Consumer Market

Retail trade is one of the oldest and most dynamically growing branches of modern Ukraine’s economy, contributing 16% of the country’s GDP. Rapid increasing personal incomes in the first decade of 2000s drove rapid market expansion and the arrival of some major retail players. The financial and economic crisis of 2008-2009 was a blow to the branch, but it also eliminated such problems as the high cost of building lots and high commercial rents. When personal incomes began to grow again in 2010, they served as an impetus for economic revival. The retail sector is very attractive to investors because of the large size of the market and pent-up demand.

Ukraine’s retail market is quite young, evident in its lack of formation and pent-up demand. So, retail, especially clothing sales, private entrepreneurs, and bazaar traders take significant part of the market. Low salaries in the regions prevent the expansion of branded clothing stores and widespread employment in the private farm sector supports the continued existence of farmers’ markets.

Historically, Ukraine’s retailers have suffered from a continuing shortage of quality retail space. This is because commercial space is new concept for most post-soviet countries, including Ukraine. In soviet times, prior to 1991, shortages were a permanent feature of the retail market, as was preferential availability and state ownership. After 1991, Ukraine began its transition to a market economy and only around 2000, with the revival of real incomes across the population and the arrival of major foreign and local players on the market, did new shopping and recreation centers begin to be built. The supply failed to keep up with expanding demand, resulting in very high rental rates for retail space.

Operator type	Sales area, m2	Average annual rent, USD/m2
supermarket	1.500-5.000	180
hypermarket	>5.000	108
appliance store	<2.000	216
	>2.000	180
sports shop	<1.500	300
	>1.500	240
cosmetics and perfumes	500–1.000	480
baby shop	>1.000	240

Country Strong Points
•    One of the biggest markets in Europe—47 million consumers;
•    The most dynamic GDP growth in Europe;
•    A very good educational system: fourth in the world, in terms of specialists with diplomas in the high-tech sector;
•    A strategic geographical position, at the crossroads of Europe, Russia and Asia;
•    A growing middle class, estimated at 20% of the population;
•    The presence of major corporations such as Kraft Foods, Coca-Cola, Hewlett Packard, Cargill, Knauf, Raiffeisen Bank, Credit Agricole and many others;
•    A banking sector that is being strengthened and reformed.

Country Weak Points
•    Little support for foreign investors in domestic legislation;
•    The weak financial position of the national fuel company, Naftogaz, and the country’s permanent risk of being unable to meet its natural gas bill;
•    A steep decline in industrial output in 2009;
•    High inflation;
•    Political instability;
•    Endemic corruption.