Pandemic Boost: How Ukraine's E-Commerce Sphere Developed in 2020

March 5, 2021
The Coronavirus lockdown pushed  Ukraine's e-commerce sphere to the next level. Read about the latest developments in our new article.

2019 was a good year for Ukrainian e-commerce. According to a study by EVO.Business outlet, the national e-commerce market grew 17% that year, reaching UAH 76 billion (USD 2.7 billion). Ukrainians were increasingly willing to buy goods and services online. On Black Friday 2019, customers of PrivatBank, Ukraine's largest retail bank with 23 million clients, made 4.5 million purchases online worth UAH 1.3 billion (USD 46 million).

While the e-commerce market has been vibrant for years, and many local companies have been increasing their online presence, many people were still reluctant to shop online. According to OLX, a Ukrainian online marketplace (analogous to Craigslist in the US or Gumtree in the UK), 7 million Ukrainians made online purchases in 2019, which was merely 30% of all internet users.

The pandemic's "helping hand"

2020 took these metrics to the next level. During the two months of strict lockdown last spring, many people tried buying online for the first time. Since most offline stores (except for grocery and drug stores) were closed, many Ukrainians really had no other choice but to spend their money online. At the same time, many Ukrainians lost their jobs due to the lockdown, and therefore the average purchase size decreased.

Furthermore, the spike in demand at the beginning of the lockdown was rather unexpected and posed big challenges for e-commerce businesses. Vladyslav Chechetkin, CEO of Rozetka, Ukraine's biggest online retailer, said in a conversation with business news site Vector that his company lost money for the first 1.5 months of the lockdown. "Basic necessities like toilet paper or sugar do not make much money. Logistic expenses ate up all the margins on cheap goods," Chechetkin explained. He also underlined that e-commerce companies might lose steam in the long run, as Ukraine's economy now is less healthy than it was prior to the pandemic, meaning that customers have less purchasing power.

Nevertheless, Ukraine's e-commerce market has seen unprecedented growth last year. EVO.Business outlet reported that the e-commerce market in Ukraine reached UAH 107 billion (USD 3.82 billion) in 2020, up 41% from 2019. Last year, Ukrainians mostly went online to buy clothes (4.6 million orders), tech and electronics (4.4 million orders), daily use goods (4.1 million), home and garden goods (4 million), and perfumes and cosmetics (2.8 million). At the same time, customers became more inclined to order online: EVO.Business said there were 35 million online orders, which is a 42% increase over 2019. Data of research company CBR shows that 33% of Ukrainian internet users were shopping online in 2020.

Let's take a look at several other key tendencies in Ukraine's e-commerce market.

Retailers expand online and offline

According to the Retail Association of Ukraine, many offline retailers moved quickly to increase their online presence. For instance, the upscale grocery chain Silpo, developed its own online store and delivery system within five weeks. ATB, another grocery chain, developed a website within two months and introduced a "click & collect" option which allows customers to select all the groceries they need online and then pick them up in-store at their convenience. Many other grocery chains, including Metro, Auchan and others, started to deliver their goods to customers via, a delivery company.

Igor Gut, a Ukrainian businessman, and co-founder of DYB — Develop Your Business, a Swedish-Ukrainian business development project, said in a commentary for UkraineWorld that retailers have also been investing a lot in user interfaces for their websites and applications, which have become one of the most important factors for customers.

At the same time, several online-focused retailers have strengthened their offline presence. For example, Rozetka opened its fifth flagship store and widened its network of regional stores. MakeUp, a perfume and cosmetics retailer which used to be online only, opened its first brick-and-mortar location store in Kyiv. Companies have been using this strategy to connect more closely with their customers and offer them more buying options.

Ukrainians buy and sell on social networks

There are 16 million Facebook users and 14 million Instagram users in Ukraine, according to a report by digital communications agency PlusOne. The Ukrainian segment of Instagram has seen increasingly more small brands selling their goods and services. According to the poll by research company CBR, 45% of Ukrainians who have shopped online have used social networks for this purpose at least once. While Facebook Shops, an e-commerce service for Facebook and Instagram, is not available in Ukraine yet, many Ukrainians are arranging deals with vendors in direct messages.

Maksym Savanevskyi, managing partner at PlusOne, told UkraineWorld that these small brands can't compete with big retailers such as Rozetka and Epicentr. The big players have widened the assortment of goods they offer. This means that more small and medium businesses have to compete with the market leaders, and they inevitably lose because their mark-up is higher, and their delivery is more expensive in most cases. "The only brands which have been able to compete are the 'craft' ones which sell unique, hand-made goods," Savanevskyi said.

Savanevskyi also noted that Ukrainian small and medium enterprises mostly do not use ads in social networks, but rather try to build organic communities instead. Meanwhile, big retailers spend a lot of money to promote their offers on social networks. Hence, any potential changes to the way ads on Facebook on Instagram are being handled would impact big players much more than small ones.

Demand for delivery rises

Igor Gut also told UkraineWorld that demand for delivery services was especially strong and continuous. "It is not only a health issue, it is also a convenience issue. Many people have tried delivery for the first time due to the pandemic, but saw it was really convenient to have goods delivered to your door," Gut said.

For instance, Nova Poshta, Ukraine's top private parcel carrier, grew by 34% in the first half of 2020., a grocery delivery company grew by 200% last year. Food delivery services have also flourished. Glovo, an on-demand service that delivers food and groceries, said the Ukrainian online food delivery market increased by a factor of six or seven between 2019 and 2020. Delivery was the only way for restaurants and cafes to earn any money during the lockdown, so any future restrictions might further strengthen demand for delivery.

More businesses are selling outside Ukraine

At the same time, more Ukrainians have started selling their goods abroad. Igor Gut says that many people who lost their jobs due to the pandemic started online businesses on marketplaces like Amazon and Etsy. Yulia Pavlenko, the head of international operations at Ukrposhta, Ukraine's national mail service, estimates the number of such businesses at 25 thousand. However, in reality, this figure may be way higher, as some goods sold by Ukrainians might be shipped from other countries.

Ukrainian companies are also exploring foreign expansion options. For instance, Yakaboo, an online book retailer, launched international delivery in cooperation with Nova Poshta in September 2020 and now is able to ship books to 200 countries and territories around the world.

EVO.Business outlet predicts that the size of the Ukrainian e-commerce market in 2021 will be UAH 137 billion (USD 4.89 billion), a 28% increase over 2020. At the same time, given that the vaccination in Ukraine only just started at the end of February and will continue throughout the whole year, there might be further quarantine restrictions down the line. Since 67% of internet users still do not shop online, there is plenty of room for the e-commerce industry to rise even higher.

Analyst and journalist at UkraineWorld and Internews Ukraine