IKEA is next. Why international retail chains are interested in expansion in Ukraine. Prospects of the retail market in Ukraine

IKEA is next. Why international retail chains are interested in expansion in Ukraine. Prospects of the retail market in Ukraine

17.10.2019

For the last few years H&M, DeFacto, Koton, CCC has opened its stores in Ukraine. IKEA is next. Why international retail chains are interested in the expansion.

I have been working in the retail market for many years. On a regular basis, I meet with the representatives of the retail companies during International exhibitions. For a long time, we have presented top-management of the well-known global companies about the prospects of the Ukrainian market, demonstrated various projects. Though, constantly we heard the same answer. The retailer is ready to enter the market only after Ukraine become EU member or prove zero tolerance to corruption. For many retailers, Russia was the first step before considering the Ukrainian market.

For the last two-three years, the discourse of the retailers has started to change. Recently Kyiv and other big cities welcomed newcomers, stores of famous brands. Among them were DeFacto, CCC, Zara Home, Ted Baker, Under Armour, Koton and many others.

Last year Lavina shopping mall hosted one of the most long-awaited brands – H&M. According to our calculations, there are about 70% of all global brands presented in the country. For example, the top management of IKEA officially declared about their plans to open its first store in Ukraine by the end of 2019. Many Turkish brands are about to enter the local market. It will not take too much time for Kyiv to be among globally famous fashion capitals.

What has changed? For the last two years in a row, the retail turnover of the country has been demonstrating a stable two-digit growth. Only during 2019 retail turnover of Ukraine grew by 10.3% yoy, including shadow economy it was 20.3 billion USD.

At the same time, retail turnover in Kyiv grew by 14.4% yoy, including shadow economy it was 4 billion USD.

In addition, the entrance of H&M, IKEA’s official announcement about readiness to open its first store in Kyiv, made competitors think. Everybody knows, these two retailers have zero-tolerance to corruption. So, the situation in Ukraine is undergoing a transformation. I think many people remember IKEA refused to enter the market exactly due to such reasons. In case of H&M, it does not only enter the market, but the retailer also keeps expanding on the local market. Such facts made big International companies look at the prospects of the Ukrainian market differently.

For a long time, many European countries considered Ukraine as a poor market. Its population is 40 million people, which is more than many other western countries. But, do Ukrainian residents ready to spend money on clothes, shoes, and accessories – it was the questions we heard from retailers all the time. Many of them thought it was not the right time. The success of their competition changed their view.

Few are aware that many foreign retailers in Ukraine are one of the most successful in the world. For instance, some of the Inditex brands, which are based in Kyiv, mainly Massimo Duty, ZARA demonstrate excellent results. The line of people waited for shopping at first H&M store in Lavina became viral in social media. It is the best advertisement for Ukraine.

Once a retailer decides to enter the market, the key question is where to open the first store. The first destination will be the showcase for the whole country. That’s why the cutting ribbon ceremonies always host top management. Though, there has not been so many high-quality retail destinations in Kyiv for a long time. As a result, it slowed down the further expansion of the existing brands and the entrance of the new one. During several last years though, new shopping malls that meet expectations and criteria of International brands appeared on the retail map of Kyiv.

Today Kyiv keeps staying the main retail center of the country. The overall market stock is 112 projects equaled to 1500 ths. sq. m of the overall gross leasable area.

When International retailers see large-scale Ukrainian projects where only entertainment area has about 30 million USD of investments, they demonstrate a huge interest. A lot of new retail chains open their first store in Lavina shopping mall, in the upcoming Blockbuster Mall. These projects allow them to rediscover Kyiv commercial real estate market.

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