Trade is one of the few sectors of Ukraine’s economy that has grown during the full-scale war. Almost half of the companies on the list of Ukrainian business leaders in 2022 work in trade, according to the ministry of digital transformation and the state statistics service.
The war has forced Ukrainians to be more demanding when purchasing goods and look for cheaper prices. As a result, more consumers have started looking for goods online.
Prom.ua, one of the largest marketplaces in Ukraine, felt this trend and was able to turn it to its advantage. Over the year of the full-scale war, sales on the platform grew by 20 percent, and the net profit quadrupled to UAH 225.2 million, its CEO Denys Horovyi told LIGA.net.
In an interview, Mr Horovyi spoke of how the full-scale war changed Prom.ua and how it managed to turn a profit.
Prom.ua is one of the largest online marketplaces in Ukraine, part of the business of the Ukrainian grocery company EVO, with five million people having made at least one purchase on it. About 30 to 40 percent of Prom.ua customers live in Kyiv and the Kyiv region.
EVO Group, which includes Prom.ua, founded by Mykola Palienko, Denys Horvyi and Taras Murashko, became part of the Ukrainian company Rozetka in the autumn of 2018. Rozetka bought out a 54-percent stake of the South African fund Naspers, and the co-owners' stake was transformed into a share in the merged company.
Is Prom.ua the strongest part of your group? What is its share in the total profit package of your group?
Yes, about 60 percent.
How has the Ukrainian e-commerce market changed since the start of the great war? What is your share in it, per your estimates?
There have been several stages of changes in the market.
At first, almost everything was at zero. Later, small entrepreneurs started placing offers on marketplaces and began to recover much faster than large companies. This trend continues to this day.
Ukraine's e-commerce market is dominated by large players: OLX, Rozetka, Aliexpress, the latter now recovering again.
How has the war affected your customers in general?
If we talk about absolute values, the number of orders from Kharkiv and the region has decreased the most. A year and a half ago, this was our third or fourth largest region, and now its share is somewhere at the bottom of the list.
Instead, Lviv and other cities in the western part of the country have seen a sharp increase at first, but in the summer [of 2022] the distribution returned to more or less the usual one.
And, of course, the occupied territories. Courageous entrepreneurs are gradually sending out more and more as soon as they [the territories] are liberated by the Ukrainian Armed Forces.
For example, this is what is happening now in the Kherson region. We give them bonuses so that they can send without commission.
Have you changed your approach to commissioning sellers since the start of the great war?
It consists of two components: a subscription, that is an annual fee paid by the seller to have their website on Prom.ua and be able to sell there, and a commission from sales on the marketplace.
Over the past year, we have allowed companies that are not ready to renew their annual subscription to switch to the so-called freeze mode. That is, we kept all their information, everything was saved, but the customer could not order from the company because it was not working.
This significantly affected our revenues: We lost about 30 to 40 percent of what we had a year ago, so we are gradually abandoning this mode, retaining it only for companies located in the region with active hostilities, or if their employee or manager is in the Armed Forces, for example.
As for the commission model, we have switched to a single rate that depends on the category (5 to 15 percent).
Previously, a company could independently determine what commission it was willing to pay. Now, if a company meets our conditions for service quality, it has the opportunity to lower rates or raise rates, or receive more orders or slightly fewer, but pay a lower commission.
How many customers do you have in total, and how do you count them? Has the share of first-time customers increased?
We consider both buyers and sellers to be customers. The share of buyers who made a purchase from us for the first time increased by 6 percent.
But if we talk about the dynamics of recent months, the number of first-time customers – those who register – is higher than a year and a half ago. So, there is definitely a tendency for entrepreneurs to become more active.
What are your average monthly registration figures?
More than 1,500. It is clear that not all of them start working actively.
How have sales on the platform changed?
Sales are now about 20 percent higher than before the great war.
And the average check?
If we compare it year-on-year, it has grown by a third and now amounts to about UAH 1,000. This is mainly due to the so-called ‘panic goods’, including generators, tourist equipment, and military goods – that is, categories with a high average check, so this affected the overall turnover on the site.
