France's Decathlon is the latest foreign retailer to enter Ukraine's increasingly appealing market

France's Decathlon is the latest foreign retailer to enter Ukraine's increasingly appealing market
France's Decathlon is the latest foreign retailer to enter Ukraine's increasingly appealing market
By bne IntelliNews September 7, 2018

France's sporting goods retailer Decathlon is going to open its first store in Ukraine in the first quarter of 2019. With incomes starting to rise and the first green shoots of economic recovery taking hold in Ukraine, foreign owned retails are starting to move in to capture market share early ahead of the countries inevitable recovery and growth.

As the most second most populous country in eastern Europe, on a par with Poland and far larger than any of the central European countries, opening stores in Ukraine should be a no-brainer for the multination retail chains. But war with Russia, political chaos of the Euromaidan revolution, endemic corruption and among the lowest income levels in Europe have all contributed to putting off any serious investment.

But that appears to be changing now. The French retail chain Decathlon will open its first store near the Pochayna subway station in Kyiv. Meanwhile, Decathlon placed on one of the headhunter sites ads with vacancies for its first location in Ukraine.

The company is going to elaborate on its plans in the Ukrainian market during a press conference to be held by late September, UNIAN news agency reported on September 5.

Real wages in Ukraine grew 14.7% year-on-year in July to $347 per month and Ukraine’s 7M18 retail sales increased 6.0% y/y in real terms, slightly slowing from 6.2% growth in the first half of 2018, Ukraine’s State Statistics Service reported on August 20.

And Decathlon is not the only foreign retailer moving in. The announcement followed the opening of a story in Kyiv by Swedish clothing brand H&M. The store is located in the 140,000 sq metres Lavina Mall. The company offers clothes for men, women, and children, as well as homeware under the H&M Home brand.

"We have been waiting for this day for a long time now, and the response from the Ukrainian public was well worth the wait," Emerging Europe news site quoted Dominique Fantaccino, country manager for H&M Ukraine, as saying. "I am so proud to welcome shoppers to our very first store in Ukraine and we are pleased to be able to offer our customers added value through fashion, quality and sustainability at the best price."

Meanwhile, Swedish furniture giant IKEA has started recruiting staff for its first store in Ukraine. The company was interested in opening its iconic yellow and blue stores in Ukraine – the same colours as the Ukrainian flag - in 2005 and 2010, but plans unravelled because of the endemic corruption scared the retailer off.

"It's no secret that for IKEA, which is currently planning to enter the Ukrainian market, one of the biggest issues is the situation with corruption," Martin Hagström, Swedish ambassador to Ukraine, said in an interview in February. "I think that the fact that IKEA has decided to come to Ukraine is a sign that the company sees the changes [in the country] and is confident that it will be able to work here based on its principles."

This statement followed an announcement in December by the Swedish furniture retailer that it intended to enter the Ukrainian market. According to IKEA, the decision to enter a new country is made by the company on the basis of "thorough market studies in which franchisees are carefully evaluated". 

IKEA South East Europe (SEE) will run the operations in Ukraine. IKEA SEE also handles the IKEA retail operations in Croatia, Serbia, Romania and Slovenia. They are currently in the process of identifying a suitable business model that would allow the large number of potential customers to shop in IKEA in Kyiv within one or two years, according to the company's media office.

According to official data, Ukraine’s retail sales increased by 6% year-on-year in real terms in January-July in real terms. In July alone, real retail sales picked up 3.9% month-on-month and 6.6% y/y (vs. a 0.8% m/m decrease and 6.3% y/y rise in June).

Regionally, the highest January-July retail growth occurred in Ukraine-controlled Luhansk (23.4% y/y), Zakarpattia (10.9% y/y) and Poltava (10.5% y/y) regions, while growth was slowest in Chernivtsi (0.6% y/y), Kharkiv (2.1% y/y) and Kirovohrad (2.9% y/y).