Nova Poshta, the largest private Ukrainian parcels and express operator, has been growing andexpanding very fast in recent years profiting from a dramatic hike in e-commerce and is now
entering the international market with a separate subsidiary.Last year, Nova Poshta shipped over 12 million parcels, Alexandr Ladyvir, Director InternationalDevelopment, told CEP-Research in an interview at Post-Expo in Brussels last month. Based on thefirst half of 2012, the company expects to ship 45-48 million parcels by the end of this year whichwould equal annual growth of over 300%. Ladyvir declined to disclose any figures in terms ofrevenues or profits, however.
Nova Poshta (“New Post”) was founded in February 2001 to create a private operator able toprovide postal and parcel services, including pallets and cargo, to compete with the state postaloperator Ukrainian Post (Ukrposhta) at a high quality level. The company now employs 9,000 staffwith a network of 1,011 offices covering 86% of the Ukrainian territory.
Over the last 2-3 years, it has been reinvesting around 50% of its revenues in developing itsnetwork and technologies and in employees. The company estimates its current market share at36-38%, with 16-18 domestic operators taken for comparison.
Ladyvir predicted that entering the international market will give an additional growth boost tothe company. “Today, we have agents representing Nova Poshta in Asia (Shanghai, Peking, Hong Kong),Turkey, United Arab Emirates, Europe and the USA. These are regions where we expect to break evenin the shortest possible period of time.”
He explained: “For the past 12 years, we have been establishing a domestic network to reach aleading position among the private express operators on the Ukrainian market which we achieved in2008. We even managed to overhaul Ukrposhta in the segment we operate in – delivery of parcels,packages, business documents in the A4 format etc. We are currently number one in e-commerce on themarket with basically every internet shop displaying us as a delivery provider in Ukraine on theirwebsite.
“Our main local competitor In-Time has about 285-290 offices,” Ladyvir stated. “On average, weopen 30-60 offices per month keeping our brand and corporate identity in white-grey-red colours.”& amp; amp; amp; amp; amp; lt; /p>
The company has three types of offices. It has classical post offices in city centres forshipments with a weight of up to 20-30 kg. In cooperation with distribution companies, Nova Poshtacollects pallets from warehouses far from the city centre. Finally, it also has service points inshopping centres for people to drop off and collect their shipments while doing other things.
In addition, Nova Poshta has installed its first parcel terminals in Kiev, Ukraine’s capital,which Ladyvir referred to as ‘post boxes’. “They are very popular in Western Europe, and in Germanyin particular. We just started launching this delivery method and are not aiming to be number onein this segment as we don’t yet fully comprehend from the marketing and commercial perspectivewhere it leads us. Right now, we have established 3-4 post boxes in Kiev and will keep furtheranalysing the market.”
Last year, Nova Poshta decided to enter the international market and set up a subsidiary NovaPoshta International in March this year. This firm offers international delivery services to andfrom Ukraine including customs brokerage and customs clearance, with local collection and deliveryprovided by the parent company Nova Poshta.
“We have a licence for customs brokerage services and our own central sorting station in Kievwhich enables us to collect a shipment from anywhere in the world and deliver it to Ukraine,complete the customs clearance and ship it to any customer within Ukraine via Nova Poshta,” Ladyvirexplained. Nova Poshta has a further 30 sorting stations in the regions.
Ladyvir explained the company’s leading position by the fact that no other national operator hasmanaged to establish a comprehensive network across the country until now. “We are the only onesfollowing the state postal operator with the second largest network in the country. The differencebetween us and them is that they have certain licences, especially in financial services that wedon’t have and are not interested in.”
“Ukrposhta has around 10,000 offices nationwide but we cover some areas where the state operatorlacks the necessary infrastructure.” He said that Ukrposhta, as the state operator, cannot affordfinancially to establish modern operational and IT systems and sorting terminals as theirs are farbehind the European and global operators.
“When it comes to the mentality of management, we are also much more dynamic than Ukrposhta.They can rely on the state budget and the government. We can rely only on our commercial skills andour pro-active way of thinking,” he stressed.
But he added: “We are not denying that Ukrposhta is still the market leader in certain productssuch as classical postal and financial services due to its extensive network and because thegovernment is not ready to open the market for other operators to offer these services keepingUkrposhta’s monopoly.”
From this month, Nova Poshta is entering the Czech market with a new registered subsidiary NovaPoshta Czech Republic which will focus on sales and marketing as well as a future cooperation withCzech Post. “This will be our first working experience in the European Union. Apart from Ukraine,we have also established our own office network in Georgia, with Czech Republic being next.”
Ladyvir stressed that Nova Poshta focuses on offering complex solutions including both deliveryand customs clearance and consulting services which it claims is a rarity. Customs clearance assuch is a big obstacle for operators. “What we want is to offer one-stop shopping so that customerscoming to us can order a range of different solutions without having to consult other operators.This is our strategy to be ahead of the others and to ensure that our product portfolio is biggerand better.”
“Our most popular product for now is express, door-to-door delivery on the Ukrainian marketincluding products such as Business Envelope A4, and 1-4 pallets to one recipient,” he pointedout.
Highlighting the firm’s leading position on the e-commerce market, Ladyvir boldly claimed thate-commerce as a market segment would not exist in Ukraine without Nova Poshta which has a marketshare of around 40% in it. “This mainly pushed us to enter the global market as there are a lot ofinternet shops that ship the products to Ukraine with other operators and hand them over to us forfurther distribution.”
Nova Poshta also offers customised solutions tailored to the needs of a particular customer ifrequested. The company cooperates with different European postal operators such as Czech Post whichselected it as its partner on the Ukrainian territory as an alternative to Ukrposhta.
According to the company’s own estimations, the Ukrainian express delivery market is growing by35-40% annually with big international players being very weak in the country. “The internationalcompany with the strongest presence in Ukraine is DHL which has 25 offices and an annual turnoverequalling less than our turnover for one month,” he commented.
Ladyvir explained that the Ukrainian market is not yet that interesting for the internationalplayers to invest in. “Their services are expensive and they are not flexible due to theircorporate standards. For example, DHL has four regional managers while we have 500.” He forecastthat the international interest in Ukraine might increase once the domestic market becomes moretransparent.
Looking ahead, Ladyvir said: “In terms of European standards, we are still far behind eventhough we are catching up very fast. But in 3-4 years from now, the Ukrainian market willstabilise. This means we have three years to expand our strength to the fullest as the currentmarket growth of 30-40% a year will slow down afterwards. I am sure that by that time the globaloperators will become much more active on the Ukrainian market taking away some market shares fromlocal players or buying the operator with a 30% market share. And that’s when it will get difficultfor us. Right now, we are spending all our resources to provide the best possible service and thestrongest possible network and the most advanced technology both in sorting and IT.”
In terms of mergers and acquisitions, Ladyvir said that Nova Poshta is currently in negotiationswith international operators and doesn’t exclude partial acquisitions of the company’s segments. “If this accelerates our development, international expansion and gives us access to globaltechnologies and experience, we will take this step provided there are mutually beneficialconditions,” he said. However, he declined to disclose any further details.
