Despite Russian President Vladimir Putin’s ‘Special Military Operation’, Ukraine already has one of the most developed out-of-home infrastructures and some very interesting customer-centric solutions.
Recognizing the anticipated significance of Ukraine, and the positive experiences we have had while collaborating with our clients, Last Mile Experts with the support of Effigy Consulting has just released its first comprehensive CEP report focused on Ukraine.
The CEP sector, like most of Ukraine’s economy, suffered significant losses and operational disruption as a result of Russia’s military aggression. The CEP market experienced a 17.4% decline in volume (8% in revenue) in 2022 when compared with 2021. This has had an impact on the number of operators providing services in the country and the way they operate. In fact, most smaller companies have suspended operations or disappeared from the market altogether. At the end of 2022, Nova Post, Ukrposhta, Meest, CAT and DHL Express remained active.
The estimated volume of the Ukrainian CEP market in 2022 is 305,000,000 parcels. The top five players in terms of volume are Nova Post, Ukrposhta, Meest, CAT and DHL Express, who collectively hold 98.5% market share. The B2B segment dropped by 49.4% in revenue, and its share of the total CEP market revenue stood at 11.5% (versus 20.9% in 2021). The C2X segment (C2C and C2B combined) experienced strong growth in 2022 (+91.4% revenue increase) due to the high growth in the C2C segment as parcels between individuals accounted for most of the year’s total volume. C2X now represents a larger share than B2B on the Ukrainian CEP market, at 36,9% in terms of revenue. It is important to note that for historical reasons, the terms CEP and postal services are often used interchangeably in Ukraine.
In 2022, major CEP networks such as Ukrposhta, Meest and CAT have experienced significant declines in their networks. Nova Post, the market leader, with 85% market share (by parcel volume) has managed to restore its network to almost pre-war levels, with approximately 24,000 service points across the country, including an incredible 14,000 parcel lockers, putting it ahead of Deutsche Post in Germany and making it the second national APM player in Europe. We should, however, note that approximately 1,175 service points remain in the occupied territories, and their current status is uncertain.
While e-commerce was already a key sector in pre-war Ukraine, cross-border e-commerce flows present future expected opportunities for service providers in the post-war world. Rozetka.com.ua was the leading online store in the country in 2022, with online net sales revenue over twice those recorded by Apple, which ranked second in the country.
We anticipate significant interest in this sector as soon as hostilities end. War-related migration led to over five million people seeking refuge in EU countries (notably Poland and Germany) and had a significant influence on the development of the e-commerce market in Ukraine. The C2X segment, encompassing both C2C and C2B transactions, exhibited remarkable volume growth (+53.6%) and now constitutes 36.6% of the total Ukrainian CEP.
There is a growing trend of mobile shopping; demand for delivery from online stores based in the EU, the US and China is growing, arguably as a result of limited access to traditional retail or ‘PC-based’ activities, easier (EU) cross-border access and restricted domestic production.
In war-torn 2022, Nova Post achieved impressive milestones, delivering 261,000,000 parcels. This is despite the fact that approximately 80% of carriers’ branches in the liberated territories have been destroyed or severely damaged so the post-war rebuild is expected to be huge. In fact, the long-term reconstruction of Ukraine’s postal system is projected to cost approximately US$1.89bn between 2023 and 2033. The majority of this amount will need to be allocated for short-term needs between 2023 and 2026.
Ukrposhta, in particular, has benefitted from strong growth in the international market in 2022 and probably had the most ‘non-commercial’ international parcel-based aid delivered via its network.
Ukraine will be a future CEP Mecca as we anticipate that, whatever the final outcome of the so-called ‘Special Military Operation’, the country will be closer to the EU and likely have customs privileges, significant inbound investment and a return of a large number of Westernized Ukrainians who spent the war as refugees. It is expected that Poland will be the main road gateway to and from Europe, and that Nova Post will be the key facilitator due to its dominant coverage and market share in Ukraine. Furthermore, we expect that as a result of the ongoing war, technological advancement will be made in the CEP space, especially in areas such as backup communication tools, more use of mobile applications by consumers, pop-up PUDOs and a drive toward re-commerce.
In summary, when the war finally ends, Ukraine clearly has the potential to be one of the most innovative or at least fastest-growing markets in Europe and a huge opportunity for Western carriers and other last-mile stakeholders.
To download the full Ukrainian CEP report for free, please click here.