Home improvement retailers are rapidly expanding, with a new Ukrainian player having opened a Kyiv store in mid-April to challenge Epitsentr and Nova Liniya.
Home improvement retail chains such as Epitsentr are rapidly expanding throughout Ukraine.
Home improvement retailers are rapidly expanding in the national market, with a new Ukrainian player having opened a Kyiv store in mid-April to challenge its established competitors, Epitsentr and Nova Liniya.
Kyiv-based Fomalgaut-T, a Fomalgaut Group division, runs the MasterOK! home improvement retail chain, with plans to open seven more by 2012. The company invested 4 million euro into its new Kyiv store on Mala Okruzhna Street near the Akademmistechko metro station.
“The market for ‘do-it-yourself’ stores is developing rapidly and is not completely saturated, especially in the regions,” said Lyudmila Miroshnichenko, head of the advertising and marketing department of Fomalgaut-Polimin, a part of Fomalgaut Group.
As a result of rising incomes, more access to credit and a suburban real estate market on the cusp of a boom, the home improvement retail market emerged in the last few years and is already struggling to keep up with surging demand.
Just last year, Epitsentr opened eight stores throughout Ukraine in 2007.
The modern construction stores, built identically to American counterparts Home Depot and Loews, are oriented towards those building their own homes or renovating their own properties, as well as construction contractors engaged in similar work.
For various reasons, Ukrainians are fond of do-it-yourself home improvements.
Quality contractors and renovators are hard-to-find, hard-to-trust and often too expensive for average Ukrainians.
Meanwhile, Ukrainians still adhere to the Soviet tradition of buying construction materials from small shops called “zdyelay sam” (do-it-yourself).
Objective economic factors, such as growing disposable income, are also fueling the demand, said Hlib Vyshlinsky, customer research director at GfK Ukraine, a Kyiv-based market research company.
“In the next several years, the development of this market will primarily depend on greater transparency in the selling or renting of land plots in Ukrainian cities,” he said. “This will affect both the development of construction business and the development of the do-it-yourself market.”
If land market reforms are inadequate, the retailers will need to focus more on marketing home improvement rather than construction materials.
Epitsentr and Nova Liniya are the pioneers of the home improvement retail market in Ukraine, said Svitlana Dryhush, an analyst at Renaissance Capital investment bank.
Epitsentr operates 15 stores nationally, while Nova Liniya operates 10.
Regional players that emerged in Ukraine, opening a store or two, include Oldi, Slon, NPP Ergo (DomoTOP and Ergo brands), Master, Ganza, and Budmen.
The main shareholders of Nova Liniya are Kyivbased Dragon Capital investment bank, Swedenbased asset manager East Capital and the managers of Nova Liniya themselves, she said.
Eugene Baranov, a partner at Dragon Asset Management, said “Nova Liniya’s development plans envision launching four to five new stores every year,” adding this year the company will open stores in Zaporizhia, Bucha (Kyiv oblast), Kharkiv, Uzhhorod, and Kremenchuk.
“For now, the company’s development strategy does not foresee expanding into the markets of other countries, since we see a huge potential for business development in Ukraine, which we will focus on in the near future,” he said.
The entry of international retailers to the market is significantly hampered by ineffective legislation on land use and allocation, market analysts said.
“For an international chain to construct its own home improvement store here is a rather complicated task,” Dryhush said. “They would need to [complete] a Greenfield project … and this is rather difficult.”
Meanwhile, only a few Ukrainian players can afford to construct home improvement stores from scratch, market analysts said. They include Epitsentr, Nova Liniya, and Karavan, which has a doityourself store in Rivne and Kharkiv.
So far, only three foreign companies have opened home improvement retail stores: Praktiker (Germany), OBI (Germany), and Metro Cash & Carry (Germany).
Praktiker was the first to enter the Ukrainian market, opening its Donetsk oblast outlet in November 2007, while German rival OBI will open stores in three cities – Kharkiv, Mariupol and Odesa, said Keith Smith, country manager for OBI Ukraine.
The company declined to reveal how much it will invest in 2008, but plans to open 20 stores within the next five years in Ukraine.
Wholesale supermarket Metro Cash & Carry has offered home improvement departments ever since the company launched its first center in Kyiv in 2003.
It opened the first expanded doityourself department in Kyiv’s Pozniaky district in the summer of 2006, said Tatiana Babenko, the company’s head of corporate communications.
Home improvement departments are at each of the company’s 18 wholesale trade centers in 14 Ukrainian cities.
In addition to Praktiker and OBI, one of the largest international retailers, Francebased Auchan, is planning to launch Leroy Merlin, the company’s subdivision for retail sales of construction materials and household goods, said Dryhush.
The Kyiv Post