What products were in greatest demand in 2022?
These are primarily clothes, appliances, electronics, household goods, children's goods, pet products – that is, traditional categories.
We also added military goods, the so-called ‘panic goods’, such as generators, camping sleeping bags, power banks, and lanterns, which are used in winter.
You mentioned that military goods were also actively sold. Does the marketplace somehow monitor the sale of low-quality bulletproof vests or tourniquets, for example?
We have gone through several stages.
Initially, we let in everyone who was ready to sell, as it was clear that it was not the right time to put up any barriers.
In the summer, it became clear that, unfortunately, there were cases when people sold low-quality goods to make money. Since then, such sensitive products can only be sold when quality certificates are provided.
Did you have to change your business model because of the war?
Yes, before the full-scale invasion, we were operating in a growth mode, with the main focus on increasing our performance and turnover.
After 24 February , we switched to a more controlled growth mode, with a safety margin in case of unforeseen circumstances, with less aggressive investment in promotion and marketing.
In short, we have become more cautious.
How does this caution manifest itself? How many projects have you had to abandon and how many people have you laid off?
At the beginning of the full-scale invasion, we tried not to fire anyone at first. We agreed with our colleagues to cut their salaries, as our income dropped to almost zero.
But after a month or so, we realised that with the transition to this more cautious model, some people would inevitably lose their jobs. So we had to lay off about a third of our staff.
But since then, we have managed to get every fifth of them back to work.
What is your current staff strength?
About a thousand people, if you count all our projects.
A question from our reader: EVO has previously announced that it was abandoning the office format. Did you manage to completely abandon it? How does the team work now?
We have remained in the hybrid format we developed during the COVID-19 pandemic. We primarily work online, but we have an open office. Any employee can come at any time.
This winter, the office was our ‘point of invincibility’ [a place with heating and electricity during blackouts caused by Russian attacks on energy infrastructure], as we managed to provide electricity thanks to generators.
So how many businesses are currently operating under the aegis of EVO? What projects have emerged during the great war?
In total, we now have 12 businesses, three of which were launched after 24 February 2022 – Made with Bravery, a marketplace for Ukrainian goods with delivery abroad; Help Volunteer; and Pidmoha [Leg-Up], a platform for volunteers.
Where do you see the biggest drop?
Businesses built on the B2B model, in particular our platform Zakupki.Prom, have seen the biggest drop.
The war has had a significant impact on the procurement industry. The government has made procurement through the Prozorro system optional in some cases, so the number of procurements in the system has decreased by 30 to 40 percent.
Part of our business is built on a consumer business model, including Prom.ua, Shafa, Kabanchik, and IZI.
B2C businesses were the least affected. This can be explained by the fact that we operate in a segment with a low average check, and the problems around us have encouraged customers to order more online.
If we compare the number of orders on Prom.ua, the figures for 2022 are only 10 percent lower than before the war.
And in financial terms, how much did you shrink or grow over the year?
In terms of profits, compared to 2021, the result is positive, but I prefer not to disclose the figures.
What about foreign businesses? I know that you have projects in Brazil and Kazakhstan. Did you manage to develop them last year?
Satu.kz is operating in Kazakhstan. We launched it 15 years ago together with Prom.ua. In Brazil, we do not operate.
However, we are planning to launch several new international projects by the end of the summer. I'm not ready to share which countries yet.
Have you had projects in Russia and Belarus? How did they turn out?
Yes, we had a project in Russia, but we closed it at the very beginning. And the project in Belarus, which we handed over to local management, is a project we have nothing to do with.
What do you mean by ‘at the beginning’, at the beginning of the great invasion, that is in February 2022?
What shares did they have in your group?
They were small, up to 10 percent.
What kind of businesses were they?
What is the share of foreign business in the group now? What is it expected to be after the expansion you mentioned?
Currently, it is about 7 percent. But I wouldn't call our plans to expand to other countries expansion; it is rather an experiment.