As far back as 10 years there were offered not many goods of building materials category even on the markets. A stimulus for the development of similar supermarkets was given by the emerging of the demand on such kinds of services. Opening of building supermarkets is a rate of people’s prosperity. Building materials are not the goods of first necessity, after all. People think of repair and comfort improvements of their dwelling, only after satisfaction of their basic needs.
On the other hand, you shouldn’t forget that creation of building supermarkets is the most capital-intensive in comparison with other formats. For that special equipment is needed – metallic, with a button of different configurations and forced shelves. Not only consumers but also potential owners theirselves had to ‘mature’ to the opening of such supermarkets.
This segment is very perspective. By the analysts’ estimate, building materials capacity of the Ukrainian market is evaluated in $2 milliard. Suggesting the branch of manufactured trade equipment for shops of similar direction, some interesting tendencies should be mentioned here. Firstly, on the market operators were clearly allocated to be manufacturers, importers and dealers. Secondly, price still remains to be one of the most priority factors when making a decision on buying shelves and check-out counters. Of no less importance is that for many companies other factors headed the list: quality of the equipment, manufacturer’s reputation, delivery terms, terms of payment etc. Thirdly, delivers of used technique in Ukraine are being reduced. Its share amounts to 10 % in total sale structure (in 2005 it came to 16 %). Basic factor which affects the development of shelving equipment market is the growth of the retailing market and political situation in the country.
What is the main is to fit the format.
It’s worth mentioning that in general following formats for building materials trade are specified:
Warehouse (both separate sales outlets and chain ones) – trade objects with an area 800-6000 square meters, working in the segment of b2b (that is the segment oriented on bulk buyers who purchase such kinds of goods not for their own use but to use them at work).
Chain stores specialized in selling of separate groups of goods and also department stores.
Not large shops with a trade area no more than 500 square meters.
Sales outlets on the open building markets.
Large building supermarkets with an all-purpose range, working in the format of DIY (derives from English «do it yourself»).
Local operators of building retailing felt the right format of retailing business – that is the increase of trade objects. The main concept of Ukrainian trade building chains is DIY. Density of building supermarkets in regions differs. The highest density is observed in cities. For example, in Kiev already 50-60% of building materials retailing fall on super- and hypermarkets. Judging by plans of the largest retailers, working in this area, capacity of the Kiev market is at the minimum 10 new large-format stores.
Western conception of the DIY format (and namely this one is considered to be the most popular one in organization of building materials sales) includes four major ranges of goods: goods for repairing (interior finish, floor coverings, paintwork output), goods for house (textiles, electrical (household) appliances, furniture, lamps etc), building materials and goods for gardening.
A holy place…
In general, the segment of building materials is thriving at the moment. By the estimate marketers of the company ‘Modern-Expo’, in the nearest prospect it will actively develop, as it is situated much more further than the satiety of the market in comparison with the grocery supermarkets .In Ukraine any of the European market leaders hasn’t begun to develop yet, meanwhile in Russia all major operators are already working. Many of overseas chaains have declared in public their will to enter the Ukrainian market. In the near future expansion of such western operators as OBI, PRAKTIKER is being waited for. Some of the overseas companies have already opened their representations in Ukraine.
The most popular format of the store for building materials abroad is hypermarket. The biggest world retailer is the company of ‘Home Depot’ (ÑØÀ), a chain of which forms over 2000 stores with an average area of 12.000 square metres and an assortment of 40-50 items of goods. The leader of the European market by sales is the English company ‘Kingfisher’ ( the owner of the chain store ‘Castorama’-aimed for bulk buyers and ‘Brico Depot ‘ aimed for professional buyers). The second place in Europe by turnover was occupied by the French company ‘Leroy Merlin’ and the third one – by the German chain ‘Obi’, which is in the group of ‘Telgelmann’ (the fourth place in the world by sales). Among other chains, working in this segment the Finnish concern ‘Kesco’ (wholesaling and retailing in Finland, Sweden, Norway, Latvia, Lithuania, Estonia and Russia) and Israeli company ‘Home Center’ (over 40 stores in Israel, Cyprus and countries of East Europe) are also worth mentioning.
It’s necessary to recon
The main problems of the present Ukrainian building materials market are:
shortage of modern trade areas. Building delays the process of new stores opening;
low shopping ability of the population, directly influencing on the stores growth and quality;
importance of the price factor while buying the equipment, because of which low- quality and low-priced equipment is often preferred;
not high rate of overseas retailers and, as a consequence, low competition in the market don’t assist at the consideration of the trade equipment (in particular, its design) as a me- thod of struggle for the buyer. To solve this issue mainly classical methods like shares, discounts, convenient store location etc. are being put to use.
For a professional to make a note
It’s being expected that improvement of equipment functional and new design decisions will always be actual for retailers’ requirements against trade equipment manufacturers. Retailers’ desire to be distinguished and remembered by their buyers is understood. That’s why more extraordinary requirements for trade equipment design and for design of certain sections in particular are set.
Fundamentally new trade equipment lines are emerging because of new goods on the market. With the emergence of new materials and its processing techniques, assortment of goods can be essentially diversified. But shelves will always remain to be shelves whatever you do.
Taking into consideration forecasts as to the development of building supermarkets chains and also tendency to trade formats extension, demand on storehouse shelving with a possibility to integrate a supermarket shelving in it can be foreseen. This model will give company a possibility (productive capacity of which allows to manufacture such a technically complex product ) to function on the market of building materials hypermarkets, supermarkets and also trade objects of Cash&Carry format actively.
Comments
Sophiya Chaikina, chief of the marketing service of JV Ltd «Modern-Expo».
As far as a bare shelving equipment market is concerned, we dispose general data of it. As it is impossible to eliminate other metal goods of the calculation, metal shelving systems, check-out counters and systems of clients’admittance. According to ‘Modern-Expo’ marketers’ estimates, the market of a bare shelving equipment came to 120 million hryvnias. In 2005 it grew by 35 % and came to 164 million hryvnias. In 2006 the growth of the market slightly went down (grew by 28,1 %, in hryvnias its equivalent amounts to 210 million). Our specialists predict that 25% growth is being expected this year (quantitative indicator will amount to 270 million hryvnias). Such a dynamics attests dynamic development of Ukrainian retailing market. In future the market will be growing 3-5 years, depending on the segment.
Igor Myronchuk, commercial director of JV Ltd «Modern-Expo».
It’s difficult to say definitely who is more interested in the development of such kind of estate property, as building supermarkets. Surely, both home investors and overseas ones are interested because of the perspective segment. The question is who can afford opening in this area. Nevertheless, these projects are capacious from the point of view of investments.
As far back as 10 years there were offered not many goods of building materials category even on the markets. A stimulus for the development of similar supermarkets was given by the emerging of the demand on such kinds of services. Opening of building supermarkets is a rate of people’s prosperity. Building materials are not the goods of first necessity, after all. People think of repair and comfort improvements of their dwelling, only after satisfaction of their basic needs. 
In general, the segment of building materials is thriving at the moment. By the estimate marketers of the company ‘Modern-Expo’, in the nearest prospect it will actively develop, as it is situated much more further than the satiety of the market in comparison with the grocery supermarkets .In Ukraine any of the European market leaders hasn’t begun to develop yet, meanwhile in Russia all major operators are already working. Many of overseas chaains have declared in public their will to enter the Ukrainian market. In the near future expansion of such western operators as OBI, PRAKTIKER is being waited for. Some of the overseas companies have already opened their representations in Ukraine. 