The entry are allowed for foreign visitors: the foreign brands are again interested in Ukraine

Who from international players has already appeared in Ukraine, what brands can entry our market in the near future and how this will affect the industry development.

The foreign retailers are building again plans for expansion into Ukraine. In the this year first half, about a new brands dozen appeared on the Ukrainian market, and in the next year and a half, several well-known and expected brands are planning to entry our country at once.

The positive dynamics

Both local players and retail real estate developers are noted by the foreign brands interest to the Ukrainian market. “Our market in terms of volumes has always looked attractive, but country risks have hampered the new brands entry in recent years. This year, the brands finally decided that the situation is stable, and it began active movement to Ukraine”, — Igor Zabulonsky, KarKat Fashion CEO (he is developing stores in Springfield, Women’s Secret and Pedro del Hierro in Ukraine) says.

The development company Arricano, which manages five shopping and entertainment complexes in Kiev and regions, also confirm the positive dynamics. “The trend has been steady the last few years. We have not yet approached by 2012, in terms of the new exits number, when about 40 new brands entry the Ukrainian market, but in 2015-16, 20-25 new brands appeared in Ukraine”, — Anna Chubotina, the Arricano retail space department director, says. The expert adds that traditionally most of the new entries are partnership with Ukrainian companies, which brands give the right to work under its franchise.

Most often, for the first store opening in the country, brands choose Kiev. In the 2017 first half, the first stores of brands Okaidi, Hanro, XETRA, van Laack, Saucony, Cole Haan, Falconeri, Baldessarini, Stradivarius Men and the Polish CCC, which first came out of Western Ukraine, appeared in the capital.

As noted in Colliers International Ukraine, the large fashion operators are replenishing its pool of brands and entry the market those brands that were not previously in demand by the buyer, in particular in the “medium +” segment. Scotch & Soda, Liu Jo, Super Dry, Hugo Boss are among the announced brands for the opening by the franchise in the near future.

Development contrary

In Ukraine, not only new foreign brands, but also existing ones intensify the development. So, the Spanish group Inditex at the last year end entry the Ukrainian market the women’s clothing Uterque brand, and in this year — the men’s clothing Stradivarius line. At the same time, on August 15, the company opens six more outlets in the capital’s SEC Lavina Mall with a total square of ​​about 7,000 sq.  There will work stores Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius and Oysho. Shop Zara,  ​​3,400 sq. square, will be the largest not only in Ukraine, but also throughout Eastern Europe. Earlier the company also considered the Zara Home store opening in Ukraine, according to the JLL company retail space department head in Ukraine Catherine Vesna. “These plans will be implemented perhaps in the next year or two,” — the expert assumes.

Another major international player in Ukraine — the Polish retail operator LPP Group, managing brands Reserved, Cropp, House, Mohito, Sinsay, in early 2017, announced its intention to lease a space minimum of 8,000 sq. to open its stores in 2017. The desire to develop the Ukrainian retailer chain is not surprising. As Interfax-Ukraine wrote, LPP revenues from sales in Ukraine in 2016 amounted to PLN225.55 million (about $ 55.19 million), while in 2015 the company’s Ukrainian revenue was at PLN188.363 million. Thus, in 2016 LPP increased revenues in Ukraine by almost 20%.

The Turkish retailers are developing also in Ukraine. In particular, LC Waikiki chain opens actively stores not only in the capital and cities with population over a million, but also in regional centers. Most recently, the company entry the Poltava market, having already opened the 19th store in the country. Earlier, in this year, March, the company launched the first Outlet trade object in Ukraine, and by the 2017 end,  LC Waikiki planned to expand the Ukrainian chain to 27 stores, and entry the market Home product line  — LC Waikiki Home.

Guests from the Bosphorus banks

The Turkish and Polish retailers will actively develop in Ukraine in 2017-2018, most likely, according to the consulting company JLL forecasts. “All manufacturers are looking for new markets. Ukraine is one of the largest countries in Europe, with more than 40 million people, and at the same time belongs to the least saturated countries in terms of the brands represented number”, — Catherine Vesna says.

