Ukraine’s Nova Poshta eyes global expansion

Nova Poshta started active international expansion to European countries in 2022, amid Russia’s full-scale invasion, and expanded to several countries by June 2023. This is just the beginning, the company as, as it plans to open in a number of new states by the end of the year.

Nova Poshta has already set up its own airline and made its first flight this spring. Andrii Hryhorov, director of international market development at Nova Poshta, spoke to LIGA.net about international development, plans, and peculiarities of working in new markets.

How Nova Poshta chooses new markets

Our main task is to logistically connect European countries with Ukraine.

That is why the logic is as follows: First of all, we focus on the number of Ukrainians living here, both those who left due to the war and those who moved there earlier and stayed. They now make up the lion’s share of our clients abroad. On average across countries, they now make up 90 percent of our clients.

The only exception is Romania. It is a special market, and when we started working here, we deliberately focused on Romania’s strong ties with Moldova. Thus, in our development model, we assume that 70 percent of cargo turnover will consist of the flow of parcels between Romania and Moldova and only 30 percent, between Romania and Ukraine.

The second step is to analyse whether Ukrainian businesses are interested in exporting or, conversely, whether local businesses are willing to send something to Ukraine. But this is a secondary factor, the primary one is still the C2C segment, that is, the number of individuals who will generate the flow of parcels from and to Ukraine.

Why it’s difficult to open new offices

There are several main difficulties.

First, all these countries are significantly different from Ukraine in terms of setting up an entity. In Ukraine, the entire process of registration and readying for operations would take up to three weeks. In the EU, it takes months.

Our ‘record’ is opening in Germany, which took six months. In Lithuania, for instance, it took three months; in Germany, even registering a bank account took 2.5 months.

Second, what caused a lot of difficulty was finding premises for offices. Europe pays great attention to preserving its historical legacy, so it is very difficult to find a location in the centre of European cities that meets our requirements.

In general, such nuances as a large number of historical sites, old premises with insufficient space, and peculiar architectural design do not hinder us, but they slow down the process.

What’s different in the work of offices in Ukraine and abroad

One of the main differences is that in Europe, the model of delivery through post offices is generally unpopular. More common are postal machines and PUDO (pick-up / drop-off) — parcel delivery through partner business outlets.

Addressed delivery has its features, too. In Europe, unlike Ukraine, phone numbers are rarely used to identify and contact people. The key method of communication is e-mail, and everyone uses it.

For instance, in Poland, couriers don't try and hand-deliver a parcel to a customer. They simply drop it off at the door and then inform the customer via e-mail that it has been delivered.

Hypothetical problems are solved by data quality. If there is even the slightest detail missing in the recipient’s data, the parcel isn’t going anywhere and will remain in the warehouse until the client provides the corrected data.

In other words, it is a bureaucratic process that simplifies the life of the postal operator, but not that of the customer.

In terms of services that are popular in European countries, it is primarily COD, cash on delivery.

Usually, customers in Europe buy goods online and pay for them only by prepayment. In Ukraine and, by the way, in Moldova since this year, NovaPay, our financial service, makes it possible to receive the goods, inspect them, and pay thereafter. NovaPay will deliver the money to the seller.

We expect we’ll be able to introduce cash on delivery in other European countries in about six months, depending on when NovaPay is given a licence from the Lithuanian central bank, which we applied for last year.

Checking the contents of international parcels

The rules for sending international parcels are significantly different from those we are used to in Ukraine.

First, there is a list of goods prohibited for shipment that differs from that in Ukraine. Second, there are restrictions on the value of parcels, which affects taxes paid by the recipient. You can send goods worth up to EUR 150 from Europe to Ukraine and up to EUR 45 from Ukraine to Europe tax-free.

To avoid violations of those rules, the first level of control of the contents of the parcel takes place at the postal office. Employees check it for prohibited items and estimate its tentative value as well.

The second level is at our sorting station in Lviv, where, in addition to customs documents, the contents of the parcel are checked as well.

It is very important to provide true and accurate data both in terms of the name of the contents and the estimated value. If the customs papers say one thing, but the actual contents are different, the customs offices of European countries simply do not clear such a parcel.

This experience varies from country to country. According to EU legislation, individual parcels must be cleared at the customs of the country of destination. Their customs offices are strict and demanding of us, requiring a complete match between the name and the actual value of the goods indicated in the documents. This makes us very careful about what our customers send abroad.

Nova Poshta’s pricing policy

First, it is based on an analysis of the competitive market. Second, the cost of the service is taken into account. Third, we want to provide services of the same quality and price for all countries that can be grouped regionally. Therefore, if those are countries bordering Ukraine, the prices for sending parcels should be the same.

In this way, we want to simplify the logic of understanding and remembering the price for our customers, and to simplify communication.

