Adapting to Adversity: Ukrainian Retailers Navigating War-Time Challenges
Updated: Jun 6
War is devastating, but Ukraine's retail industry has shown remarkable strength and resourcefulness in the face of unprecedented challenges caused by the Russian invasion. From innovative marketing techniques to creative supply chain solutions, Ukrainian businesses have adapted to their difficult circumstances and become stronger.
Want to learn from their success stories and gain valuable insights on how your business can navigate tough times? Read on to learn more firsthand from the Ukrainian food and non-food retail giants.
Building Resilience: How Ukrainian Retail Overcame Core Challenges and Prepared for Anything
To gain insights into the realities of the Ukrainian retail industry during the war, we had the privilege of speaking with Vadym Osynskyi, Head of Supply Chain Management at Foxtrot, and Anna Matsyuk, Head of eCommerce at Novus.
Foxtrot is a well-known electronics retailer in Ukraine with a vast brick-and-mortar presence in 90 regions and districts across the country, as well as a thriving eCommerce platform. On the other hand, Novus is a popular grocery store chain that caters to the Western Ukrainian and Kyiv regions and is also on the path to eCommerce success.
With Vadym and Anna as our guides, we gained an inside look at the challenges these companies faced and the strategies they used to overcome them.
Putting People First: Safeguarding Employee Safety for a Thriving Business
During times of war and conflict, ensuring the safety of employees is the first thing to take care of. To safeguard employee safety during the war, companies in Ukraine had to implement various measures, from installing security cameras to providing regular safety training and immediate relocation.
The same happened with Foxtrot, which chain of electronic stores was present almost in each region of the country. The company felt the breath of the war before it started and tried hard to perform timely evacuation of its people from potentially dangerous areas. Vadym Osynskyi confessed it was the top priority for Foxtrot to save employees and ensure decent living conditions for them in Western Ukraine.
“We decided that the lives and health of our employees are the first things to ensure. The company provided a relocation of key team members to the western regions, host for them and their families. We opened something like dormitories in our stores to help everybody who needed it.”
Vadym Osynskyi
Head of Supply Chain Management, Foxtrot
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Preparing for the Unthinkable: Action Plans for Business Continuity When Main Hubs are Destroyed
The war damaged all retail enterprises in Ukraine, affecting the market conditions and assets. Hundreds of stores and warehouses were destroyed and robbed. Companies experienced huge losses. Among the merchants that felt this horrible impact at a full scale was Foxtrot - a retailer that lost its core warehouse hub in Hostomel. Nevertheless, the company managed to find a suitable building in a few months and change the location.
“The biggest asset lost for Foxtrot was the main logistic hub in Hostomel. The connection with it was broken at the beginning of the war. The warehouse was half-burnt and half-robbed. So the scale of the disaster was massive, it was impossible to rebuild it.
But, we needed to have a central warehouse. Therefore we decided to find a suitable building in the West. Of course, it wasn’t a piece of cake since the rental fee increased dramatically; from $2-3 per m², they grew to $10 per m². Luckily our local partner helped us out and provided a 3 000 m² warehouse. In April 2022, it was opened. ”
Vadym Osynskyi
Head of Supply Chain Management, Foxtrot
Foxtrot’s central warehouse in Hostomel after the russian invasion of Ukraine
For some retailers, like Novus, the devastating aftermath of the conflict left them without main offices, distribution centers, or physical stores. The company was forced to pivot quickly and find alternative ways to provide a safe work environment while continuing to support and develop its sales channels.
“We lost our main office and distribution center in Kyiv. They were totally destroyed. Luckily, we planned to build the new distribution center and make it the core logistics hub. The project is still in progress, but we’re working to achieve results soon.
Several stores were also damaged, but we renovated them all in December 2022. The last one became a store in Bucha, it was a really crucial moment for us since the store was fired at by rockets and the only thing left was a frame. So, in December 2022 we completed a key milestone in our path to victory. We opened the doors of all stores that required renovation.
For now, we don’t have a main office, but the pandemic before taught us to work remotely, so now 90% of activities are performed during work from home. However, people still have an opportunity to visit local offices and work in convenient and safe conditions.”
Anna Matsyuk
Head of eCommerce, Novus
In the face of unprecedented challenges, both enterprises acted swiftly and proactively, creating backup plans that accounted for the current circumstances and prospects. Their transformation during the pandemic provided a solid foundation for their resilience, enabling them to adapt and remain nimble in the face of adversity. By embracing change and proactively anticipating the market's needs, these enterprises have proven they have what it takes to thrive, even in the most challenging times.