In the foreseeable future, the Turkish brands Koton and Defacto expansion is expected to Ukraine, as well as the opening of the sportswear Decathlon hypermarkets French chain store. Colliers International (Ukraine) managing director Alexander Nosachenko is sure that all of the above indicates that the large international chain operators are interested in the Ukrainian market. “Tenants are adapting to new realities, are looking positively towards development and are increasing their presence in the market, despite the externally unfavorable situation in the country and the relatively low official income population level”, —  Nosachenko says.

This is facilitated by the fact that the Ukrainian consumer likes to dress beautifully and most of his income continues to be spent on food, clothing and footwear, — Chubotina believes. “The population purchasing power, albeit very slowly, is recovering, the competition is still relatively low. Although, of course, the market has already been partially mastered by such flagships as Inditex Group, LPP Group, LC Waikiki and others. Therefore, new chains need to hurry”, — she is sure.

According to her, many of the companies that are interested in the Ukrainian market are large department stores that are necessary for the market, and especially for new megamallas’ experiencing filling difficulties. And now the market can offer locations that meet the retailer requirements, including in square terms. Thus, retailers have the opportunity to quickly open several stores at once. “Together, these all are weighty arguments for the positive decision making on entry new brands to Ukraine”, — Chubotina sums up.

The bright future

The official announcement by H & M about development plans on the Ukrainian market has become one of the most high-profile news in 2017. One of the world largest fashion retailers, managing a chain from more than 4,500 stores in 66 countries, announced plans to open the first store in Ukraine as early as 2018. According to the portal LIGA.net information, next year H & M plans to open two or three stores in Kiev, and the SEC Sky Mall, Lavina Mall and Ocean Plaza are the most attractive for the retailer.

The American Under Armor has become another expected brand in the country, which has already confirmed an early entry into the Ukrainian market. Will Van Rensburg, Head of Retail Under Armor New Markets, expressed in an exclusive interview for the RAU confidence that now is a good time for the entry of Under Armor in Ukraine and he stressed that he believes our market is promising.

True, the brand does not plan to open its own stores yet. MD Group company, one of the largest fashion-retailers, will be represented this brand on the Ukrainian market. “We were able to find very good partners, and this also has become another factor influenced our decision to entry Ukraine. We long chose and analyzed, so we are confident in our partner – MD Group – and give them the right to work under our franchise”, — Will Van Rensburg explained.

There is confidence in the Ukrainian division of Cushman & Wakefield (formerly DTZ) that plans to entry Ukraine Under Armor, and even more so H & M, can draw attention to Ukraine and other well-known world brands.

“The official announcement of plans to entry the Ukrainian market in the H & M report will be an occasion to look at the Ukrainian market and other foreign companies. It is possible that the “shark” will be followed by smaller players. H & M will be opened for the European retail of Ukraine again. Most likely, the activity will increase after the beginning and the first results of the brand’s work”, — Tatiana Khoma, the senior agent of the company Cushman & Wakefield commercial real estate department in Ukraine, says.

The Ukrainian Frontier

At the same time, experts acknowledge that many international retailers still consider Ukraine to be a high-risk zone, so the decision to invest in the country is taken very cautiously. “Insufficient awareness about the situation in the country and the military conflict make Ukraine a “gray zone”, which is not included in development plans because the fears of instability”, — Tatyana Khoma adds. According to her, the retailers development in Ukraine is also constrained by economic factors, such as the lowest average monthly salary in Europe (about $ 220), the hryvnia instability (devaluation in 2014-2015 was 75%), and others.

Catherine Vesna adds that the main factors that alert new players are low purchasing power, and not always a transparent and complexly organized system of doing business. “The current trends of developed European countries, the United States and other regions with developed economies include the business doing transparency, the legal origin of capital, ethical and environmental of performance, social responsibility. Naturally, the direct entry the Ukrainian market carries in its current state the significant financial and reputational risks for the international retailers”, — she affirms.

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