A single price for certain regions is the best option for this. This creates some inconvenience for us since the cost of production varies from country to country; however, we are ready to sacrifice our own conveniences for the sake of customers’ comfort.

Choosing marketing channels

Usually, before launching in new markets, we analyze media consumption in countries in detail – what are the trends, which channels are most used by the target audience (TA) and what content is viewed. We always estimate the size of the potential target audience and analyze the socio-demographic profile.

The top channels among Ukrainians abroad in all countries are not too different: Telegram messenger channels and groups and social media. In our advertizing campaigns, we use a mix of channels, from digital to offline, to reach and cover the entire target audience. After all, there are Ukrainians who have long since moved to a given country and assimilated. Therefore, they can, for example, draw content from the local press, which is still quite popular among consumers in Germany, or from printed materials (flyers, leaflets) that are still relevant to consumers in Poland.

On competitors

I would not call them competitors, but rather our partners – both international and local players. For example, Venipak, which operates in the Baltic states and Finland. There are also large companies, such as DPD or GLS, which are more global, as they are present in almost all European countries.

And they are all our partners, because in each new country we find a company that helps us expand delivery options for our customers. For example, to provide targeted delivery services until we can do it on our own. Or provide delivery to automated parcel lockers.

We currently have three partners in Poland: Inpost, DPD and GLS. In Germany, it is DPD, in Lithuania – Venipak, in Romania – Cargus, and in the Czech Republic – GLS. These companies perceive our arrival positively, they all support Ukraine and admire the heroism of Ukrainians. It is also important that we focus our business model on Ukrainians and connections with Ukraine, and thus draw a line of demarcation in our competition.

On the company's advantages compared to competitors

The European market is highly competitive. The number of companies is off the charts, with over 100 carriers in Poland alone. Surveys show that most local consumers prefer the services of local operators they are already familiar with.

On the other hand, the consumer in Ukraine and Europe is quite the same in terms of his or her focus on quality, service and price. And if a customer notices that we are faster, better, and more transparent, I am sure that this will be more important to them than the history of their relationship with a local operator.

One of our advantages is the speed of delivery. The second advantage is quality in terms of delivery at a precisely defined time. That is, if we say we deliver in three days, we keep our promise. From this point of view, delivery in Europe does not work so well, and we have seen it for ourselves.

The third advantage I would mention is our digitalization, the provision of additional digital services that create convenience around the basic delivery service. For example, thanks to tracking, the consumer receives transparency – the ability to always know where their parcel is. Or they can arrange a parcel pickup right from their home or office via a mobile app. This is what definitely distinguishes us from local operators. They either do not have such digital services, everything works through the website, or they have very limited functionality.

On building its own airline fleet

On May 16, Supernova Airlines operated its first flight between Riga and Rzeszow. Since then, the airline has operated 14 flights and carried 70.5 tonnes of cargo, or 250,000 parcels. Currently, all flights are operated in partnership with the Latvian airline RAF-Avia on an ATR 72 aircraft.

The long-term plans of Supernova Airlines include the formation of a fleet in the future involving cargo versions of modern aircraft manufactured by Boeing or Airbus. However, we are still in the process of negotiations, so we are not yet ready to disclose details. The global goal is to ensure the fastest possible delivery of parcels for our customers.

On international development, including the NP Shopping service

We see growth and great interest every day, both long before and after the opening. Often people come from other cities to send parcels on the day of our opening – this was the case in Germany and Czechia.

In the context of the dynamics, we can talk about Nova Poshta Global's international delivery product, NP Shopping, which allows Ukrainians to order goods from foreign stores that do not deliver directly to Ukraine. The dynamics of NP Shopping parcels is positive: the volume of shipments for six months of this year is 34% higher than before the full-scale war.

The most popular country is the United States (it accounts for 50% of all import deliveries), followed by Poland (35%). This country wins due to the speed of delivery of orders, which in some cases (depending on the store) can be up to four days. Germany is now in third place, while before the war, orders from the UK were in second place. The three most popular stores from which Ukrainians order most often are Amazon, 6pm, and ebay.

On the company's plans and new markets

We are currently working on entering the next four countries during the third quarter: Latvia, Estonia, Slovakia and Hungary. We are still analyzing the launch format and opening model.

We are currently updating the NP Shopping service in Moldova. Our priority will remain speed, and we will invest in it by opening our own warehouses and increasing the number of our own flights.

We see prospects for the development of imports in Asian markets, so this year we plan to launch deliveries from Korea and Japan and grow deliveries from China. At the same time, we continue to improve the NP Shopping service and test additional international delivery features that should significantly improve the user experience and bring it to a completely different level.

We are not going to stop digitalizing and will continue to make our digital services for customers both in Ukraine and abroad even more convenient and functional. For example, in the near future, we will launch a mobile application common to all of our foreign markets, and in some countries where we launch business products, we will also launch business accounts.

Victoria Saravas, exclusively for LIGA.net