The strengthening of e-commerce under quarantine conditions will stimulate the demand for warehouse space within the city in 2020, according to a study by CBRE Ukraine (Kyiv), an international consulting company. “As in the past ten years, e-commerce will again become a catalyst for demand and will lead to shifts and changes in the warehouse real estate market in the next cycle. E-commerce will stimulate demand for the format of so-called warehouses within the city (incity warehouses, urban warehouses). In 2020, transactions may be signed for the acquisition of former industrial facilities in the city for conversion into storage facilities,” CBRE said.
At the same time, the worsening of the economic situation could facilitate the acquisition by the market players of land plots for the development of built-to-suit projects at reduced prices. However, the launch of new projects may be suspended due to the limited work of government agencies and delays in processing permits.
“A large number of representatives of industrial real estate took a wait-and-see position, which most likely means a reduction in rental activity and vacancy in 2020. However, the likelihood of negative absorption in the industrial market is minimal. Warehouse services are currently in a great demand, more than ever before, which will allow most of logistics and warehouse services operators to stay ‘afloat’ throughout the crisis period,” CBRE predicts.
According to the consulting company, pharmaceutical distribution, food retail and its logistics are experiencing a peak in sales under quarantine conditions in the amount of 40-50% higher than in the New Year season.
The Swedish company IKEA, the world’s largest retailer of furniture and household goods, has updated its plan to enter the Ukrainian market, deciding to launch e-commerce first. “In order to make the range of IKEA functional products with attractive designs and prices affordable for as many people in Ukraine as possible, the company decided to launch e-commerce first. The expected launch date is spring 2020,” the company said. At the same time, they confirmed their intention to open a store in Kyiv.
“IKEA confirms its commitment to Ukraine and plans to open the first store in Kyiv as soon as possible after the launch of e-commerce,” the company said.
As reported, in the summer of 2019 IKEA announced the launch of an official website for Ukrainian consumers and the recruitment of staff to work in the first urban-format store in Kyiv (about 100 employees). The opening of the store was scheduled for the end of 2019.
In September 2018, IKEA officially announced the opening of the first city store in Ukraine in 2019. The facility was supposed to be opened in the Ocean Mall trade center in Kyiv. However, the retailer later said that due to the delay in building the shopping center, the company is considering alternative ways to start business in Ukraine.
The network in Ukraine is developed by IKEA Southeast Europe, which is part of IKEA Group (Ingka Holding B.V.). The company is engaged in the retail business of IKEA in Croatia, Serbia, Romania, and Slovenia.
Ukraine should improve logistic infrastructure, coverage with Internet and electronic payments for developing e-commerce, the founder of Alibaba Group Jack Ma has said.
“Three things that Ukraine should develop: Internet infrastructure, logistics and electronic payments. And also entrepreneurship. If these four components are ready, Ukraine will have huge potential on the Internet,” Ma said during the Kyiv International Economic Forum on Friday.
Ma said that he was disappointed to learn that it takes from four to seven days for the delivery of goods from China to Ukraine.
“These are indicators of the last century. They need to be improved,” he said.
The Better Regulation Delivery Office (BRDO) assesses growth of the e-commerce market in Ukraine at over 30% every year, IT Telecom Sector Head at BRDO Oleksandr Kurbakov said at a roundtable devoted to e-commerce and smart regulation for the progressive market held in Kyiv. “The e-commerce market in the world is growing at a rate of 23-25% per year. In Ukraine, these rates are much higher – about 30% per year,” he said, citing statistics.
At the same time, Kubrakov said that Ukraine is in the second lowest position in Europe in terms of GDP per capita, the lowest in terms of Internet penetration, and the country is lagging behind the neighboring countries in terms of penetration of bank cards by 10-20%. According to BRDO, the volume of the e-commerce market in Ukraine in 2017 exceeded $50 billion, or 3.2% of the total retail sales. At the same time, the growth rate of e-commerce in Ukraine amounted to about 31%, which is the second highest growth rate in Europe.
“A significant problem for the market is the obligation of the seller to print a fiscal receipt in hard copy at the moment when the money paid for the goods arrive. This practically makes Internet acquiring impossible with payments of more than UAH 7.5 billion per year and cash on delivery in the amount of more than UAH 12 billion,” Kubrakov said. He said that the solution to this problem could be permission to submit receipts in electronic form.
The outflow of population from Ukraine is a real threat to the development of e-commerce market, the founder of In Time Serhiy Hrachev said at a press conference. “In February this year, browsing of Ukrainian online shops fell. Within my remembrance, this is the first time in five years. Of course, there are seasonal fluctuations, but in February usually there is growth… This year the profile was different,” he said, adding that in the future the quantitative indicator of browsing online stores has leveled off, but these trends force one to think.
“A real outflow of the population today is a threat to e-commerce that can slow down the growth of e-commerce in Ukraine. We feel it on ourselves. All blue-collar workers left the country, if earlier we took “one-day workers” only in the season, now it is the usual daily practice: a person can leave in the morning, work out a day and never come back at all. The labor force is leaving [the country] actively, and this is a disaster,” the founder of In Time said. In turn, according to Hrachev, the players of the logistics market are affected by the outflow of drivers and loaders.
“There are no them on the market at all. We already have contractors with vehicles, but there are no drivers, and trucks are idle, I consider this a key threat,” he said.
At the same time, Hrachev believes that in general the e-commerce market in Ukraine is developing very actively and this year it will continue to grow.