Ukraine is waiting for the IKEA and H&M: why global brands have been slow to open stores

In Ukraine again, talking about the chances of coming to the country world-famous Swedish furniture brand IKEA. This time the occasion was a statement by the Chairman of the company “Mandarin Plaza” Alexander Chernitsky, who plans to build a new shopping center on the site of the Kiev ice stadium. According to the Chernitskiy, IKEA can become a tenant of the shopping center, whose construction should start this autumn, writes Deutsche Welle.

“IKEA is looking in our direction. Their intentions already announced, the representatives visited met,” – said the businessman. Even in the most Swedish company announced that really gave the franchise to market. “But while we have no exact date for the opening of the trading network,” said IKEA.

This is not the first attempt of the company to enter the Ukrainian market. IKEA planned to build a store near Kiev since Kiev office in 2005, but was not able to buy land for this purpose on the background of disputes with local authorities.

In April 2012 the then Minister of economic development and trade, and nowadays the President of Ukraine Petro Poroshenko said in an interview with Bloomberg: “IKEA is not only a way to have affordable quality furniture, IKEA is a symbol. If IKEA does not allow you to get into the market, suffers not the company that suffers Ukraine”, – said Poroshenko, insisting on the need to restore investor confidence in the country. In March 2016, a spokesman for the company Kajsa Johansson said the Ukrainian media that IKEA has no plans to enter the Ukrainian market.

Similar rumors surround and others known in the West but absent in Ukraine brands, among them Swedish brand of clothes, shoes and accessories from H&M. the interest of the Swedes to the Ukrainian market, citing its own sources in December of 2016, wrote the publication LigaBusinessInform. The journalists then reported that the development Director for new markets, the company Matthias Lamberg visited Ukraine, having examined a number of Metropolitan Mall. However, later the press service of H&M announced that in 2017, the brand plans to open in the country their stores.

Risky country

According to the sales of securities of the investment company Dragon Capital Sergey Fursa, the statement Chernitsky about the alleged interest of IKEA rental of retail space in Kyiv should be treated with caution.

“The very phrase that they look this way, suggests that concrete agreements yet,” – said the expert. Therefore, in his opinion, while talking about the seriousness of the Swedish furniture brand is not worth it.

Obstacle on this path can be corruption, because IKEA is known not to give bribes, says the expert.

The only thing that may outweigh the concerns of corruption risks, says Fursa, this is the opportunity to enter the untapped market on the background of significant solvency of the population. However, Ukraine, in the expert’s opinion, do not meet these criteria – there is a large number of shopping centers, and the population is recovering from the economic turmoil.

But, if some Western brands are hesitant to enter the Ukrainian market, other on it a long time. According to the Executive Director of the Center for economic strategy Gleb Vyshlinsky, the brand’s decision to enter a particular market is affected by a number of risks, some of which are unique to each company, while others equally affect the behavior of investors. Among the latter, according to the expert, for such brands as IKEA, really important and the ability to conduct business without violating the law, and the purchasing power of the population.

“Although Ukraine’s position in the ranking of Doing Buisness has grown – the government has simplified foreign exchange regulation, and taking into account macroeconomic stability, the forecasts are positive – it is hardly a breakthrough that would fundamentally changed the strategies of Western brands in our region”, says Vyshlinsky.

The lack of market isn’t always a sign of backwardness

However, the lack of brands in a particular market is not always evidence of its backwardness in comparison with its neighbors, puts Vyshlinsky.

In the case of H&M in Ukraine are widely presented its competitors in the same price segment, which indicates there is demand and feasibility of successful work in the country. At the same time, the Swedish brand is present in a much less promising from the point of view of the size of the market of Georgia.

The Ukrainian retail market of banking services, despite all the warnings back in 2006, successfully entered the French Bank BNP Paribas bought a controlling stake in UkrSibbank. “Few countries in Eastern Europe, he is represented in the retail segment”, – said the expert.

This thesis is confirmed by Fursa, according to which the requirements of specific brands in the promising markets are very individual, so each case should be considered separately.

Thus, unequal representation in the countries of the region can be caused by changes in the strategies of companies. Vyshlinsky says that before the financial crisis of 2008, many companies were engaged in active geographic expansion, then modifying these plans. This, according to experts, has led to the emergence on the maps of the “white spots”, on the site of the countries where certain brands don’t have time to go to a drastic change in their intentions.

“In this case to force a particular company to reach a certain market can only be something extraordinary, but Ukraine does nothing of the sort shows,” says Vyshlinsky.