this system, while low cost airlines have already been using online ticket sales as the basic form of work with passengers for years.
Another actively developing segment is the service of "collective purchases", meaning discount coupons with limited duration term. There are several similar projects being realized in Ukraine now. New head of the Groupon office in Ukraine Tengiz Tkeshelashvili estimates the turnover of these projects at $2.5 million monthly. According to the expert, "in a year the figures may show $200 thousand daily. Such growth is possible thanks to the development of goods categories, not available through other discount services. Thus, 20-30% of growth can be provided by tourism segment, including for foreigners. Another 30% can be provided by not yet developed segments as restaurants, tickets (for concerts, cinema, theatres), promenades, conferences. These are very profitable categories."
How they attract buyers
Sellers try to attract buyers not only with wide range of goods, various promotions and discounts, but with advertisement through social networks. Many people first go to a supermarket of equipment to choose a model with the help of 'living' consultants, then write down the series numbers and go to buy it through internet. Such manipulations help to save 800-1000 hryvnias when buying a laptop, or up to 500-600 hryvnias when buying a simple washing machine.
Among the reasons of fast development of the internet-market, there is not only high demand, but also relative easiness to enter the business. Voronov says that "internet-shops of souvenirs, small appliances or other inexpensive goods can be opened with $1000-500 start-up budget only.
However, the success also depends on the selected segment and aggressiveness of "entry". Finally, the operator must create convenient and available means of payment (from cash to WebMoney) with minimal fees for customers. In general, experts distinguish seven factors of internet business success:
1. Straightforward interface: good online shopping must be easy and fast. A client must understand at any point what stage of purchasing he is at and what he should do next.
2. Price policy: in order to earn the trust of customers, operators must provide information about the total cost of purchase at early stages of process. Users will leave a website, which does not immediately report the cost of delivery, order process and other additional payments.
3. Item page: every page of an item must contain detailed information and high-quality photo. Ratings and customers' feedbacks may also be of use.
4. Basket: the "Add to basket" button must be easy-to-see on the screen to attract attention. Users often use the basket to compare goods, thus operators must make this process as simple as possible (with the help of preview pictures and links to detailed information). Basket interface must allow editing its content, as well as to proceeding to the order or further shopping.
5. User's profile: the system should know to remember users to make the next visit even easier. It concerns the delivery address, payment parameters, etc. Users should also be able to restore the forgotten password without leaving the website or interrupting the shopping process.
6. Delivery: clients want to know all possible variants of delivery before providing information about payment data. Thus, customers must have a choice among several ways of delivery with terms and prices of this service. The cheapest way of delivery must be used automatically.
7. Confirmation: the last page of the shopping process must contain the confirmation of the order, summary of the purchase and approximate terms of delivery. The page must be available for printing out and/or e-mail delivery.
Further prospects
Further development of the internet-market is backed by large national industrial holdings. Thus, in the beginning of 2012, the investment and consulting group EastOne completed the deal on entering the business of collective purchases Pokupon. According to EastOne director general Genandiy Gazin, "this is a part of group's strategy, aimed at development of works in the segment of internet-commerce. This is our first serious step into the internet-business in Ukraine, and we plan to use the opportunity for launching other projects."
In this respect, it is rather interesting that Ukrainians buy 10 times more often than sell through internet. Only 8.2% of trade internet-requests contain the words "for sale" or "to sell". Economists believe it is a large field for further development. The same concerns regional lay-out: online trade is more developed in Kyiv and other large cities, while in provinces the online trade is poor or does not exist at all due to lack of internet cover and logistic infrastructure for delivery. This also means wide possibilities for market expansion.
Summing up we dare to say that in the next years the sector of internet-trade will grow rapidly, by 50-80% annually: large retail chains keep creating internet-platforms, e-payments keep developing and improving, the number of internet users keep growing. Moreover, the competition among market operators keeps increasing, which results into improving of service quality.
Andriy Boyarunets
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