“The experience gained during the pandemic saved the situation. In 2020 we did our best to set up flexible logistics processes. We changed the management of residues, stockpiles, and pickup points, performed the diversification of partner delivery services, and worked on the last mile issue. Our readiness helped us withstand.
We had a theoretical plan on what to do during the war, but the guidelines written in peacetime were not efficient. A situation like this requires quick business decisions and actions. The case is war is unpredictable. Nobody knows what will be damaged.”
Vadym Osynskyi
Head of Supply Chain Management, Foxtrot
Overcoming Supply Chain Challenges and Ensuring Efficient Purchases in Force-Majeure
The fallout from the Russian invasion of Ukraine extended far beyond the country's borders, as the supply chain disruptions that followed affected companies worldwide. However, the Ukrainian retailers bore the brunt of this crisis, finding themselves at the epicenter of a logistical nightmare.
The severity of the situation was apparent, with kilometer-long queues snaking outside stores as people scrambled to stock up on essential groceries at the onset of the war. The impact of the supply chain pitfalls was all-encompassing.
"We had over 40 000 unique SKUs, and the lion's share of goods were imported. The first half of 2022 was really challenging in the matter of import and supply chain as a whole. Sure, each food retailer in Ukraine now feels the lack of goods. Meantime, we have managed to eliminate pitfalls, and consequently, our supply chain gets well step-by-step.
Imagine the entire collapse of all built supply chains. Vehicles did not go on the routes; logistics companies provided part of their vehicles for military needs. Some manufacturers, mainly in the East of Ukraine, stopped their operations. We had to build everything from scratch. The main goal was to deliver groceries to Kyiv. During the first three weeks, we provided only the most demanded items, such as bread, dairy, etc. The priority was to make essential products accessible. But the delivery of items to Kyiv was challenging. Carriers delivered shipments to borders and refused to move forward; meantime, our drivers couldn't move abroad.
We cooperated with governmental agencies to solve this issue; they supported us since supermarkets are not a business only; it's a part of critical infrastructure. The availability of items on shelves and understanding that stores are open and working help people keep calm."
Anna Matsyuk
Head of eCommerce, Novus
The entire supply chain collapsed like a house of cards because of dangerous conditions for transportation, blackouts, and the absence of delivery by sea. But businesses built new routes, transformed processes, and found new partners on the move.
"We prepared the distributional logistics infrastructure in advance by dividing it into three main channels: brick-and-mortar stores, eCommerce, and our wholesale direction. Each store is a sort of dark kitchen. In other words, SKU shipment happens after a client opts for it on the website. The system automatically defines the availability of goods in the nearest warehouses to provide better delivery service.
We have our client logistics & delivery service. Foxtrot also cooperates with all Ukrainian logistics operators, such as Nova Poshta, Justin, and Ukrposhta. So, even before the war, the system worked in a way to cut the delivery time."
Vadym Osynskyi
Head of Supply Chain Management, Foxtrot
"When it comes to the procurement logistics, 60% of the entire goods were supplied by sea. But now it's impossible to deliver by the Black Sea, so we're using the Port of Klaipeda. Obviously, we refused any services from Belarus and russia, so the entire procurement logistics migrated to the western border. Now, we're cooperating with Poland, Romania, and Moldova. Sure, this process is much more complicated now. It's costly and time-consuming. Earlier, it took 3-5 days to get goods. Now it takes about two weeks."
Vadym Osynskyi
Head of Supply Chain Management, Foxtrot
"Considering the warehouse logistics, we had three warehouses during the war. But over time, we noticed that the demand was growing. It became the core driver of investment in its own Foxtrot warehouse building. Due to joint effort, we built the new logistics hub in 3 months, and in September 2022, it started full-fledged operation."
Vadym Osynskyi
Head of Supply Chain Management, Foxtrot
The challenges that Ukrainian retailers have faced in the wake of unforeseen circumstances have left them grappling with a problem that is far from straightforward. Preparing for a disaster is no easy feat; even the most detailed backup plans have faltered in the face of an unpredictable reality. Meanwhile, the insights from these experiences can catalyze merchants worldwide to develop an agile supply chain.
"We couldn't even imagine that the warehouse in Hostomel could be destroyed. The only thing I would do in peacetime to prevent it is probably the diversification of goods across the country. It's easy to do with various warehouses. Of course, it requires a huge investment, but in case of force majeure, it potentially can save the business. Unfortunately, at the very beginning, we had only two main hubs. The first contained 20% of all SKUs and the notorious hub in Hostomel - 80% of goods."
