DIY market is still one of the most monopolized retail segments in Ukraine. The ukrainian DIY market review

Ukrainian DIY market started its active development back in 2000. The main factors that contributed to the development of this sector were the following at that time: growth of consumers’ incomes, development of the construction market, revitalization of the secondary real estate market, development of the mortgage lending market and consumer lending market and lack of modern DIY retail. An analyze provided by AllRetail.ua publication.

From 2000 to 2007, ukrainian real estate market experienced a period of rapid growth. The increase in the number of transactions in the market contributed to an increase in demand for construction and decoration materials, and the development of mortgage and consumer lending largely determined the increase of demand for this category of materials. Those people who could not afford the purchase of new housing usually tried to improve the existing housing conditions and additionally increased the demand for decoration materials and repair services.

Nevertheless, the global financial crisis of 2008–2009, as well as the political-military conflict in Ukraine in 2014–2018, have significantly limited the development of Ukrainian retail market in general and DIY market in particular.

The consequences of this are: decrease in people’s consumer ability, devaluation of the national currency, a significant slowdown in the development of the market for residential and commercial property, reduction of retail turnover, slowing down the dynamics of the territorial development of large and small retail operators, a number of international operators exited from the market (OBI, Praktiker) and lack of interest in the ukrainian retail market from foreign investors.

Ukrainian DIY market

As of today, the ukrainian DIY retail market is represented by the following main sales’ channels:

<> Modern DIY chains (big box stores)

<> Specialized (niche) DIY stores (like “Agromat”, “Leokeramika”, etc.)

<> Small DIY stores and private entrepreneurs

<> Warehouses of building materials

<> Regular grocery stores (usually there are always a few points on grocery markets that sell DIY products)

Competition

As it was mentioned above, local company „Epicenter” maintains its absolute leadership in the Ukrainian DIY market. Despite the fact that „Epicenter” entered in the market 2 years later than „Novaya Liniya” retailer, in 7 years this company managed not only to catch up with its main competitor, but also to overtake it in terms of revenue, number of stores, and also total retail space. Subsequently, whole chain „Novaya Liniya” was merged by the company „Epicenter K” and today is de facto included in the portfolio of the „Epicenter”.

Largest operators of the Ukrainian DIY retail market (by the end of 2018)

The „Epicenter” ‘s extreme success was because of the following factors:

1. The speed of stores’ openings. Unlike its competitors, the company was able to optimize the process of opening new stores. In addition, in recent years, the retailer has begun to develop also a new concept of small stores intended for regional centers.

2. Good locations. When opening stores, the company managed to correctly select the location of its facilities. In particular, to increase synergy, the company opened part of its stores in the proximity of big box grocery stores of the chains METRO, Auchan, Tavria V, etc. A distinctive feature of Epicenter is that the company is not afraid to open its hypermarkets near its competitors. Due to the breadth of the range and reasonable prices, the company quietly maintains the competition, even being in close proximity to the store of another retailer.

3. Range. At the moment, the chain „Epicenter” provides the widest range of products in Ukraine. Using the best practices of foreign DIY chains, the company began to actively expand its product range beyond the familiar DIY lineup and moving into Home Improvement format. So, today, in most of the „Epicenter” stores, you can easily find a children’s section, sports goods, kitchen goods and accessories, electronics, and even car tires. In European countries, this trend has started more than 10 years  ago, while in Ukraine it has begun to be applied by local operators just in the last 4 years.

4. Successful application of global practices. Today, ”Epicenter” is, in fact, the only local area chain that effectively applies advanced european experience. The company began to gradually improve customer service, offering its customers not only products, but also installation and decoration services. For example, in some hypermarkets of the chain, the tile sales department is designed and equipped as an entire design studio, where the customer can not only pick up the right product, but also watch the visualization and also use the services of a professional designer. Also, “Epicenter” offers the services of its repair teams.

Ukrainian DIY market – forecasts

If we exclude military and political risks, the further development of the ukrainian DIY market seems quite predictable and will be characterized by the following features:

1. The single player market and the departure of foreign operators. If you don’ t take into account the political issues, the further leadership in the DIY retail market of ukraine will continue and strengthen even more behind the Epicenter chain. The company managed to stake out the most promising areas in all economically attractive regions.

Therefore, further competition with “Epicenter” due to the entrance to the regions of its presence will be troublesome even for such world giants as Castorama or Home Depot (these global DIY operators are not yet present in Ukraine). Leroy Merlin, which is already operating in the market, is unlikely to be able to catch up with Epicenter, given the low speed of opening stores and the fact that the ukrainian market is not a priority for the French operator.

2. Further development of small-format stores. Since there is almost no space left for large-format hypermarkets on the market due to the national presence of „Epicenter” facilities, as well as the lack of suitable sites, further development of market leaders will occur due to the development of small-format facilities with a size of ​​1.000 – 5.000 sqm.

3. Online sales. „Epicenter” and „Nova Linia” retail chains are already selling their products on the Internet. At the same time, they compete not only with representatives of their retail segment, but also with major operators of the market of household appliances and electronics, as well as large food retailers. We expect that the penetration degree of the leading DIY retailers in Ukraine online will increase.

4. Expansion of the products range. The trend of transition from classic DIY (building and decoration materials) to Home Improvement (everything for the home) in Ukraine will only be strengthened in the future. In Europe, the leaders of the DIY market have long since learned the truth that in 80% of cases, the decision to buy is made by women, so the range of hypermarkets is constantly expanding.

“Epicenter” chain was the pioneer in this trend and, apparently, in the future this company will set the tone for the market. In addition, „Epicenter” has the chance to become the largest chain operator of household goods (electronics, furniture, kitchen utensils, etc.), since this market segment is still poorly developed by niche networkers.

5. Development of specialized (niche) DIY networks. At the moment, the niche of specialized chains in Ukraine is still weakly occupied. Retailers such as „Alcest Instrument”, „Agromat”, „Leokeramika” and others are not actively expanding yet. Considering that the leaders of the market have a well-developed logistics and well-established relations with suppliers, this niche can also be taken up by „Epicenter” and any of its competitors. In Europe, this practice takes place, so it is possible that leading companies can use this opportunity to squeeze everything out of the market as much as possible.

6. Customer Service orientation. In the developed markets, where the niches of large (Big-Box) hypermarkets and small-format stores are already occupied, customer service is the main tool of competition. Operators begin to lure customers with additional services, the introduction of loyalty programs, discount cards, etc.

7. B2B segment s growing. One of the additional opportunities to increase sales is the additional development of the B2B segment. Here, DIY hypermarkets can compete with wholesale companies that are focused on the B2B segment.

8. The dominant position of DIY hypermarkets. The share of construction markets, as well as retail stores on grocery markets in the total volume of the DIY market will gradually decline. This situation can be explained by the fact that market are already starting to lose to DIY retailers in terms of assortment, quality of goods, price, convenience of purchases, delivery and service.

The only competitive advantage that will allow them to keep some competitiveness in the future is a good location for making small and minor purchases. According to the forecasts of some experts, in few years some stores can be transformed into modern shopping stores and entertainment centers or DIY supermarkets. However, such transitions most likely will be point-like, rather than have a massive phenomenon.

This article is part of the CEE DIY retail category from www.bricoretail.ro B2B publication and bring together news, in english, from Central and East Europe related with DIY and home improvement retail

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