"We came to pamper Europeans" — Nova Poshta’s Volodymyr Popereshniuk explains EU expansion
In October 2022, the Ukrainian postal giant Nova Poshta entered the first country of the European Union, Poland, through its subsidiary Nova Post. As early as April, there should be a Nova Post office in each of Poland's 16 voivodeships, and by June there should be 50. The goal is that a parcel from Warsaw to Kyiv should arrive within a day — the same timeframe as in Ukraine.
On March 20, the first white and red post office appeared in another EU country, Lithuania. Next in line are Germany, Romania, and the Baltic states — a total of 200 offices across 30 European countries by 2025.
The reason for this frantic pace is that millions of Ukrainians who were NP's clients ended up abroad because of Russia's attack.
The new player in the EU market spares no expense: the company is investing €1 million in Poland, Volodymyr Popereshniuk, co-owner of Nova Poshta, tells LIGA.net. By 2025, €10 million is to be spent on the development of international business.
How is the Ukrainian express delivery operator going to recoup these funds when the war is over and Ukrainians leave? LIGA.net visited the opening of the first Nova Post branch in Vilnius and asked Volodymyr Popereshniuk about how the company is going to win over the hearts of Europeans.
Not competitors, but partners
- How much larger are the Polish and Lithuanian markets than the Ukrainian one and what shares does the company expect to take in the next three years?
In terms of volume, they are significantly larger. For example, in Poland, there are 26 shipments per person per year, in Lithuania – 18, and in Ukraine – 11. Our main focus in European countries is on Ukrainians who already live there or have left because of the war. That is why we are developing cross-border delivery in these markets, i.e. two main services — delivery of parcels to and from Ukraine.
Therefore, we are not competitors for local companies, but rather 100% partners. In order to provide a full range of services, both in Lithuania and Poland, we have targeted delivery and targeted pickup of parcels in partnership with local companies. Thanks to this, we can deliver or pick up a parcel from any address in these countries. In Poland, these are InPost, DPD, GLS, and Venipak in Lithuania. We create an additional volume of parcels for them, and they help us to better understand the new market and the peculiarities of the country in which we operate.
- However, Poland and Lithuania are not your first experience of expansion. NP already entered Moldova and Georgia. And as far as I understand, it did not work out with the latter. Why exactly? What did the Georgian experience teach you and how much did it cost NP?
The Georgian experience showed us that you cannot approach different markets with the same yardstick, and even a country that is so close to us can be radically different in its habits, mentality, and consumer demands. In other words, we slightly overestimated the market's readiness for our services in the format in which we were providing them at the time.
Indeed, the work on opening new markets is always done in the dark to some extent. We are creating new products, forming new habits, and therefore, on the one hand, you need to do what you have done in the past, and on the other hand, you need to move forward into the future and take risks.
When opening new markets, there are no minor decisions — they are all strategic. At that time, we were not ready to delegate less authority to the management, so we decided to stop in Georgia. Now we have worked on our mistakes and learned all the necessary lessons.
- Are you going to return there? When and under what conditions?
Of course, when we have the skills to work abroad.
- What were the biggest challenges you faced when entering the European markets? Are there any that you were not prepared for?
There are no situations for an entrepreneur when he or she does not have problems or challenges. Solving them is their job.
When entering new countries, we worry the least about legal issues: opening a legal entity, a bank account, obtaining a license, because it is more difficult and time-consuming to open all this and obtain licenses here than in Ukraine. But this is not our problem, but the problem of the economies of these countries, which lose a lot of money due to downtime.
We will compare the taxes in the countries, how long it takes to get a license, how long it takes to open a bank account, how difficult it is to find employees, etc.
By the way, the issues of quality recruitment and language issues, namely which language of communication with customers should be the first, second, or third, have become not so much a problem as an interesting task for us.
Because at the moment, most of our clients are Ukrainians, but locals also come to us to send or receive parcels from Ukraine. That's why we decided to make the language of the country we are entering the first, and all employees must know it perfectly. We even have to adopt a language standard — in which languages we should have signs, price lists, and how should we say hello.
- How do Europeans differ from Ukrainians in their behavior? What influences the formation of Nova Post's tariff policy?
Europeans are not very spoiled by service, so we came here to pamper our customers. For example, the first thing we decided to surprise them with is that we work on Sundays. The second is the speed of delivery. We believe that parcels should be delivered very quickly, they shouldn't stop anywhere and be delayed.
Here, everything is different. There is a standard in delivery. It's slow, but everyone is used to it, so Europeans have no problems with it. They perceive this level of service as the norm. But I realize that it can be better and faster.
Our tariff policy is based on two factors. The first is how the market perceives the tariffs. The second is the cost price. Since we are just opening, it is currently high, but with scaling, it will decrease.
- Visually, NP branches in Ukraine and EU countries are different: spacious, with children's areas, new design, and furniture. How much does it cost to open a branch, for example, the first one in Lithuania? And how much have you already invested in Poland?
We invested about €100,000 in the branch in Lithuania. The approximate amount of investment in the Polish market is €1 million.
- Do you rent all your branches and terminals abroad?
Yes, we rent all the premises, and we produce and import furniture from Ukraine.
- What about franchises? What is the share of NP's business on franchisee terms in Ukraine and what is the share abroad?
In Ukraine, almost 25% of Nova Poshta's parcels are sent through franchised outlets.
In Europe, we are still testing the franchise and working out the bottlenecks. The first two partner branches have been opened in Poland (Katowice and Czestochowa).
In the near future, we plan to open four more branches by the end of March under the franchise in Kielce, Jelenia Góra, Gorzów Wielkopolski, and Szczecin. I assume that over time their share will be higher than in the Ukrainian segment.
- Will you concentrate all your investments on international business this year? Do you plan to grow your network of retailers in Ukraine?
This year we plan to grow by 10% in Ukraine compared to 2021. We are planning to complete two new innovative terminals in Odesa and Kyiv Oblast, as well as to start construction of the second stage (expansion) at the terminals in Lviv, Khmelnytskyi, and Kharkiv.
In addition, we will expand our network. We plan to open 2,000 new branches in villages and towns, and install 1,000 new post offices.
- Don't you acknowledge 2022?
This is a year of business retention, not growth.
20% of NP's profits should come from international business
- The war has to some extent accelerated the entry of the postal service into the EU markets, as almost 10 million of our citizens are abroad. The CEO of Nova Post Polska said that only 8.5% of its customers are non-Ukrainians. How are you going to earn back investments abroad when the war is over and Ukrainians return home?
You have to understand that many Ukrainians settled in the countries we are entering even before the full-scale invasion. They had no intention of returning. Also, a large number of Ukrainians who have already managed to establish their lives abroad during the war will not return to Ukraine.
It will all depend on the conditions that will be created for businesses in Ukraine, and, frankly, I see no signs that they will become much better in the near future. Regulation and licensing are not being abolished, and taxes are not being reduced, but the number of inspections and social pressure from the state is increasing.
Our focus on Ukrainians in European markets is only the first stage of development. The second is working with local customers and companies, including delivery within Europe. We will do our best to grow business in all our branches.
- What share of NP's profits should be generated by international business, say, in 2025?
The share of profits related to NP's business in Europe and other countries should be approximately 20% of NP's profit structure in 2025.