Vadym Osynskyi
Head of Supply Chain Management, Foxtrot
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Trends born under bombs: insights from the largest Ukrainian retailers
eCommerce popularity is growing despite the great migration
Even as war rages on, the retail industry continues to evolve and progress. In an unrelenting pursuit of delivering unparalleled customer experiences, companies have left no stone unturned in eliminating any potential obstacles hindering their progress. Against all odds, the Novus team rose to the occasion last year and launched a much-needed eCommerce sales channel facilitating online grocery shopping in Ukraine. While the journey had its fair share of challenges and unexpected hurdles, the team's unwavering commitment to excellence led to extraordinary outcomes.
“We planned to launch our eCommerce service at the beginning of March 2022, so the entire 2021 was the year of intensive preparation to go live. As you might guess, the launch was delayed. Our main target audience (35-45-year-old buyers) migrated, so we needed to rebuild our go-to-market strategy from the marketing perspective. Consequently, now our main audience is Gen Z. I suppose that the main reason for this shift was the migration inside the country from one region to another. ”
Anna Matsyuk
Head of eCommerce, Novus
“The average price of an online shopping cart is around $50, which is much higher than the offline one. Now, people usually order 15-17 SKUs. So, the share of eCommerce purchases now is about 1,5% of the entire scope. It’s a great result, to be honest since eCommerce is not so popular in Ukraine, and when it comes to eCom in grocery retail, achieving a significant shift from the start is challenging. But we’re moving towards this goal and will perform it with time.”
Anna Matsyuk
Head of eCommerce, Novus
In non-food retail, the eCommerce direction is also gaining popularity because of the buyers’ desire to stay at home and avoid any dangerous situations. Meanwhile, the war caused a significant decrease in sales, making retailers react and change their assortment.
“In 2022, sales dropped by 45% compared with 2021. The decrease in offline and online sales was in proportion to their pre-war share. So, both online and offline sales fell in volume, but the structure and ratio are approximately on the same level.”
Vadym Osynskyi
Head of Supply Chain Management, Foxtrot
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Shift in consumer behaviour: what are the first-priority items demanded
The interdependence between demand and supply is an undeniable truth, which remains evident even during unprecedented times. During peacetime, it is relatively easy to predict changes in customer behavior, which prompts retailers to adapt their product offerings to align with seasonal and holiday trends. However, the same principle applies during times of force majeure.
In war, when survival becomes the primary concern, consumers are laser-focused on procuring essential goods. The urgency of the situation leaves no room for frivolous pursuits, and the stakes are high. It is during such times that the true resilience of both suppliers and consumers is tested, and only the most agile and responsive can weather the storm.
“At the beginning of the war, we noticed that people mostly needed dry groceries with a long expiration date and non-food SKUs like household chemicals. Fresh categories weren’t so popular. During the last two months, the shopping cart has been the same as before the war. Buyers prefer different goods, but water is a compulsory purchase, it’s among the top 10 most demanded positions. Consumers take bottles of water all the time in large quantities to have stock at home.”
Anna Matsyuk
Head of eCommerce, Novus
Foxtrot recognized the importance of catering to the needs of individuals undergoing a significant life transition by providing them with the essential items necessary to start afresh. The company focused on supplying a curated selection of must-have devices that align with the financial constraints of consumers still settling in. Foxtrot has adapted its inventory to suit the immediate needs of its buyers in a way that is both practical and affordable.
“The demand has changed a lot. We noticed the most significant drop in demand for large household appliances and TVs. Consumers preferred portable electronics and household appliances during the war, so we have adapted our assortment to meet this demand.”
Vadym Osynskyi
Head of Supply Chain Management, Foxtrot
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Afterword
In the face of unimaginable hardship, Ukrainian retailers have demonstrated remarkable resilience, creativity, and adaptability. From leveraging eCommerce channels to implementing innovative supply chain solutions and putting employee safety first, businesses have successfully navigated some of the most challenging times in their history. Despite the devastating impact of war, Ukrainian retailers emerged stronger and wiser, having learned valuable lessons about the importance of building a resilient and people-centric business.
As we navigate an increasingly unpredictable and turbulent world, the lessons learned by Ukrainian retailers serve as a powerful reminder that with determination, resourcefulness, and a focus on people, any business can weather the storm and emerge stronger on the other side.
Looking for a way to upgrade your retail business and make it invincible in the face of challenges - contact our sales team to explore what software solution might be a driver of your performance.
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